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2014 (1) TMI 1767 - AT - Income TaxUnexplained cash credit u/s 68 - Held that - The assessee has provided PANs of the share applicants. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on this issue. In any case, even under the provisions of Section 68 of the Act, the assessee cannot be forced to prove the source of the source. The law on this subject is also settled by numerous decisions. The alleged report of the Inspector of the Department who is stated to have visited at the given addresses of the share applicants was never put or confronted to the assessee. The cumulative effects of these reasons is that the impugned addition cannot be added in the hands of the assessee company. Accordingly, we order to delete the entire additions and allow the appeal of the assessee.
Issues Involved:
1. Addition of share application money as unexplained income under Section 68 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Addition of Share Application Money as Unexplained Income under Section 68: The primary issue in this case pertains to the addition of share application money received by the assessee from various companies, which was treated as unexplained income under Section 68 of the Income Tax Act, 1961. The assessee filed a return of income for the assessment year 2009-10 declaring a total income of Rs. 7,54,65,640/-, which was subsequently assessed at Rs. 10,04,65,640/- by the Assessing Officer (AO). The AO added Rs. 2.50 crores to the returned income, considering it as unexplained income. Survey and Statement of Director: During a survey conducted under Section 133A of the Act at the business premises of the assessee on 18-07-2011, the director of the company, Shri Pramod Jain, admitted to receiving bogus share application money of Rs. 2.50 crores from seven companies during the financial year 2008-09. The details of the money received were provided, and the AO issued summons under Section 131 to verify the genuineness of the transactions. Assessee's Defense: The assessee argued that the share application money was received through proper banking channels, and the share applicants were duly registered companies with valid PANs, regularly filing income tax returns. The assessee provided detailed information, including the names, addresses, PANs, and bank details of the share applicants, and submitted that the share certificates were issued to these companies. The assessee also contended that the statement of Shri Pramod Jain was not voluntary and lacked evidentiary value. AO's Findings: Despite the assessee's submissions, the AO was not satisfied and conducted further inquiries, concluding that the parties were not genuine. Consequently, the AO added the amount of Rs. 2.50 crores to the assessee's income, holding that the identity and creditworthiness of the share applicants were not proved. CIT(A)'s Decision: The assessee appealed to the Commissioner of Income Tax (Appeals), who upheld the AO's decision, confirming the addition of Rs. 2.50 crores as unexplained income. Tribunal's Analysis: The Tribunal examined the case in light of the legal provisions and precedents. It noted that the share applicants were identified, and their PANs were provided. The mode of payment was explained, and there was no direct or indirect relationship between the assessee and the share applicants. The Tribunal emphasized that statements recorded during the survey had no evidentiary value and that the assessee could not be forced to prove the source of the source under Section 68. The Tribunal also observed that the alleged report of the Inspector, who visited the addresses of the share applicants, was never confronted to the assessee. Legal Precedents: The Tribunal referred to several judgments, including: - CIT vs. Shree Barkha Synthetics Ltd. (2004) 270 ITR 477 (Raj.) - CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR 308 (SC) - CIT vs. Orissa Corporation Limited (1986) 159 ITR 78 (SC) These judgments established that if the share applicants are identified and the transactions are through banking channels, the burden shifts to the Revenue to prove that the investment is the assessee's own money. Conclusion: Based on the cumulative effect of the reasons and the legal precedents, the Tribunal concluded that the addition of Rs. 2.50 crores could not be sustained. The Tribunal ordered the deletion of the entire addition and allowed the appeal of the assessee. Final Order: The appeal of the assessee was allowed, and the addition made by the AO was deleted. The order was pronounced in the open Court on 24-01-2014.
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