No addition towards Unexplained cash credit u/s 68 can be sustained if cash did not pass at any stage and the respective parties did not receive cash nor did pay any cash
– Issue of addition towards Unexplained cash credit u/s 68
– When the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise.
– share capital and share premium received by the assessee during the year under consideration
– HELD THAT:- When the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise.
In our opinion, the ratio of this decision of the Hon’ble Jurisdictional High Court in the case of Jatia Investment Co. [1992 (8) TMI 16 – CALCUTTA HIGH COURT] is squarely applicable in the facts of the present case and the Ld. CIT(A) was fully justified in deleting the addition made by the AO u/s 68 by holding that the said provision was not applicable.
– Decided in favour of assessee.
“3.1. The Appellant Company most humbly and respectfully submits that the Assessing Officer was not justified in invoking the provisions of section 68 of the Income Tax Act, 1961 when the Appellant Company did not receive any stun of money for allotment of shares of the face value of ₹ 10/- each issued and allotted at a premium of ₹ 90/- each to the aforesaid two shareholders against the purchase of their investment in shares of Zest Marcom Private Ltd. vide two separate agreements both dated 27.03.2012 and that the assessee company did not receive any sum of money for such allotment of shares. The issue of the shares at premium of ₹ 6,00,00,000/- was recorded in the books of accounts of the Assessee Company by way of Book Entry.
It is submitted on behalf of the Appellant Assessee Company that the shares were issued to two corporate entities namely M/s. Gokul Realtors Pvt. Ltd and M/s. Arman Advisory Pvt Ltd and in consideration of such allotment of shares no cash was received.
The Appellant assessee company issued shares against the purchase of shares from the corporate entities; therefore, it is a book entry.
According to the law of the land prevailing during the relevant period, the consideration received in respect of the issue of shares was not in cash then the provision of section 68 of the Income Tax Act, 1961 cannot be invoked”.
6. The above submission made by the assessee was forwarded by the ld. CIT(Appeals) to the Assessing Officer for verification.
In the remand report submitted to the ld. CIT(Appeals), the Assessing Officer accepted on verification that there was no payment received by the assessee company against the issue of share capital along with premium by cash or through banking channel.
Keeping in view this finding of fact recorded by the Assessing Officer in the remand report and the ratio of the judicial pronouncements cited on behalf of the assessee-company including the decision of the Hon’ble Calcutta High Court in the case of Jatia Investment Co. –vs.- CIT [206 ITR 718], the ld. CIT(Appeals) held that section 68 had no application when the shares were allotted by the assessee-company under a barter system. He accordingly deleted the addition made by the Assessing Officer under section 68.
I.T.A. No. 2246/KOL/2017
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