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2018 (2) TMI 1754 - AT - Income TaxAddition u/s 68 - Addition on account of income from undisclosed sources - charging interest u/s 234B and 234D - Held that - Assessee-company produced sufficient documentary evidences before A.O. to prove ingredients of Section 68. The assessee also allotted shares to the investors. The A.O. did not make proper enquiry on the evidences filed by the assessee-company on record. Whatever enquiry was made under section 133(6) of the Act are ultimately remained in favour of assessee and was not discussed in the assessment order. Assessee-company discharged initial onus to prove identity of the investor companies, their creditworthiness and genuineness of the transaction in the matter. The decisions relied upon by the Ld. D.R. are clearly distinguishable on facts. The decisions relied upon by the Learned Counsel for the Assessee are squarely applicable to the facts and circumstances of the case. In view of the above discussion, we set aside the orders of the authorities below and delete the addition of ₹ 2.44 crores under section 68. The other grounds i.e., charging of interest under sections 234B and 234D of the I.T. Act, are consequential in nature.
Issues Involved:
1. Addition of ?2.44 crores as income from undisclosed sources. 2. Charging of interest under sections 234B and 234D of the Income Tax Act, 1961. Issue 1: Addition of ?2.44 crores as income from undisclosed sources The assessee filed a return declaring NIL income but disclosed income under section 115JB of the Act, calculating tax at ?3,35,949. A search at the premises of a Chartered Accountant (CA) revealed that he had floated about 90 companies providing accommodation entries, including the assessee's company. The Assessing Officer (A.O.) issued notices under section 133(6) to the investors, but the assessee failed to produce them for verification. Consequently, the A.O. added ?2.44 crores under section 68 of the Act, treating it as income from undisclosed sources. The assessee challenged this addition before the Commissioner of Income Tax (Appeals) [CIT(A)], providing voluminous evidence to prove the identity, creditworthiness, and genuineness of the transactions. The CIT(A) confirmed the addition, noting that the assessee failed to establish the identity and creditworthiness of the investors, and the transactions appeared dubious due to low income returns and immediate withdrawals from bank accounts. In the appeal before the Tribunal, the assessee reiterated the submissions made before the lower authorities, emphasizing that the A.O. did not issue summons under section 131 to the investors despite the assessee's request. The Tribunal noted that the A.O. admitted in the remand report that the identity of the investors was established and that some investors had confirmed their investments directly to the A.O. The Tribunal held that the A.O. should have assisted the assessee by issuing summons to enforce the attendance of the investors, as per the judgments of the Hon'ble Allahabad High Court and Hon'ble M.P. High Court. The Tribunal also observed that the A.O. did not undertake any investigation into the veracity of the documents submitted by the assessee, and no cash deposits were found in the investors' bank accounts before making the investments. The Tribunal relied on various judicial precedents, including the decisions of the Hon'ble Delhi High Court and Hon'ble Supreme Court, to conclude that the assessee had discharged the initial onus of proving the identity, creditworthiness, and genuineness of the transactions. The Tribunal set aside the orders of the lower authorities and deleted the addition of ?2.44 crores under section 68 of the Act. Issue 2: Charging of interest under sections 234B and 234D of the Income Tax Act, 1961 The Tribunal noted that the grounds related to charging interest under sections 234B and 234D were consequential in nature. Since the primary addition of ?2.44 crores was deleted, the interest charges under these sections would also be affected accordingly. The Tribunal allowed the appeal of the assessee, setting aside the orders of the lower authorities.
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