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2015 (1) TMI 1054 - AT - Income TaxAddition u/s 68 - CIT(A) deleted the addition - whether investors are mere entry operators? Held that - We reach to a logical conclusion that the present case falls in the second category as the AO has not made any further enquiry or verification in regard to details, evidence and explanation submitted before him rejected and dismissed the same by only relying on the information of the Investigation Wing proceeded to make addition u/s 68 of the Act. Hence, we are inclined to hold that the present case is squarely covered in favour of the assessee by the decision of Hon'ble High Court of Delhi in the case of CIT vs. Gangeshwari Metal (2013 (1) TMI 624 - DELHI HIGH COURT) and we are unable to see any ambiguity, perversity or any other valid reason to interfere with the impugned order of the CIT(A). - Decided against revenue.
Issues Involved:
1. Deletion of addition of Rs. 30,00,000/- made by the AO under Section 68 of the Income Tax Act as unexplained credits. 2. Whether the investors were mere entry operators. Detailed Analysis: Issue 1: Deletion of Addition of Rs. 30,00,000/- under Section 68 of the Income Tax Act The Revenue's appeal contested the deletion of Rs. 30,00,000/- added by the Assessing Officer (AO) as unexplained credits under Section 68 of the Income Tax Act. The AO initiated proceedings under Section 147 based on information from the Investigation Wing, which indicated that the assessee received Rs. 30,00,000/- from four entities. Despite the assessee providing PAN numbers, copies of ITRs, audit reports, and affidavits of the directors of the investor companies, the AO rejected the explanation and made the addition, reasoning that the entities were involved in accommodation entries to route unaccounted money into business. The Commissioner of Income Tax (Appeals) [CIT(A)] overturned the AO's decision, stating that the assessee had discharged the initial onus of proving the bona fides of the transactions. The CIT(A) observed that the AO failed to provide evidence that the share application money represented the assessee's undisclosed income. The CIT(A) referenced judicial pronouncements, including the Supreme Court's decision in CIT vs. Divine Leasing & Finance Ltd., which held that if share application money is received from alleged bogus shareholders, the Department should reopen the individual assessments of the shareholders rather than adding the amount to the assessee's income. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s order, noting that the AO did not conduct further verification or inquiries into the details provided by the assessee. The ITAT emphasized that the AO relied solely on the Investigation Wing's report without independently verifying the evidence submitted by the assessee. The ITAT cited the Delhi High Court's decision in CIT vs. Goel Sons Golden Estate Pvt. Ltd., which underscored the necessity of the AO conducting inquiries and verifications before making additions under Section 68. Issue 2: Whether the Investors Were Mere Entry Operators The AO's addition was based on the premise that the investors were mere entry operators, facilitating accommodation entries to introduce unaccounted money into the assessee's business. The CIT(A), however, found no adverse evidence to substantiate this claim. The CIT(A) and ITAT noted that the AO did not provide any material to discredit the particulars furnished by the assessee, such as names, addresses, PAN numbers, and other relevant documents of the investor companies. The ITAT referenced the Delhi High Court's decision in CIT vs. Gangeshwari Metal (P.) Ltd., which distinguished cases where the AO conducts necessary inquiries from those where the AO merely rejects the evidence without further investigation. The ITAT concluded that the present case fell into the latter category, where the AO failed to verify the details and evidence provided by the assessee and instead relied on presumptions. Conclusion: The ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of Rs. 30,00,000/- under Section 68. The ITAT held that the AO did not conduct necessary inquiries or verifications and relied solely on the Investigation Wing's report. The ITAT found no evidence to prove that the investors were entry operators or that the transactions were accommodation entries. Consequently, the addition was not justified. The Cross-Objection filed by the assessee, aimed at supporting the CIT(A)'s order and addressing the legality of the notice under Section 148, was dismissed as it became redundant following the dismissal of the Revenue's appeal. Final Order: The appeal of the Revenue and the Cross-Objection of the assessee were dismissed. The order was pronounced in the open court on 11.12.2014.
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