Key takeaway: Investments accepted in earlier years are strong evidence against calling their later sale proceeds bogus under Section 68.
1. Core Facts & Background
- The assessee received sale consideration on the disposal of unlisted equity shares during the relevant period.
- The underlying investments had been acquired in earlier financial years and consistently disclosed in books of account.
- The assessee maintained a regular pattern of investment activities with movement of investments documented across multiple years.
- All sale proceeds were transacted through regular banking channels and the investments had been accepted in prior scrutiny assessments.
2. Revenue / Department’s Action
- The Assessing Officer made an addition under Section 68 treating the entire sale proceeds as unexplained cash credits.
- Revenue alleged that the purchasing entities were shell or paper companies facilitating accommodation entries.
- The department contended that the transactions lacked commercial substance under the test of human probabilities.
- Revenue appealed against the deletion of the addition, arguing that the investments were fictitious from their inception.
3. Assessee’s Defense & Arguments
- The assessee provided comprehensive documentation including purchase and sale bills, bank statements, and audited financial statements.
- The identity, creditworthiness, and genuineness of the purchasers were substantiated with tax returns, registered addresses, and confirmations.
- The purchasing entities independently complied with and responded to statutory verification notices issued by the department.
- The assessee maintained that historic acceptance of the investments in earlier scrutiny proceedings supported the genuineness of the subsequent realization.
4. Final Ruling & Outcome
- The appellate authority affirmed that while earlier acceptance of investments does not create an absolute bar against inquiry, it serves as relevant evidence against allegations of fictitious origin.
- The addition under Section 68 cannot be sustained on suspicion or generalized allegations without independent evidence proving the funds represented the assessee’s undisclosed income.
- The appeal of Revenue was dismissed since the findings of fact were supported by comprehensive evidence and raised no substantial question of law.
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This summary is for general information only and is not legal advice. Please check the full order or notification before acting on it.
