Revenue's appeal dismissed as addition under Section 68 for bogus LTCG lacks material evidence proving transaction illegitimate

The ITAT Raipur dismissed the revenue's appeal challenging deletion of addition made under Section 68 for alleged bogus LTCG on shares. The assessee had fully cooperated by providing necessary documentation and producing the investor company's director before the AO. The Tribunal held that mere findings regarding unchanged share capital and insufficient income of the investor cannot solely characterize transactions as bogus. The AO failed to disprove the identity, creditworthiness of the investor company, and genuineness of the transaction with material evidence. The addition was deemed arbitrary and based on preconceived notions, making it unsustainable.

---

---

Issues Involved:
1. Justification of the deletion of the addition of Rs. 2,00,00,000/- received towards share capital as unexplained credit u/s 68 of the Income Tax Act, 1961.

Summary:

Issue 1: Justification of the deletion of the addition of Rs. 2,00,00,000/- received towards share capital as unexplained credit u/s 68 of the Income Tax Act, 1961:

The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals), NFAC, which deleted the addition of Rs. 2,00,00,000/- received towards share capital as unexplained credit u/s 68 of the Income Tax Act, 1961, for the A.Y. 2017-18. The case was selected for scrutiny due to large share premium received during the year and higher turnover reported in the Service Tax Return compared to the ITR.

The Assessing Officer (AO) verified the receipt of share application money from five shareholders, focusing on Axis Propbuild Pvt. Ltd., which invested Rs. 2,00,00,000/-. The AO found that Axis Propbuild Pvt. Ltd. lacked sufficient creditworthiness as its income did not justify the investment, leading to the addition of Rs. 2,00,00,000/- as unexplained credit u/s 68.

The CIT(A), NFAC, deleted the addition, accepting the assessee's contentions and the documents provided, such as confirmations, bank statements, financial statements, and the appearance of the director of Axis Propbuild Pvt. Ltd. before the AO. The CIT(A) concluded that the identity, creditworthiness, and genuineness of the transaction were established.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee had discharged its burden u/s 68 by providing all necessary documents and evidence. The Tribunal found that the AO's addition was based on a preconceived notion and lacked material evidence to disprove the assessee's claims. Thus, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of Rs. 2,00,00,000/- u/s 68.

Order:

The appeal of the department is disposed off in terms of the Tribunal's observations, with the order pronounced in the open court on 08/04/2024.

---