ITAT Orders Deletion of Addition Made on Unexplained Cash Credits up to Rs. 5.76 crore
The Income Tax Appellate Tribunal (ITAT), New Delhi Bench, on 26 March 2021, in the case titled Mukesh Mittal (Appellant) v. Income tax Officer (Respondent) ordered deletion of the additions made on account of unexplained cash credits to the tune of Rs.5.76 crore.
The ITAT coram comprising of Accountant Member N.K. Billaiya and Judicial Member Sudhanshu Srivastava observed that the assessee has successfully discharged the onus cast upon him by provisions of Section 68 of the Income Tax Act (IT Act).
The factual background of the case is that the assessee had sold 7,50,000 shares of M/s Radford Global Ltd. for Rs. 5,99,40,819 against the purchase of 1,50,000 shares at Rs. 22,50,000 resulting into long term capital gains of Rs. 5,76,90,819/-.
The assessee was allotted 1,50,000 preferential shares at a price of Rs. 15 per share which included premium of Rs. 5 per share. The return declaring taxable income of Rs. 85,85,510 was filed through e-filing and was processed under Section 143(1) of the IT Act.
The assessee has declared income from house property, short term capital gain and other sources. He has also declared income from long term capital gains of Rs 5,83,61,303 which has been claimed exempt under Section 10(38) of the IT Act.
The Assessing Officer (AO) opined that the brokers and employees have admitted to the fact that they have artificially inflated the prices of the shares of their dummy companies to deliberately provide bogus accommodation entries of the long term capital gain/loss, short term capital gain/loss to the beneficiaries.
However, no such statement has been confronted or supplied to the assessee during the course of assessment proceedings. No specific statement has been referred to by the AO regarding the assessment or in the show cause notice extracted in the order of assessment.
An appeal was made before the Commissioner of Income Tax Appeals [CIT (A)] that did not accept the contention of assessee and following the rule of preponderance of probability dismissed the appeal of assessee.
The assessee approached the ITAT. It put reliance on the decision of the Supreme Court Supreme Court in the case of Adamine Construction (P) Ltd.99 Taxmann 45 wherein it held that "What is evident is that the AO went by only the report received and did not make the necessary further enquiries - such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO."
The ITAT directed the AO to accept the long term capital gain of Rs. 5,76,90,819 declared as such and allow exemption under Section 10(38) of the IT Act. It also deleted the addition made of Rs. 5,76,90,819 on account of unexplained cash credits under Section 68 of the IT Act.