2013 (4) TMI 657 - AT - Income Tax

Unexplained cash credit - addition u/s. 68 - Held that - Assessee company has submitted that the share application money was received through the proper banking channel. The above also establishes the identity of the share application money provider company which are duly incorporated Company under the Companies Act. In this regard, confirmation by way of affidavit, PAN No., resolution passed by the share application provider company and the evidence of share allotment to the share company provided by the assessee company was duly submitted. In this regard, we note that Assessing Officer has not made any further independent enquiries to substantiate that the assessee has received bogus share application entry. Thus as decided in CIT Vs. Lovely Exports 2008 (1) TMI 575 - SUPREME COURT OF INDIA that that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. Also see C.I.T. vs. Gangeshwari Mtetal (P) Ltd. 2013 (1) TMI 624 - DELHI HIGH COURT & C.I.T. vs. Goel Sons Golden 2013 (4) TMI 571 - DELHI HIGH COURT . Thus as Assessee has submitted enough cogent material before the AO which substantiate the identity, creditworthiness and genuineness of the transactions who in turn has not done any exercise to bring on record any evidence which refute the above submissions of the assessee - In favour of assessee.

Summary

Issues Involved:
1. Addition of unexplained cash credit under section 68 of the Income Tax Act.
2. Confirmation of share application money received by the assessee from two Private Limited Companies.

Analysis:

Issue 1: Addition of unexplained cash credit under section 68 of the Income Tax Act:
The Revenue's appeal challenged the deletion of an addition of Rs. 20,00,000 made by the Assessing Officer to the income of the assessee on account of unexplained cash credit under section 68 of the Income Tax Act. The Revenue contended that the assessee received accommodation entries from entry operators, leading to suspicion. However, the assessee provided documents establishing the identity, creditworthiness, and genuineness of the transactions. The Commissioner of Income Tax (Appeals) noted that the assessee had submitted sufficient documents, including bank statements, affidavits, and resolutions, to substantiate the legitimacy of the share application money received. The Commissioner held that the money was received through proper banking channels, and the Assessing Officer failed to provide evidence to prove the funds were undisclosed income. The Commissioner referred to relevant case laws and concluded that the initial onus was discharged by the assessee, leading to the deletion of the addition.

Issue 2: Confirmation of share application money received by the assessee from two Private Limited Companies:
The Appellate Tribunal noted that the assessee company had received share application money from two Private Limited Companies, submitting detailed documentation to support the legitimacy of the transactions. The Tribunal observed that the Assessing Officer did not conduct independent inquiries to verify the genuineness of the share application money. Citing relevant case laws, the Tribunal emphasized the importance of proper investigation by the Assessing Officer and upheld the Commissioner's decision to delete the addition. The Tribunal found that the material submitted by the assessee substantiated the identity, creditworthiness, and genuineness of the transactions, while the Assessing Officer's lack of inquiry rendered the addition baseless.

In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the Commissioner's decision to delete the addition of unexplained cash credit, emphasizing the importance of thorough investigation and substantiated evidence in such cases. The Cross Objection filed by the assessee was dismissed as not pressed.