2010 (3) TMI 900 - AT - Income Tax

Addition under section 68 Cash credit - Assessing Officer noticed that the assessee had shown to have received share capital from the shareholders - When the assessee was called upon to explain the sources of investment towards share capital assessee had explained the sources of shareholders-wise deposit Held that - Identity of share applicants is beyond doubt and further that they have admitted to have given money to the assessee-company then onus is discharged by the assessee-company - The Assessing Officer thereafter having not brought any material on record to show that it was the assessee-company s money which was routed back as share application money, addition cannot be sustained in its hands - assessee has discharged the initial onus put on it under section 68 of the Act and the Revenue having brought no cogent material addition deleted

Summary

Issues Involved:
1. Validity of the order passed by the Commissioner of Income-tax (Appeals).
2. Consideration of submissions and facts by the Commissioner of Income-tax (Appeals).
3. Addition in respect of share capital induction.
4. Addition of unexplained cash credits under section 68 of the Act.
5. Levy of interest under sections 234B and 234C.

Detailed Analysis:

1. Validity of the Order Passed by the Commissioner of Income-tax (Appeals):
The assessee contended that the order passed by the learned Commissioner of Income-tax (Appeals)-II, Patna was "unjust, unwarranted and bad in law." The Tribunal reviewed the detailed findings and the basis on which the Commissioner of Income-tax (Appeals) upheld the additions made by the Assessing Officer.

2. Consideration of Submissions and Facts by the Commissioner of Income-tax (Appeals):
The assessee argued that the Commissioner of Income-tax (Appeals) failed to appreciate or consider the submissions and facts presented. The Tribunal noted that the Commissioner of Income-tax (Appeals) had indeed considered the submissions made by the assessee, including the explanations regarding the sources of share capital and the agricultural income claimed by the shareholders.

3. Addition in Respect of Share Capital Induction:
The Assessing Officer had added Rs. 42,98,442 to the income of the assessee as unexplained cash credits under section 68 of the Act, citing insufficient evidence to substantiate the sources of share capital. The Tribunal examined the detailed explanations provided by the assessee regarding the sources of the share capital, including the agricultural income of the shareholders and the transactions conducted through banking channels.

4. Addition of Unexplained Cash Credits Under Section 68 of the Act:
The Tribunal referenced its previous decision in the assessee's own case for the assessment year 2001-02, where similar additions were made and later deleted by the Tribunal. The Tribunal reiterated that the identity of the shareholders was established, and the shareholders had confirmed their investments. The Tribunal emphasized that the onus was on the Revenue to disprove the genuineness of the transactions and the creditworthiness of the shareholders. The Tribunal found that the assessee had discharged its initial onus under section 68 and that the Revenue had not provided sufficient evidence to counter the assessee's claims.

5. Levy of Interest Under Sections 234B and 234C:
The Tribunal addressed the levy of interest under sections 234B and 234C, noting that these were mandatory levies and not penal in nature. The Tribunal directed the Assessing Officer to allow consequential relief while giving effect to the Tribunal's order.

Conclusion:
The Tribunal concluded that the assessee had discharged its initial onus under section 68 of the Act regarding the share capital induction. The Tribunal directed the deletion of the addition of Rs. 42,98,442 and allowed the assessee's appeal partly, while also directing the Assessing Officer to provide consequential relief concerning the interest levied under sections 234B and 234C.