2026 (1) TMI 1199 - AT - Income Tax

Unexplained cash credit additions on sale of investments rejected where earlier acceptance and genuineness of shares established.

Addition under unexplained cash credit was challenged on the basis that the assessee had held and purchased the contested shares in earlier years, which ... Addition u/s 68 - unexplained cash credit - burden to establish identity, genuineness and creditworthiness - Sale of investments accepted in earlier assessment years - consistency in treatment of investments HELD THAT:- Investments/ shares were held by the assessee company since earlier years and we note that the assessee company has purchased these shares during the F.Y. 2011-12 and these investments were duly reflected in the balance sheet as on 31.03.2012. The case of the assessee was selected for scrutiny assessment and these investments comprising 6700/- shares of Nihon Impex P. Ltd. and 9220/- shares of Sonali Suppliers P. Ltd. were accepted in the assessment framed u/s 143(3) of the Act. Therefore, once the investments were accepted in the earlier years by the department how the same could be doubted during the year when these were sold. The case of the assessee is squarely covered in case of Tulsyan and Sons (P.) Ltd.[2025 (4) TMI 1696 - CALCUTTA HIGH COURT] - Decided in favour of assessee. Issues: Whether the additions made by the Assessing Officer under section 68 of the Income-tax Act, 1961 treating receipts as unexplained cash credits should be sustained or deleted.Analysis: The appeals concern receipts of sale proceeds of investments reflected in the assessee's bank account and supported by sale transactions through banking channels, confirmations obtained under section 133(6), and earlier acceptance of the investments in prior assessments and balance sheets. The Assessing Officer relied on an investigation report and third-party statement implicating entry transactions without affording opportunity for cross-examination and without furnishing or corroborating the relied-upon statement. The CIT(A) examined identity, genuineness and creditworthiness parameters relevant to section 68, considered documentary corroboration and prior acceptance of investments, and found no infirmity in the assessee's evidence. The Tribunal noted binding jurisdictional authority holding that where sale of investments is shown and earlier assessments accepted such position disentitles the revenue to treat receipts as unexplained credits, and found the AO's reliance on uncorroborated investigational material and failure to allow cross-examination to be a breach of natural justice.Conclusion: Addition under section 68 is deleted and the Revenue's appeals are dismissed; decision is in favour of the assessee.