2025 (8) TMI 352 - AT - Income Tax

Assessee wins appeal under Section 68; investments from shares via banking channels upheld as genuine

The ITAT Mumbai allowed the assessee's appeal against additions under section 68 regarding investments from undisclosed sources. The assessee demonstrated ... Additions towards investments from undisclosed sources u/s 68 - information received from investigation wing Kolkata and Mumba - HELD THAT:- Assessee purchased the shares through the BSE, made payments via banking channels, and submitted contract notes, STT was paid and Demat account details evidencing delivery of shares. The assessee subsequently sold 27,780 shares for a total consideration through the BSE, with delivery made from the same Demat account. AO did not dispute the sale proceeds. Having furnished the requisite documentary evidence, the onus shifted to the Ld. AO to establish the alleged non-genuine nature of the transaction. AO failed to provide any corroborative evidence to substantiate the allegations. We respectfully rely on the ruling of Jamnadevi Agarwal [2010 (9) TMI 81 - BOMBAY HIGH COURT] as followed in Lalitaben Praful Shah [2024 (4) TMI 1239 - ITAT MUMBAI]. In our considered view, the addition is unjustified - Assessee appeal allowed. ISSUES: Whether addition under section 68 of the Income-tax Act, 1961, towards investments in shares purchased from undisclosed sources can be sustained without proper evidence and merely on suspicion.Whether transactions involving purchase and sale of shares through recognized stock exchanges and brokers, with payments made through banking channels and supported by documentary evidence, can be treated as sham or bogus transactions.Whether the onus lies on the Assessing Officer to establish the non-genuine nature of share transactions after the assessee furnishes adequate documentary evidence.Whether additions made on the basis of information from investigation wings without corroborative evidence are justified. RULINGS / HOLDINGS: The addition of Rs. 1,49,21,637/- under section 68 of the Act was held to be unjustified and quashed as the assessee had furnished 'genuine documentary evidence' including contract notes, bank statements, Demat account details, and proof of payment through banking channels, and the Assessing Officer failed to provide corroborative evidence to substantiate the allegation of undisclosed sources.Transactions involving purchase and sale of shares through recognized stock exchanges and brokers, supported by documentary evidence and payment through banking channels, cannot be treated as 'sham transactions' or 'bogus transactions' without substantial proof to the contrary.The onus to prove the non-genuine nature of the transactions shifts to the Assessing Officer once the assessee produces adequate documentary evidence, and mere reliance on suspicion or information from investigation wings is insufficient.Additions based solely on information received from investigation wings without proper facts, evidence, or application of mind are 'arbitrary and highly excessive' and cannot be sustained. RATIONALE: The Court applied the statutory provisions of the Income-tax Act, 1961, particularly section 68, which requires unexplained cash credits or investments to be treated as income unless satisfactorily explained by the assessee.Precedents relied upon include the Hon'ble Bombay High Court judgment in CIT vs. Jamnadevi Agarwal, which held that share transactions supported by genuine documentary evidence cannot be considered bogus.Recent coordinate bench decisions of the ITAT Mumbai were considered, distinguishing cases where transactions were found to be sham from the present case where the assessee complied with all procedural and documentary requirements.The Court noted reliance on judgments from the Hon'ble High Courts of Gujarat and Madhya Pradesh, which found no irregularities in transactions involving the same scrip and held that transactions involving amalgamated companies listed on recognized stock exchanges cannot be categorized as sham.The Court emphasized the principle that the burden of proof lies on the revenue to establish non-genuineness once the assessee furnishes credible documentary evidence, and mere suspicion or information from investigation wings without corroboration is insufficient to uphold additions under section 68.