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2015 (7) TMI 153 - AT - Income TaxAddition u/s 68 - unexplained share capital /share premium - CIT(A) deleted the addition - Held that - Respectfully following the ratio laid down in the case of Nova Promoters And Finlease (P) Ltd. (2012 (2) TMI 194 - DELHI HIGH COURT ), we hold that Ld. CIT(A) is not justified in deleting the addition of R.30 lacs in as much as the respondent assessee had failed to establish conclusively three essential ingredients identity, genuineness and creditworthiness of share applicants. Further, Ld. CIT(A) had also failed to notice that the respondent assessee company failed to produce the Directors of share applicants before the A.O. As held by Hon ble Jurisdictional High Court in the case of Nova Promoters and Finlease (P) Ltd. that the ratio laid down by Hon ble Supreme Court in the case of Lovely Exports Pvt. Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA is not applicable and CIT(A) adopted wrong approach in allowing the appeal by holding that the A.O. had failed to point out source from which money was received by the assessee company before making addition u/s 68. Therefore, we are unable to uphold the order of CIT(Appeals) and hereby confirm the addition made by A.O. - Decided in favour of revenue.
Issues Involved:
1. Deletion of addition of Rs. 30,00,000/- under Section 68 of the Income Tax Act as unexplained share capital/share premium. 2. Failure to prove the identity, creditworthiness, and genuineness of transactions by the assessee. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68: The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted the addition of Rs. 30,00,000/- made by the Assessing Officer (A.O.) under Section 68 of the Income Tax Act. The A.O. had treated the share application money received from three companies as undisclosed income, doubting the genuineness and creditworthiness of the transactions based on information from the Investigation Wing. The CIT(A) allowed the appeal by the assessee, holding that the assessee had discharged its onus of proving the identity by filing copies of income tax returns, bank statements, and share application money. The CIT(A) relied on the decisions of the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. and the Hon'ble Delhi High Court in the case of CIT Vs Value Capital Services Pvt. Ltd. 2. Proof of Identity, Creditworthiness, and Genuineness: During the assessment proceedings, the A.O. doubted the genuineness of the transactions, as the business premises of the companies were the same as those of a known entry provider, Shri Tarun Goyal. The A.O. presumed that the assessee used unaccounted money to obtain book entries from these companies and added Rs. 30,00,000/- to the income of the assessee under Section 68. The assessee failed to produce the directors of the companies before the A.O. but submitted that the share applicants were corporate assessees, duly incorporated under the Companies Act, and assessed to income tax. The A.O. was not satisfied with the evidence provided and made the addition. The CIT(A) held that the assessee had discharged its onus by providing sufficient evidence and deleted the addition. However, the Revenue argued that the CIT(A) failed to appreciate the evidence gathered by the Department and that merely filing copies of share application forms and confirmation letters did not conclusively establish the genuineness of the transactions. Tribunal's Decision: The Tribunal referred to the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs Nova Promoters and Finlease (P) Ltd., which distinguished between cases where the A.O. has no material to discredit the particulars furnished by the assessee and cases where the A.O. has material that discredits the particulars and establishes a link between entry providers and the assessee. The Tribunal noted that in the present case, the A.O. had material showing the link between the entry providers and the assessee and that the assessee failed to produce the directors of the share applicant companies. The Tribunal concluded that the CIT(A) was not justified in deleting the addition as the assessee failed to establish the identity, genuineness, and creditworthiness of the share applicants. The Tribunal held that the CIT(A) adopted the wrong approach by holding that the A.O. failed to point out the source from which the money was received by the assessee before making the addition under Section 68. The Tribunal cited the Supreme Court's observation in the case of A. Govindarajulu Mudaliar Vs CIT, which states that if an assessee fails to prove the source and nature of certain cash receipts, the A.O. is entitled to infer that the receipts are of an assessable nature. Conclusion: The Tribunal allowed the appeal filed by the Revenue, confirming the addition of Rs. 30,00,000/- made by the A.O. under Section 68 of the Income Tax Act. The Tribunal held that the assessee failed to establish the identity, genuineness, and creditworthiness of the share applicants and that the CIT(A) erred in deleting the addition. Order Pronounced: The order was pronounced in the open court on 25th June, 2015.
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