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2017 (4) TMI 1268 - AT - Income TaxAddition u/s 68 - unexplained cash credit - capacity and genuineness of parties - Held that - It is well established principle of law that once the transaction has taken place through banking channels, the genuineness of transaction cannot be disputed, as the assessee is not required to prove source of a source. We are adding here that it is always not sacrosanct because the assessee has to satisfy the ingredients of section 68 of the Act. However, the facts clearly indicates that the assessee has discharged its primary burden because the identity of the share subscribers, their capacity and genuineness of the transaction is not in doubt. Assessing Officer merely relied upon the information received from the investigation wing and did not made any independent enquiry. The Assessing Officer was expected to disprove the claim of the assessee with the help of evidence, if any, received from the investigation wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastening the liability upon anybody, the Department has to provide the authenticity of the information to the person against whom such information is used. The principle of natural justice, demands that without confronting the assessee of such evidence, if any, or the information, no addition can be made - Decided in favour of assessee.
Issues Involved:
1. Reopening of proceedings under Section 148 of the Income Tax Act, 1961. 2. Addition of ?20 lakh under Section 68 of the Income Tax Act, 1961 as unexplained cash credit. Issue-Wise Detailed Analysis: 1. Reopening of Proceedings under Section 148: The assessee challenged the reopening of proceedings under Section 148 of the Income Tax Act, 1961, arguing that the reassessment proceedings were invalid and bad in law. However, during the hearing, the counsel for the assessee did not press this ground, and the CIT-DR had no objection to this request. Consequently, this ground was dismissed as not pressed. 2. Addition of ?20 lakh under Section 68: The primary issue argued by the assessee's counsel was the addition of ?20 lakh made under Section 68 of the Income Tax Act, 1961, related to share application money received by the assessee. The assessee contended that they had duly filed the necessary confirmation and details, but the Assessing Officer made the addition based on statements from certain individuals without providing the assessee an opportunity for cross-examination, thus violating the principle of natural justice. The Revenue argued that the assessee failed to discharge the onus of proving the creditworthiness of the investing companies and the genuineness of the transaction. The Revenue relied on the investigation wing's information that the assessee received share application money from entities involved in providing accommodation entries. Tribunal's Analysis: - The Tribunal considered the submissions, material on record, and various judicial pronouncements. - It was noted that the assessee company, engaged in building and developing projects, had received share application money from M/s Yash V-Jewels Ltd. and M/s Alka Diamond Industries Ltd. totaling ?20 lakh. - The Tribunal highlighted that the assessee provided necessary details, including confirmations, bank statements, and ROC filings, to substantiate the share application money. - The Tribunal emphasized the importance of the principles laid down in various judicial precedents, including the decisions from the Hon'ble jurisdictional High Court and the Hon'ble Apex Court, which support the assessee's position if the identity of shareholders, genuineness of transactions, and creditworthiness are established. - The Tribunal noted that the Assessing Officer did not conduct an independent inquiry and relied solely on the investigation wing's information without providing the assessee an opportunity for cross-examination. - The Tribunal referred to the Hon'ble Supreme Court's decision in Andaman Timber Industries vs CCE, which held that not allowing cross-examination amounts to a serious flaw and violation of natural justice. - The Tribunal also referred to the Hon'ble Bombay High Court's decision in HR Mehta vs ACIT, reinforcing the necessity of providing an opportunity for cross-examination and the importance of natural justice principles. - The Tribunal concluded that the assessee had discharged the onus cast upon it under Section 68 by proving the identity, creditworthiness, and genuineness of the transactions. The onus then shifted to the Revenue, which failed to disprove the assessee's claims with concrete evidence. - The Tribunal found that the addition made under Section 68 was not justified, given the facts and the judicial precedents favoring the assessee. Conclusion: The Tribunal reversed the order of the Commissioner of Income Tax (Appeals) and allowed the assessee's appeal, concluding that the assessee had duly discharged the onus under Section 68, and the addition of ?20 lakh as unexplained cash credit was not justified. The appeal of the assessee was partly allowed.
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