2023 (12) TMI 1497 - AT - Income Tax

Section 68 addition fails where no credit entry or verified share transaction exists in the assessee's books or Demat records.

Section 68 could not be invoked where no sum was found credited in the assessee's books and no corresponding share purchase, sale, or capital gain entry ... Unexplained cash credit - Credit entry in books of account - Bogus long-term capital gain accommodation entrySection 68 addition - Absence of credited sum in books - Investigation Wing information - Addition under section 68 could not be sustained where the assessee denied the alleged share transactions, no such transactions were found in the demat accounts or books, and the Assessing Officer proceeded only on the basis of information from the Investigation Wing. - HELD THAT: - The Tribunal found that the assessee had not declared any long-term capital gain from the shares in question, and the demat accounts placed on record did not show any purchase or sale of shares of M/s. Twenty First Century India Limited. Though the Assessing Officer noted the assessee's denial of the transaction, he made the addition solely on the report received from the Kolkata Investigation Wing without first ascertaining whether the alleged transactions had actually been undertaken by the assessee. Since section 68 postulates a sum found credited in the books of the assessee, and no such credit entry was shown in the books or related records, the essential condition for invoking that provision was absent. The confirmation of the addition by the appellate authority was also held unsustainable because no finding was returned on the basic factual question whether the alleged transaction had in fact been carried out by the assessee. [Paras 7, 9]The additions made for both assessment years on account of alleged bogus long-term capital gains were held unsustainable and were deleted.Final Conclusion: The Tribunal allowed both appeals and deleted the section 68 additions for the two assessment years. It held that, in the absence of any actual share transaction or credit entry in the assessee's books, the additions could not be sustained merely on the basis of Investigation Wing information. Issues: Whether addition under section 68 of the Income-tax Act, 1961, could be sustained on the basis of alleged bogus long-term capital gains from shares of Twenty First Century India Limited when no such transaction or credit entry was found in the assessee's books or Demat records.Analysis: The assessee denied having entered into the alleged share transactions. The record showed that the Demat accounts did not reflect any purchase or sale of the script, and no corresponding capital gain was declared in the return or found in the books of account. The addition was made substantially on the basis of information from the Investigation Wing and not on verified material establishing an actual transaction or a credit entry in the assessee's books. Since section 68 applies only where a sum is found credited in the books of the assessee and the assessee fails to explain the nature and source thereof, the essential precondition for invoking that provision was absent.Conclusion: The addition under section 68 was held to be unsustainable and was deleted for both assessment years, resulting in relief to the assessee.