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2007 (7) TMI 626 - HC - Income TaxIncome from undisclosed sources - share capital - failed to establish the credit-worthiness and genuineness of the transactions - Whether Tribunal was correct in law in deleting the addition made by the Assessing Officer u/s 68 - HELD THAT - As per findings of the Tribunal, the CIT(A) did not dispute the Assessee s contentions that payments have been made by account-payee cheques and addresses of the shareholders had been furnished. However, CIT(A) held that the assessee failed to establish the creditworthiness of the cash creditors and genuineness of the transactions. It is apparent from the order of the Tribunal that it has not gone into the question of credit worthiness of creditors and genuineness of the transaction. Since, in the present case, the Tribunal has not gone into credit worthiness of the creditors and genuineness of the transaction, it is a fit case which ought to be remanded to the Tribunal give its finding on these two issues. Learned counsel for the revenue has also stated during the course of argument that she has no objection if the matter is remanded on these issues. Thus, we remand the matter back to the Tribunal with directions to give its finding on creditworthiness of the creditors and genuineness of the transaction. Accordingly, the present appeal stands disposed of.
Issues: Challenge to deletion of addition under section 68 of the Income-tax Act, 1961 by the Income-tax Appellate Tribunal (ITAT).
Analysis: 1. The Revenue challenged the ITAT's order deleting the addition of Rs. 5,87,27,000 made by the Assessing Officer under section 68 of the Income-tax Act, 1961. The ITAT held that the assessee had duly identified and established the existence of share applicants, and no material was presented to doubt the genuineness of the shares issued by the assessee. 2. The Assessing Officer found credits of Rs. 5,87,27,000 in the balance sheet of the assessee, engaged in the business of growing mushrooms and manufacturing calcium carbonate. Despite opportunities, the assessee failed to provide confirmations substantiating the genuineness, credit-worthiness, and identity of the shareholders, leading to the addition under section 68 of the Act. 3. The CIT(A) upheld the addition, stating that the assessee did not establish the credit-worthiness and genuineness of the transactions to the satisfaction of the Assessing Officer. Subsequently, the ITAT, in a miscellaneous application, deleted the addition, emphasizing the lack of material to doubt the genuineness of the share issue by the assessee. 4. The contention was raised that the onus is on the assessee to prove the identity of the subscribers, creditworthiness, and genuineness of the transaction under section 68 of the Act. The assessee argued that addresses of shareholders were provided, payments were made through account-payee cheques, and cited a relevant court decision to support their position. 5. The Tribunal observed that the payments were made through account-payee cheques, and shareholder addresses were furnished. However, it did not delve into the creditworthiness of creditors and the genuineness of the transaction, prompting a remand to the Tribunal for findings on these crucial aspects. 6. Citing a previous case, the Court highlighted the importance of maintaining a balance between proving legitimacy and avoiding undue suspicion on subscribed capital. The Court outlined essential factors for the assessee to establish under section 68, emphasizing the need for thorough investigations by the Assessing Officer in case of doubts. 7. Consequently, the matter was remanded to the Tribunal for a determination on the creditworthiness of the creditors and the genuineness of the transaction. Both parties were directed to appear before the Tribunal on a specified date for further proceedings, leading to the disposal of the present appeal.
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