2015 (4) TMI 181 - AT - Income Tax

Unexplained cash credit and expenditure - accommodation entries - entry operators - CIT(A) deleted the addition - Held that - All the shareholders are incorporated and registered with the concerned registar of companies under the Companies Act, 1956 and are allotted company identification number by the ROC, Ministry of Corporate Affairs, Government of India after they having completed necessary formalities and their status shown is active. He noted further that all the shareholders are income-tax assessees and are assessed to tax under jurisdiction of different Assessing Officers. The genuineness of the share subscription transaction is verifiable from I.T. Records, bank statements of the subscribers and all the share holders share application form, board s resulation etc. Besides, the shareholders have confirmed the share money transaction which were produced before the Assessing Officer. At the conclusion of the paragraph, the Learned CIT(Appeals) has directed the Assessing Officer to delete the addition on the basis that the assessee has established the identity of the 16 share-subscribers, their creditworthiness and genuineness of the share transactions with documentary evidence as per law. Also that the assessee explained and substantiated the nature and source of credits found credited in the books of account during the relevant financial year. In absence of rebuttal of these material findings of the Learned CIT(Appeals) by the Revenue, we do not find reason to interfere with the First Appellate Order in this regard. - Decided in favour of assessee. For addition as unexplained expenditure being commission @ 25 paise per 100 rupees paid for arranging entries of ₹ 3,85,00,000/-. Since this addition is consequential to the addition of ₹ 3,85,00,000/- being the accommodation entry, same is directed to be deleted as the main addition of ₹ 3,85,00,000/- has already been directed to be deleted - Decided in favour of assessee.

Issues Involved:
1. Validity of the order of the Learned CIT(Appeals).
2. Deletion of addition made under Section 68 of the Income-tax Act, 1961, amounting to Rs. 3,85,00,000 and Rs. 96,250 on account of unexplained expenditure.
3. Validity of notice issued under Section 148 of the Income-tax Act, 1961.
4. Onus of establishing the genuineness of the claimed share capital.
5. Reliance on statements made during the survey under Section 133A of the Income-tax Act, 1961.
6. Applicability of judicial precedents and case laws.

Detailed Analysis:

1. Validity of the Order of the Learned CIT(Appeals):
The Revenue questioned the order of the Learned CIT(Appeals) on the grounds that it was erroneous and contrary to facts and law. The Revenue argued that the CIT(Appeals) erred in deleting the additions made under Section 68 of the Income-tax Act, 1961, and ignored various evidences and statements that indicated the receipt of bogus share application money.

2. Deletion of Addition Made Under Section 68 and Unexplained Expenditure:
The Assessing Officer (AO) made an addition of Rs. 3,85,00,000 under Section 68 on account of unexplained cash credits and Rs. 96,250 on account of unexplained expenditure being commission paid for arranging entry of the said amount. The CIT(Appeals) deleted these additions, which was contested by the Revenue. The CIT(Appeals) noted that the share capital was duly accounted for in the books of accounts and disclosed in the audited balance sheet filed along with the return of income. The CIT(Appeals) also considered the statements of various individuals and found no direct evidence linking the assessee to the alleged bogus transactions. The CIT(Appeals) further noted that the statements of entry operators did not name the assessee company as a hawala operator and that the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the share applicants.

3. Validity of Notice Issued Under Section 148:
The CIT(Appeals) did not allow the objection of the assessee regarding the validity of the notice issued under Section 148 of the Income-tax Act, 1961, and the assessment made in furtherance thereto. The assessee preferred a cross-objection before the ITAT on this matter, but it was not pressed during the hearing and was subsequently dismissed as withdrawn.

4. Onus of Establishing the Genuineness of the Claimed Share Capital:
The Revenue argued that the assessee failed to discharge its onus to establish the genuineness of the claimed share capital. The CIT(Appeals), however, found that the assessee had furnished all necessary evidence, including audited balance sheets, income tax returns, statements of directors, and confirmations from shareholders. The CIT(Appeals) concluded that the assessee had satisfactorily explained the nature and source of the credits found in the books of accounts.

5. Reliance on Statements Made During the Survey:
The AO relied heavily on the statements made by the director of the assessee company and other entry operators during the survey under Section 133A. The CIT(Appeals) noted that these statements alone could not be the basis for making additions, especially when they were not supported by any corroborative evidence. The CIT(Appeals) emphasized that the statements recorded during the survey did not have evidentiary value unless supported by material findings.

6. Applicability of Judicial Precedents and Case Laws:
The CIT(Appeals) referred to various judicial precedents, including the judgments of the Hon'ble Supreme Court and High Courts, which held that additions could not be made solely based on statements recorded during surveys without corroborative evidence. The CIT(Appeals) also noted that the assessee had provided sufficient documentary evidence to establish the genuineness of the transactions, and the Revenue had not brought any material on record to dispute these evidences.

Conclusion:
The ITAT upheld the order of the CIT(Appeals) and dismissed the Revenue's appeal. The ITAT found that the CIT(Appeals) had thoroughly examined the evidence and provided detailed reasons for deleting the additions made by the AO. The ITAT also noted that the Revenue had not provided any rebuttal to the findings of the CIT(Appeals). Consequently, the appeal and cross-objection were dismissed, and the additions made under Section 68 and on account of unexplained expenditure were deleted.

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