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2015 (6) TMI 179 - AT - Income TaxReopening of assessment - addition u/s. 68 - Held that - Once the identity of the share holder have been established, even if there is a case of bogus share capital, it cannot be added in the hands of company unless any adverse evidence is not on record. The facts and circumstances of the present case are similar and identical to that of the aforesaid case i.e. ITO vs. Neelkanth Finbuiltd Ltd. (2015 (6) TMI 163 - ITAT DELHI) in which both of the Members were the parties wherein the issues in dispute are decided in favor of the assessee. Respectfully, following the precedent of the Coordinate Bench as aforesaid, we quash the orders of the authorities below and delete the addition of ₹ 30,00,000/- made u/s. 68 of the Act by the AO on the allegation of unexplained credits of share application - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the AO under Section 143(3)/147 of the Income Tax Act. 2. Addition of Rs. 30,00,000/- under Section 68 of the Income Tax Act for unexplained credits of share application money. 3. Proof of identity, creditworthiness of the creditor, and genuineness of the transaction. 4. Ignoring the remand report submitted by the AO. Detailed Analysis: 1. Jurisdiction of the AO under Section 143(3)/147 of the Income Tax Act: The assessee contested the jurisdiction of the AO in issuing the notice under Section 148 and completing the assessment under Section 143(3)/147. However, during the hearing, the assessee's counsel stated that they were not pressing this issue. Consequently, the tribunal dismissed this ground as not pressed. 2. Addition of Rs. 30,00,000/- under Section 68 of the Income Tax Act for unexplained credits of share application money: The AO added Rs. 30,00,000/- to the assessee's income under Section 68, alleging that the share application money received was unexplained. The AO based this addition on the failure of the assessee to produce the parties for cross-verification and the lack of bank account details of those parties. The CIT(A) upheld this addition, leading the assessee to appeal to the tribunal. The tribunal considered the assessee's argument that the issue was covered in their favor by the decision in the case of ITO vs. Neelkanth Finbuild Ltd. The tribunal found that the assessee had provided sufficient documentary evidence, including confirmations, PAN details, and bank statements, to prove the identity and creditworthiness of the share applicants and the genuineness of the transactions. 3. Proof of identity, creditworthiness of the creditor, and genuineness of the transaction: The AO and CIT(A) held that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. However, the tribunal noted that the assessee had produced the directors of the investing companies, who confirmed the investments and explained the mode and manner of the investments. The tribunal emphasized that the AO had accepted these confirmations in the remand report, which was ignored by the CIT(A). The tribunal referenced the decision in the case of ITO vs. Neelkanth Finbuild Ltd., where it was held that once the assessee provides sufficient documentary evidence to prove the identity and creditworthiness of the investors and the genuineness of the transactions, the onus shifts to the revenue to disprove the evidence provided by the assessee. The tribunal found that the AO and CIT(A) did not bring any adverse material to disprove the evidence submitted by the assessee. 4. Ignoring the remand report submitted by the AO: The assessee argued that the CIT(A) ignored the remand report submitted by the AO, which confirmed the identity and creditworthiness of the investors and the genuineness of the transactions. The tribunal found merit in this argument, noting that the remand report clearly supported the assessee's case. Conclusion: The tribunal quashed the orders of the AO and CIT(A) and deleted the addition of Rs. 30,00,000/- made under Section 68 of the Income Tax Act. The tribunal allowed the appeal of the assessee, emphasizing that the assessee had discharged its onus of proving the identity, creditworthiness, and genuineness of the share application money received. The tribunal also dismissed the preliminary objection raised by the DR regarding the defect in Form No. 35, citing a precedent where such procedural defects do not affect the substantial rights of the assessee. Order: The appeal filed by the assessee was allowed, and the addition of Rs. 30,00,000/- was deleted. The order was pronounced in the open court on 29/5/2015.
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