2015 (12) TMI 1453 - AT - Income Tax

Addition u/s 68 - CIT(A) deleted the addition - Held that - The Assessing Officer made this addition on account of unsecured loan as the assessee was not explained the source of cash credit. The Assessing Officer came to this conclusion mainly on the ground that the assessee-company failed to prove that the statement recorded from Shri Mukesh C. Choksi and Shri Jayesh Sampat by the Investigation Wing was incorrect. According to the Assessing Officer, the genuineness of the transaction could not be proved. In appeal, the CIT(A), having considered the submission of assessee-company, has rightly deleted the addition on both accounts (i.e. ₹ 85 lakhs on account of share application money and ₹ 30,47,169/- on account of unsecured loan) by holding that the assessee-company had duly discharged the initial burden in respect of identity, creditworthiness and genuineness of all transactions by relying on various judicial pronouncements. Thus, this addition is not justified under the provisions of Section 68 of the Act. Therefore, we do not see any reason to interfere with the findings of the CIT(A) who has rightly deleted the amount on account of unsecured loan which was made by the Assessing Officer u/s 68 of the Act. - Decided in favour of assessee

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act in respect of share application money.
2. Deletion of addition made under Section 68 of the Income Tax Act in respect of unsecured loans.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 68 in Respect of Share Application Money:

The Revenue appealed against the orders of the CIT(A) regarding the deletion of additions made under Section 68 of the Income Tax Act for various assessees. The primary contention was that the CIT(A) erred in deleting the additions without appreciating the fact that the additions were based on specific information provided by the Investigation Wing of the Income Tax Department. The Investigation Wing had provided information that the investor companies issued cheques towards the alleged share application money in return for cash. The assessee failed to discharge the onus cast upon it to prove the credit entries of share application money.

The assessee argued that the reassessment proceedings were initiated based on information received from the Directorate of Income-tax (Investigation) without recording the Assessing Officer's own satisfaction. The CIT(A) deleted the additions by following various judicial pronouncements in similar facts and circumstances. The assessee cited several ITAT decisions, including ITO vs. J.J. Multitrade Pvt Ltd, M/s. SDB Estate Pvt Ltd vs. ITO, and others, where similar additions were deleted.

The Tribunal upheld the CIT(A)'s decision, stating that the assessee had discharged the burden of proof by providing documentary evidence to substantiate the identity, genuineness, and creditworthiness of the shareholders. The Tribunal referred to the Supreme Court's decision in CIT vs. M/s. Lovely Exports (Pvt) Ltd, which held that if the share application money is received from alleged bogus shareholders whose names are given to the AO, the department is free to reopen their individual assessments but cannot regard it as undisclosed income of the assessee company.

2. Deletion of Addition Made Under Section 68 in Respect of Unsecured Loans:

In the case of M/s. Sitara Properties Pvt. Ltd., the Assessing Officer made an addition of Rs. 30,47,169/- on account of unsecured loans, which was deleted by the CIT(A). The Assessing Officer concluded that the assessee failed to prove the genuineness of the transaction based on statements recorded from individuals by the Investigation Wing. However, the CIT(A) held that the assessee had duly discharged the initial burden in respect of identity, creditworthiness, and genuineness of all transactions by relying on various judicial pronouncements.

The Tribunal agreed with the CIT(A)'s findings, noting that the assessee had provided sufficient documentary evidence to substantiate the transactions. The Tribunal found no reason to interfere with the CIT(A)'s decision to delete the addition made under Section 68 on account of unsecured loans.

Conclusion:

The Tribunal dismissed all appeals filed by the Revenue, upholding the CIT(A)'s orders that deleted the additions made under Section 68 of the Income Tax Act in respect of share application money and unsecured loans. The Tribunal emphasized that the assessee had provided sufficient evidence to substantiate the identity, genuineness, and creditworthiness of the transactions, and the Revenue had not rebutted these facts. The Tribunal's decision was consistent with various judicial precedents and the Supreme Court's ruling in CIT vs. M/s. Lovely Exports (Pvt) Ltd.

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