2024 (4) TMI 423 - AT - Income Tax

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 ... Bogus LTCG on shares - unexplained credit u/s 68 - HELD THAT:- Only finding of the Ld. AO that the investor’s share capital and reserves were not changed from the preceding year also there is insufficient income cannot be the sole reason to characterize the said transaction as bogus and to disqualify the same under the provisions of Section 68 for making an addition. In the present case, the assessee had cooperated with the department have produced all the necessary information, including the production of the director of the investor company, before the ld. AO; therefore, the burden cast on the assessee has been duly discharged. Ld. CIT(A) has also observed, and rightly so, that there was no reasonable basis supported by any material on record with the Ld. AO to disprove, the identity and creditworthiness of the investor, i.e., M/s Axis Propbuild Private Limited, and the genuineness of the transaction. We hold that the addition made by the AO was merely on the basis of a preconceived notion, arbitrary, and unsustainable; therefore, the finding of CIT(A) that since the identity and creditworthiness of the investor as well as the genuineness of the transaction is duly established, therefore, in absence of any further explanation, evidence, material, or decision to dislodge such finding of the CIT(A) by the revenue, we do not find any infirmity in the said findings so as to interfere with the same. In result, Ground No. 1 of the appeal of the revenue dismissed. 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.