2011 (8) TMI 1148 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 25,00,000/- made by the A.O. u/s 68 of the I.T. Act, 1961.
2. Justification of ld. C.I.T.(A) in allowing relief to the assessee.

Summary:

Issue 1: Deletion of Addition of Rs. 25,00,000/- u/s 68 of the I.T. Act, 1961

The department filed an appeal against the order of ld. C.I.T.(A)-I, Kolkata, which deleted the addition of Rs. 25,00,000/- made by the A.O. u/s 68 of the I.T. Act, 1961. The A.O. had treated the share application money received by the assessee-company as unexplained cash credit, alleging it was the undisclosed cash of the assessee circulated through various layers. The assessee provided details of share applicants, including PAN, bank statements, and other documents to prove the genuineness and creditworthiness of the transactions. The ld. C.I.T.(A) deleted the addition, relying on judicial precedents, including the decision of the Apex Court in CIT vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC).

Issue 2: Justification of ld. C.I.T.(A) in Allowing Relief to the Assessee

The ld. C.I.T.(A) observed that the assessee had discharged its onus by furnishing details of share capital raised, bank statements, and income tax returns of the investing parties. The ld. C.I.T.(A) concluded that the share capital raised could not be treated as the undisclosed money of the assessee u/s 68 of the Act. The Tribunal upheld this view, noting that the assessee had proved the identity, genuineness, and creditworthiness of the share applicants. The Tribunal emphasized that the initial burden of proof lay on the assessee, which was satisfactorily discharged. The department failed to provide any cogent material to discredit the documents produced by the assessee.

The Tribunal referred to several judicial pronouncements, including CIT vs. Oasis Hospitalities P. Ltd. [(2011) 333 ITR 119 (Del)], Barkha Synthetics Ltd. vs. ACIT [2005] 197 CTR 432 (Raj.), and the Apex Court's decision in CIT vs. Daulat Rant Rawatmuli [87 ITR 349 (SC)], to support its conclusion. The Tribunal held that the A.O.'s suspicion was based on surmises and conjecture without any substantive evidence. The Tribunal also cited the Third Member decision of I.T.A.T., Jodhpur Bench in the case of Polymers (P) Ltd. vs. DCIT [111 TTJ 112], which held that the burden to prove that the money did not belong to the share applicants but to the assessee lay on the revenue.

Conclusion:

The Tribunal dismissed the department's appeal, upholding the order of the ld. C.I.T.(A) and confirming the deletion of the addition of Rs. 25,00,000/- made by the A.O. u/s 68 of the Act. The Tribunal found no infirmity in the ld. C.I.T.(A)'s decision and rejected the grounds of appeal taken by the department. The order was pronounced in the open Court on 12.08.2011.