2011 (3) TMI 954 - AT - Income Tax

Addition - Unexplained credit - Share application money and money received against sale of shares - The A.O. refers to an enquiry conducted by the investigation wing of the department, no attempt is made by him to establish the fact that the money in question has originated from the coffers of the assessee company - Merely casting a shadow of doubt is not sufficient to charge the assessee with the tax liability without collecting positive evidences to covert the doubts into a real act of tax evasion - Hence, the addition is not sustainable and is accordingly being deleted.

Issues Involved:
1. Legality of the reopening of the case under sections 147/148 of the Income-tax Act.
2. Deletion of the addition of Rs.25,00,000/- made by the Assessing Officer under section 68 of the Income-tax Act.

Detailed Analysis:

Issue 1: Legality of the Reopening of the Case under Sections 147/148
The assessee argued that the reopening of the assessment under sections 147/148 was improper as the Assessing Officer (A.O.) did not record proper reasons and merely acted on information received from the investigation wing. The original return was filed on 30.12.2001, and the case was reopened on 18.3.2008 based on information that the assessee was a beneficiary of accommodation entries. The A.O. issued a notice under section 148 and completed the assessment on 30.12.2008, adding Rs.25,00,000/- under section 68 and Rs.6,250/- as commission allegedly paid to entry operators.

The revenue countered that the original assessment was not completed under section 143(3), and the information from the investigation wing was sufficient to form a reason to believe that income had escaped assessment. The Tribunal held that the information received constituted fresh information, and the A.O. had properly recorded reasons and applied his mind. The correctness and sufficiency of reasons need not be considered at the initiation stage. Thus, the cross-objection of the assessee was dismissed.

Issue 2: Deletion of the Addition of Rs.25,00,000/- under Section 68
The revenue contended that the assessee failed to prove the source, creditworthiness of the creditors, and genuineness of the transactions. The A.O. had made an addition of Rs.25,00,000/- as unexplained cash credit on account of share capital and sale proceeds of shares.

The assessee provided extensive documentation to support the transactions, including confirmations, board resolutions, PAN copies, income tax returns, and audited balance sheets for the relevant parties. The CIT (A) had deleted the addition, relying on several judicial precedents, including CIT vs. Stellar Investment, CIT vs. Lovely Exports (P) Ltd., CIT vs. Orissa Corporation Ltd., and CIT vs. Gujarat Heavy Chemicals Ltd. The CIT (A) observed that the A.O. had not established that the money originated from the assessee company and merely casting doubt was insufficient without positive evidence.

The Tribunal, referencing the Delhi High Court's decision in Oasis Hospitalities (Pvt.) Limited, held that the primary onus was discharged by the assessee by providing necessary documentation. The A.O. did not confront the assessee with the investigation findings nor provided an opportunity to cross-examine the persons whose statements were recorded. The Tribunal found that the facts of the assessee's case were similar to those in Oasis Hospitalities and other cited cases, where the High Court had ruled in favor of the assessee.

Conclusion:
The Tribunal dismissed both the revenue's appeal and the assessee's cross-objection. The reopening of the assessment under sections 147/148 was deemed proper, and the deletion of the addition of Rs.25,00,000/- under section 68 was upheld, as the assessee had sufficiently discharged the onus of proving the genuineness of the transactions and the creditworthiness of the creditors.

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