Tribunal deletes unexplained cash-credit addition on sale of shares where earlier investment was accepted

5-Second Takeaway

The Tribunal deleted the section 68 addition, holding that share investments accepted in earlier assessment proceedings could not later be treated as unexplained when the same shares were sold by the amalgamating companies and sale proceeds were received by them. It also held that the buyers had responded to summons under section 131 with confirmations and supporting evidence, and the CIT(A) additions were therefore unsustainable.

The dispute concerned additions made under section 68 on the footing that the assessee had sold private equity shares and booked unexplained cash credit. The shares in question had originally been held by amalgamating companies that later merged with the assessee under an NCLT order.

The Tribunal noted that the investments had already been accepted by the Department in earlier assessment years, including an assessment completed under section 143(3). It also recorded that the sale of the investments was made by the amalgamating companies themselves and that the sale consideration was received by those companies.

Further, the share purchasers had been summoned under section 131 and had replied with confirmations and supporting evidence. In that setting, the Tribunal held that the Revenue could not doubt the same investment in the year of sale and treat it as unexplained cash credit.

Following its earlier decision in the assessee group’s case, the Tribunal deleted the additions sustained by the CIT(A).