2013 (9) TMI 1107 - HC - Income Tax

Additions of unsecured loan, share capital and share application money - Held that - It is not the case of the revenue that these persons are entry providers and there was any other material or doubt that these were bogus entries routed through fictitious or name lenders. Assessing officer did not conduct any investigation by sending Inspector to the addresses and nothing has been brought on record to show steps or attempt by the assessing officer to go deeper and find out/check veracity of the assertion. The share application money addition is not in isolation but has to be examined with other additions on similar grounds. Absence of verification, different additions made and reasoning given for deleting the additions are plausible.

Summary

Issues:
Delay in filing appeal, additions made by assessing officer, genuineness of loans received, share capital allotment, share application money received.

Delay in filing appeal:
The appeal by the revenue under Section 260A of the Income Tax Act, 1961 relates to the assessment year 2007-08. There was a delay of 21 days in filing the appeal and a delay of 35 days in re-filing. The delay was condoned after the respondent's counsel stated no objection. The applications for condonation of delay were disposed of.

Additions made by assessing officer:
The assessing officer made additions of unsecured loan, share capital, and share application money. The respondent claimed to have received a loan from various persons, and details of each transaction were presented. The assessing officer rejected the genuineness and creditworthiness of the transactions, but the Commissioner of Income Tax (Appeals) provided detailed information and verified the addresses of the creditors, finding them to be correct.

Genuineness of loans received:
Specific details about each loan transaction were presented, including the source of funds and the capacity of the lenders to advance the loans. The Commissioner of Income Tax (Appeals) reviewed the income tax returns, statements, and other documents of the lenders to establish the genuineness of the transactions. The assessing officer's lack of further inquiry and verification raised concerns, but no evidence suggested that the loans were bogus or routed through fictitious entities.

Share capital allotment:
Details of the persons allotted share capital were provided, along with their backgrounds and financial information. The Commissioner (Appeals) scrutinized the details of each shareholder, including their income tax returns and bank statements, to verify the legitimacy of the share capital allotment. There was no indication that the share capital was paid through suspicious means or incorrect details.

Share application money received:
The respondent received share application money from four individuals, and documentation including income tax returns, PAN numbers, addresses, and share application forms were submitted. However, the assessing officer did not conduct further inquiries or verification, despite the lack of evidence suggesting that the transactions were dubious. The Tribunal found the assessing officer's actions lacking and upheld the deletion of the additions made by the assessing officer.

In conclusion, the High Court dismissed the appeal, as there was no substantial question of law arising from the case. The Tribunal's decision was deemed reasonable, considering the lack of evidence supporting the revenue's claims of illegitimacy in the loans received, share capital allotment, and share application money. The judgment highlighted the importance of thorough verification and investigation by assessing officers to establish the authenticity of financial transactions.