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2012 (12) TMI 762 - HC - Income TaxUnexplained income u/s 68 - CIT(A) deleted the addition - Held that - An assessee s duty to establish that the amounts which the AO proposes to add back, u/s 68 are properly sourced, does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant s PAN particulars, or bank account statement, surely its relationship is closer than arm s length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be reopening of such investor s proceedings. That apart, the concept of shifting onus does not mean that once certain facts are provided, the assesse s duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68. As decided in A. Govindarajulu Mudaliar v CIT, (1958 (9) TMI 3 - SUPREME COURT) whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature - Having regard to the totality of facts and circumstances, particularly the remand report, which was not considered by the CIT (A) and the ITAT in its proper perspective, this Court is of the opinion that the question of law requires to be answered in favour of the revenue.
Issues Involved:
1. Whether the Tribunal erred in directing the deletion of the sum brought to tax by the AO as unexplained income under Section 68 of the Income Tax Act. Detailed Analysis: 1. Tribunal's Alleged Error in Deleting the Sum as Unexplained Income: The revenue was aggrieved by the ITAT's order which dismissed its appeal and directed the deletion of the sum added by the AO as unexplained income under Section 68. The primary question of law was whether the Tribunal erred in this decision. Facts and Procedural History: The assessee filed its return for AY 2004-05 declaring a loss of Rs. 42,793. The case was reopened, and the AO issued a notice under Section 148, eventually framing the assessment under Sections 147/144 and adding back Rs. 35,00,000 under Section 68. The assessee appealed to the Commissioner of Appeals, who sought a remand report. The remand report highlighted the failure of the parties to comply with summons under Section 131 and the lack of evidence to prove the identity, creditworthiness, and genuineness of the transactions. Commissioner of Appeals' Findings: The Commissioner concluded that the assessee had furnished all relevant particulars of the share applicants, including PAN details, which revealed that the investors were filing income tax returns. The Commissioner found that the AO could not conclusively prove that the investors were entry providers or that the transactions were bogus. The Commissioner also noted that no opportunity was given to cross-examine the deponents. Consequently, the addition under Section 68 was set aside. ITAT's Decision: The ITAT rejected the revenue's appeal, emphasizing that the assessee had provided sufficient evidence to prove the identity and creditworthiness of the share applicants. The Tribunal relied on the Supreme Court ruling in Commissioner of Income Tax v. Lovely Exports, which stated that once the assessee provides the PAN and other documentary evidence, the onus shifts to the revenue. Revenue's Arguments: The revenue argued that the Tribunal failed to appreciate that the corroborative evidence furnished by the assessee was worthless. The remand report indicated that summons under Section 131 were returned unserved, and the share applicants did not attend the proceedings. The revenue also highlighted that the assessee, a stock broker, did not engage in stock transactions but received dividends and did not declare any dividends to its shareholders. Assessee's Defense: The assessee contended that it had discharged its initial onus by providing the addresses, PAN particulars, and other details of the share applicants. The burden of proving that the amounts were unexplained income lay with the revenue, which it did not discharge. Court's Analysis and Conclusion: The court referred to the principles laid down in Lovely Exports and other precedents, emphasizing that the assessee must prima facie prove the identity, genuineness, and creditworthiness of the share applicants. The court noted that the remand report was exhaustive and highlighted the failure of the share applicants to respond to summons and the lack of business activity by the assessee. The court concluded that the Tribunal and the Commissioner (Appeals) did not consider the remand report properly. Therefore, the question of law was answered in favor of the revenue, and the appeal was allowed. Conclusion: The court allowed the revenue's appeal, stating that the Tribunal erred in directing the deletion of the sum brought to tax by the AO as unexplained income under Section 68. The court emphasized the importance of thoroughly investigating the creditworthiness and genuineness of the transactions and the necessity for the assessee to provide substantial evidence beyond mere PAN details and addresses.
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