Case Law Details
Lalita Bajaj Vs DCIT (ITAT Delhi)
ITAT Delhi held that addition under section 68 of the Income Tax Act towards sale of shares by the assessee unsustainable as such transaction cannot be alleged as unexplained/ bogus when department has not disputed investment in shares.
Facts- The assessee has sold 3,50,000/- shares of RNB Infrastructure Pvt. Ltd. @10% which were acquired by the assessee at the very same price, i.e., @10 per share. AO made addition by observing that the explanation submitted by the assessee was baseless as the impugned amount remained unexplained credit and the explanation of the assessee was not found to be sustainable to the satisfaction of the AO, therefore, the AO made the addition u/s 68 of the Act.
CIT(A) dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- Held that in these case issue was of alleging the allotment of Shares by assessee company against share application money and share premium and the AO made addition under section 68 of the Act by holding that the identity and creditworthiness of investor and genuineness of transactions could not be established by the share application and premium recipient assessee company. But in the present case, the assessee has not received any share application money or premium from the investor but the impugned transaction in the present case pertains to sale of investment/shares by the assessee to the other entities and such transaction cannot be alleged as unexplained or bogus particularly when the Department has not disputed the investment in shares of RNB Infrastructure Pvt. Ltd. by the assessee during the earlier period of time i.e. in the A.Y. 2008-09 in the year of investment by the assessee. Therefore, we respectfully note that the benefit of case laws relied by CIT(A) having distinct and dissimilar facts and circumstances are not available for the Revenue in the present case.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeals have been filed by the assessee against the orders of the Commissioner of Income Tax (Appeals)-30, New Delhi dated 05.09.2022 in the case of Smt. Namita Bajaj and dated 07.09.2022 in the case of Smt. Lalita Bajaj for the same Assessment Year 2015-16.
2. At the very outset, the Learned CIT-DR agreed to the submission of Learned Counsel of assessee that except quantum of addition, other facts and circumstances of both the cases are similar and identical, therefore, we are taking up ITA No.2598/Del/2022, the appeal of Smt. Namita Bajaj as a lead case for the sake of convenience and brevity.
3. Learned Counsel submitted that the assessee wants to press her ground no.14 on merits first, which reads as follows:
“14. (i) On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the addition of Rs.35,00,000/-under Section 68 of the Act on account of income from undisclosed sources.
(ii) That the above addition has been confirmed ignoring the detailed submissions provided by the assessee.”
4. The Learned Counsel submitted that on the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the addition of Rs.35,00,000/- u/s 68 of the Act on the baseless allegation of earning undisclosed income by the assessee by ignoring the detailed submissions of assessee wherein the assessee substantiated that no capital gain accrued to her as the shares acquired were sold during the relevant financial period at the same price on which the shares were acquired. Drawing our attention towards assessee’s paper book page no. 254, the Learned Counsel submitted that the Learned CIT(A) after admission of additional evidence of assessee under Rule 46A of the Income Tax Rules, 1962 called remand report from the AO, which was filed on 15.03.2020. Further drawing our attention towards relevant concluding para nos. 4 & 5 of remand report (assessee paper book page nos.252 to 254) the Learned Counsel submitted that after proper evaluation and consideration of additional evidence submitted by the assessee and keeping in view other documentary evidence available on record the AO in the said remand report noted that the assessee has submitted that investment held in the shares of RNB Infrastructure Pvt. Ltd. were sold by her @10 per share which were acquired by her directly from RNB Infrastructure Pvt. Ltd. @10 per share.
5. The Learned Counsel submitted that referring to additional evidence and other documents submitted by the assessee, the AO issued notices u/s 133(6) of the Act to the share purchaser to above concerns on 07.03.2022 and in response to said notices replies were received from the parties. Learned Counsel submitted that in the said replies of the share purchaser parties they confirmed that funds were given to the assessee on behalf of RNB Leasing and Financial Services on account of purchase of shares by them from RNB Leasing and Financial Services out of their disclosed sources and funds. The Learned Counsel vehemently pointed out that despite of above categorically findings substantiating the genuineness of transaction of sale of shares by the assessee, Learned CIT(A) upheld the addition by ignoring the remand report para 5, wherein the AO mentioned that in respect of explanation of purchaser parties/investor they submitted copies of their Bank Statement, Financial Statement, Income-tax Return and the explanation given by the assessee was substantiated and supported by the documents submitted before the authorities below including additional evidence placed during first appellate proceedings.
6. The Learned Counsel further pointed out that the AO in concluding para 6 has not made any adverse comments except alleging that during the assessment proceedings ample opportunities were given to the assessee to discharge her onus to substantiate the genuineness of transaction but no plausible explanation was given at that point of time. The Learned Counsel submitted that the documentary evidences filed before AO and additional evidence filed before the Learned CIT(A) cumulatively and successfully supported the explanation of the assessee and therefore, the AO in para 6 of remand report concluded that the document filed before Learned first appellate authority and replies received from share purchaser parties confirming the transaction of purchase of share from the assessee are on record. The Learned Counsel thus submitted that despite clear remand report from the AO in favour of the assessee, the Learned CIT(A) proceeded to confirm the addition in the hands of the assessee u/s 68 of the Act which is not sustainable and thus the AO may kindly be directed to delete the addition.
