9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (12) TMI 385 - AT - Income TaxDeletion of addition on share application money received Amount to be treated as unexplained credit or not - Reopening was based on the information received from Investigation Wing with regard to share application money received by assessee - Held that - Assessee has filed the relevant details which it could have filed in support of its contention of having received the share application money from each of these shareholder companies - it cannot be said that these companies were not in existence at the given addresses - The documents filed with the Registrar of Companies show that these companies were active during the relevant period AO has not verified any of the relevant documents submitted by AO for discharging onus u/s 68 the AO has not referred nor discussed about the so-called statement of entry providers against the assessee company - it is also not known whether assessee s name figured in that statement - the information received by him from the Investigation department has been made the basis of addition without any further investigation - even the process of examination of the directors by issue of summons has not been taken to the logical end as after the failure of the directors to attend in response to the summons issued to them no further steps were taken. Relying upon CIT vs Fair Finvest Ltd 2012 (12) TMI 170 - DELHI HIGH COURT - the AO has not been able to bring on record any valid material or evidence to discredit the evidences and the explanation given by the assessee company - the only evidence which has been referred by the AO is statement of third parties recorded by the Investigation Wing - these statements were not recorded by the AO but were recorded by the Investigation Wing at the back of the assessee - The AO has not even referred to the relevant portion of such statement so as to establish the collusive arrangement the assessee company had with these persons thus, the order of the CIT(A) is upheld in deleting the addition Decided against revenue.
Issues Involved:
1. Validity of the reopening of the assessment under section 148 of the Income-tax Act, 1961. 2. Genuineness and creditworthiness of the share application money received by the assessee. 3. Burden of proof in establishing the genuineness of the transactions under section 68 of the Income-tax Act, 1961. 4. Adequacy of the Assessing Officer's investigation and adherence to the principles of natural justice. Issue-wise Detailed Analysis: 1. Validity of the reopening of the assessment under section 148 of the Income-tax Act, 1961: The case was reopened based on information received from the Investigation Wing regarding share application money received by the assessee. The reopening notice was issued on 19.02.2010, for the original return filed on 02.11.2003. The information indicated that the assessee had received accommodation entries from certain entities, which led to the reopening of the assessment. 2. Genuineness and creditworthiness of the share application money received by the assessee: The Assessing Officer (AO) added Rs. 60,00,000 as unexplained credit under section 68 of the Income-tax Act, 1961, asserting that the assessee failed to prove the genuineness of the share application money received from various companies. The AO issued summons to the directors of these companies, but none attended. Despite the share application money being received through banking channels, the AO concluded that the companies were mere conduits for providing bogus accommodation entries, as evidenced by the low balances in their bank accounts and the lack of business activity. 3. Burden of proof in establishing the genuineness of the transactions under section 68 of the Income-tax Act, 1961: The CIT(A) deleted the addition, holding that the assessee had discharged its initial onus by providing comprehensive documentation, including copies of share application forms, bank statements, income tax returns, PAN cards, balance sheets, and other relevant documents. The CIT(A) emphasized that the AO failed to bring any valid material evidence to disprove the assessee's claim. The CIT(A) cited various legal precedents, including the Supreme Court's decision in CIT v. Lovely Exports (P) Ltd., which held that if the identity of the shareholders is established, the burden shifts to the Revenue to disprove the claim. 4. Adequacy of the Assessing Officer's investigation and adherence to the principles of natural justice: The CIT(A) criticized the AO for not providing the assessee with an opportunity for cross-examination and for not conducting a thorough investigation. The AO's reliance on information from the Investigation Wing without further verification was deemed inadequate. The CIT(A) highlighted that the AO did not verify the documents submitted by the assessee or conduct field inquiries to establish the non-existence of the companies. The CIT(A) referenced several case laws underscoring the importance of providing a fair hearing and the necessity for the AO to confront the assessee with any material collected at the back of the assessee. Conclusion: The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 60,00,000, concluding that the assessee had provided sufficient evidence to discharge its onus under section 68. The AO's failure to conduct a proper inquiry and the lack of material evidence to discredit the assessee's documentation were key factors in the decision. The appeal by the Revenue was dismissed, reinforcing the principle that the burden of proof shifts to the Revenue once the assessee provides prima facie evidence of the genuineness of the transactions.
|
