2018 (10) TMI 1725 - HC - Income Tax

Addition u/s 68 - CIT A deleted such addition primarily on the ground that the assessee had established the source genuineness of the transactions and the creditworthiness of the investors also confirmed by ITAT - HELD THAT - It can thus be seen that the entire issue is based on appreciation of material on record. CIT A and the Tribunal concurrently came to the conclusion that the assessee had discharges its basic onus. The investors have confirmed the transactions. Such transactions were carried out through the banking channel. The director of the investing company had also appeared before the Assessing Officer and also confirmed the transactions. The CIT A and the Tribunal also did not confirm the Assessing Officer s finding that the assessee failed to establish the creditworthiness or genuineness of the transactions.

Summary

Issues:
1. Whether the Appellate Tribunal erred in deleting the addition under Section 68 of the Income-tax Act?

Analysis:
The case involved a dispute regarding share application money received by the respondent-assessee-company. The Assessing Officer added a significant sum in the hands of the assessee under Section 68 of the Income-tax Act. However, the CIT [A] deleted this addition, emphasizing that the assessee had proven the source, genuineness of the transactions, and creditworthiness of the investors. The Tribunal upheld this decision after a detailed examination of the facts. The Tribunal noted that the appellant had received the amount from a specific company, confirmed the investment, and provided evidence of transactions through banking channels. The Tribunal also highlighted that both the appellant and the share applicant were managed by the same group of persons, further supporting the genuineness of the transactions.

The High Court observed that the issue primarily revolved around the assessment of the material on record. Both the CIT [A] and the Tribunal agreed that the assessee had fulfilled its initial burden of proof. The investors had verified the transactions, which were conducted transparently through the banking system. Additionally, the director of the investing company had personally confirmed the transactions during the assessment process. The High Court underscored that the Assessing Officer's doubts regarding the source of the share applicant should be addressed through investigations on the share applicant's side, not on the appellant's side. Ultimately, the High Court concluded that no legal question arose in this matter and dismissed the Tax Appeal.

In conclusion, the judgment highlighted the importance of establishing the source, genuineness, and creditworthiness of transactions in cases involving additions under Section 68 of the Income-tax Act. The decision underscored the significance of proper documentation, verification, and transparency in financial dealings to avoid unwarranted additions by tax authorities.