7. The Learned Counsel also submitted that the Learned CIT(A) has considered irrelevant and not applicable case laws having distinct and different facts and circumstances from the present case and thus the same is not applicable in the present case against the assessee. The Learned Counsel has placed reliance on various judgments listed at serial nos.35 to 41 of the assessee paper book and submitted that when the investment in share of RNB Infrastructure Pvt. Ltd. @10 per share was not disputed by the Department in the year of acquisition of share then the same investment cannot be disputed in the year of sale at par i.e. on the same rate @10 per share merely because no capital gain was approved to the assessee. The Learned Counsel submitted that before the Learned CIT(A) the assessee submitted that provision of Section 68 of the Act are not applicable to the assessee as the assessee was not acquired to maintain the books of accounts and said provision cannot be invoked against the assessee in absence of the books of accounts for the previous year.
8. In support of said contentions, Learned Counsel has placed reliance on various judgments and orders including reasoned order of ITAT, Amritsar Benches in the case of Satbir Singh Bhullar vs. ITO dated 02.03.2023 reported as 2023 (3) TMI 356 – ITAT, Amritsar. The Learned Counsel reiterating earlier submissions, submitted that the assessee has sold investment at par value and authorities below has not doubted the purchase of shares/investment by the assessee in the year of investment and hence the assessee has duly explained the transactions of purchase and sale of shares @10 per share without earning any capital gain and therefore, no addition can be made in the hands of the assessee under section 68 of the Act or any other provision of the Act. Drawing our attention towards paper book pages 184-185, the Learned Counsel submitted that the list of shareholder for the year 2014 of RNB Infrastructure Pvt. Ltd. filed with Ministry of Corporate Affairs/ROC, makes it clear that the assessee had enough opening balance of share of said company and holding the shares by the assessee was never doubted or disputed by the AO. Therefore, when the purchases of shares were made by the assessee in the shares of RNB Infrastructure Pvt. Ltd. has not been doubted then how can the same transactions in respect of sale of part holding can be doubted for invoking provision of section 68 of the Act. The Learned Counsel finally submitted that the AO has simply treated the entire sale consideration as accommodation entry treating the same as unexplained money received by the assessee despite the fact no capital gain/profit has accrued to the assessee out of sale transaction of shares. Learned Counsel has placed reliance on various judgments including recent judgment of ITAT, Delhi Benches in the case of Brij Resources Pvt. Ltd. vs. ITO in ITA No.8835/Del/2019 dated 07.07.2021 and submitted that the baseless addition may kindly be deleted.
9. Replying to the above, the Learned CIT-DR supporting the action of the AO as well as first appellate order, submitted that the alleged shell concerns and individuals has made payment to the Bank account to the appellant on the instructions of M/s. RNB Infrastructure Pvt. Ltd. Therefore, it was rightly observed the credit entry received from so called purchaser of share parties remained unexplained and thus the provision of section 68 of the Act was attracted and the AO rightly made addition in the hands of the assessee and Learned CIT(A) also quite and justified in upholding the same. Learned CIT-D.R. also drew our attention towards provision of Section 2(24)(x) r.w.s 36(1)(va) of the Act to submit that when the assessee has not successfully demonstrated investment and the genuineness of transaction of purchase of Shares from assessee then the AO is entitled to invoke the provision of Section 68 of the Act form making addition to the income of the assessee. Therefore, the Learned CIT-D.R. submitted that the ground of assessee on merits may kindly be dismissed.
10. On careful consideration of submission, first of all, we note that the Assessing Officer made addition in hands of assessee by noticing that the assessee has sold 3,50,000/- shares of RNB Infrastructure Pvt. Ltd. @10% which were acquired by the assessee at the very same price i.e. @10 per share. The AO made addition by observing that the explanation submitted by the assessee was baseless as the impugned amount remained unexplained credit and the explanation of the assessee was not found to be sustainable to the satisfaction of the AO, therefore, the AO made addition u/s 68 of the Act. Before Learned CIT(A), assessee filed an additional evidence under Rule 46A of the Income Tax Rules and remand report was called from the AO wherein the AO after verification and examination of additional evidence and by taking on record the replies of the assessee from the share purchaser parties in response to notice u/s 133(6) of the Act reported as follows:
“4. In the application under rule 46A, the appellant has submitted that the credits/funds received in the bank account in the year under consideration are on account of sale of investment held by her in equity shares of RNB Infrastructure Pvt. Ltd. to RNB Leasing and Financial Services. It is further submitted by the appellant that amount received by her from the alleged shell concern was merely on the instructions of RNB Leasing and Financial Services, however, she has no business relation with the alleged shell concerns. Further referring to FORM 2 i.e return of allotment filed on 23.05.2007 and list of share transfer submitted with MCA. the assessee has submitted that investments held in shares of RNB Infrastructure Pvt. Ltd. were sold by her @10 per share which were acquired by her directly from RNB Infrastructure Pvt. Ltd. @ 10 per share. Referring to the above mentioned additional evidences the assessee has stated that funds received by her in the year under consideration were only on account of sale of investments at par out of which no gain/profit has arisen to her and since, no surplus money being received by her except for the recovery of cost of investments, the transactions cannot be regarded as accommodation entries.
