DCIT Vs Vedanta Resources Pvt. Ltd (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata dismissed the Revenue’s appeal and upheld the order of the Commissioner of Income Tax (Appeals) deleting an addition of ₹4,81,50,000 made under Section 68 of the Income-tax Act on account of alleged bogus sale of shares. The Tribunal also dismissed the assessee’s cross-objection after setting aside the CIT(A)’s direction to estimate a 5% profit element on the sale consideration, holding that such direction lacked any substantive basis.
The case arose after two companies merged with the assessee pursuant to a Calcutta High Court order with effect from 1 April 2013. Based on information received from the Investigation Wing that the amalgamating companies had received funds that had allegedly escaped assessment before the merger, the Assessing Officer reopened the assessment under Sections 147 and 148. The Assessing Officer concluded that the sale of unlisted equity shares by one of the amalgamating companies, amounting to ₹4,81,50,000, was a false and sham transaction and treated the sale proceeds as unexplained cash credit under Section 68.
Before the CIT(A), the assessee submitted that the investments had been acquired in earlier years and were reflected as non-current investments in the balance sheets. The investments had already been accepted by the Department in scrutiny assessments for earlier assessment years. During the relevant year, only a portion of these existing investments was sold. The assessee produced valuation reports, sale bills, bank statements, confirmations from purchasers, audited financial statements, PAN details, MCA records, and evidence showing that the purchasers existed and had responded to notices issued by the Assessing Officer. The transactions were carried out through banking channels, and the Assessing Officer did not dispute the valuation reports or the existence of the investments.