5. In order to verify the above documents and submissions made by the assessee, notices under section 133(6) were issued to the above concerns on 07.03.2022. In response to which replies were received from the parties. Copy of the said replies is also enclosed here with this report for your goodself’s kind consideration and reference. In the replies the parties have confirmed that funds were given to the assessee on behalf of RNB Leasing and Financial Services on account of purchase of shares by them from RNB Leasing and Financial Services out of their disclosed sources of fund Further, in support of their explanation they have submitted copy of their bank statement, financial statements, ITR. The explanation given by assessee is substantiated by the documents submitted.
6. It is noticed that the explanation/submission now being made by the assessee was not made during the course of assessment proceedings. During the assessment proceedings ample opportunities were given to the assessee to discharge her onus to substantiate the genuineness of the transactions. However, no plausible explanation was given in this regard at that time. However, the documents now being filed before your good self and replies have also been received from various parties confirming the same Hence, the decision of considering the additional evidence may be Taken on merit by your good office.”
11. When the observations of the AO, basis taken by the Learned CIT(A) for upholding the addition made by AO is evaluated on the touch stone of documentary evidences submitted by the assessee and the remand report of the AO vide dated 15.03.2022, then we safely gather that the assessee acquired shares of RNB Infrastructure Pvt. Ltd. by view of allotment during F.Y. 2007-08 and her name was listed in the list of share holders filed by the said company in Form 2 on 23.05.2007 which was submitted to Ministry of Corporate Affairs. It is also not in dispute that the acquisition price of shares and sale price of shares was same i.e Rs.10 per share. The AO in the remand report recorded the Learned CIT(A) that the share purchaser party have confirmed the fund given to the assessee on behalf of the RNB Leasing and Financial Services on account of purchase of share by them from RNB Leasing and Financial Services out of their disclosed sources of funds. In support of said explanation, share purchases parties had also submitted copies of their respective Bank Statement, Financial Statement, Income-tax Returns in response to notice u/s 133(6) of the Act issued by AO. The Assessing Officer has concluded his remand report by merely alleging that despite several opportunities, the assessee did not submit documentary evidences during the proceedings which were submitted belatedly before Learned First Appellate Authority without any reason. The AO have not made any adverse comments on the additional evidences filed by the assessee and submitted the report by finally stating that the documents now being filed as additional evidences and replies of share purchaser confirming the transaction of purchaser of shares are on record.
12. In view of above factual findings stated by the AO in the remand report, we are unable to see any valid reason to invoke the provision of Section 68 of the Act treating the amounts received by the assessee as considering of sale of shares as unexplained to credits particularly when the Department has not objected the investment of shares by the assessee during F.Y. 2007-08 relevant to A.Y. 2008-09. On respectful and careful perusal of the proposition relied by the Learned CIT(A), we clearly observe that in these case issue was of alleging the allotment of Shares by assessee company against share application money and share premium and the AO made addition under section 68 of the Act by holding that the identity and creditworthiness of investor and genuineness of transactions could not be established by the share application and premium recipient assessee company. But in the present case, the assessee has not received any share application money or premium from the investor but the impugned transaction in the present case pertains to sale of investment/shares by the assessee to the other entities and such transaction cannot be alleged as unexplained or bogus particularly when the Department has not disputed the investment in shares of RNB Infrastructure Pvt. Ltd. by the assessee during the earlier period of time i.e. in the A.Y. 2008-09 in the year of investment by the assessee. Therefore, we respectfully note that the benefit of case laws relied by CIT(A) having distinct and dissimilar facts and circumstances are not available for the Revenue in the present case. Accordingly, Ground No.4 of assessee on merits is allowed and AO is directed to delete the addition.
13. Since the facts and circumstances of Ground No.14 in ITA No.2598/Del/2022 are similar and identical to the ground no. 14 in the case of Smt. Lalita Bajaj, ITA No.2596/Del/2022 for A.Y. 2015-16 therefore, our conclusion drawn in the earlier appeal would apply mutatis mutandis to ground no.14 in ITA No.2596/Del/2022. Resultantly, AO is also directed to delete the addition of Rs.45,00,000/- in the later appeal accordingly, Ground No.14 of assessee in ITA No.2596/Del/2022 is also allowed.
14. Since neither the Learned Counsel of the assessee nor Learned CIT-D.R. has placed any arguments on the other grounds of the assessee, therefore, in absence of any arguments or submissions, we do not deem it proper to adjudicate the same in absence of any submissions from the parties.
15. In the result, appeals are allowed on merits in the manner as indicated above.
Order pronounced in the open court on 11.10.2023
Author Bio
