2019 (6) TMI 1408 - HC - Income Tax

Addition u/s 68 - Unsecured cash credit - HELD THAT - It is the finding of the CIT(A) that the assessee has proved identity, genuineness of the transaction and the credit worthiness of the lenders by furnishing requisite details, like confirmations, PAN details, return of income, bank statements etc. It is the finding of the CIT(A) that on perusal of the bank statements all the lenders have advanced monies to the assessee out of funds obtaining the bank statements out of deposits through bank transfers into their accounts. It is the finding of the CIT(A) that first deposits are received through bank transfers from the lenders accounts and thereafter they were given to the assessee company by account payee cheque. It is the finding of the CIT(A) that AO has not disputed the above facts nor has brought any material on record to suggest that the said transfers are not genuine transfers as and the lenders also confirmed giving funds to the assessee through account payee cheque and shares were also allotted by the assessee company against such funds. CIT(A) concluded that assessee has established not only the credit worthiness and identity of the said creditors but also established the genuineness of the transaction. None of the finding of the CIT(A) has been dislodged by the revenue with evidences. In the circumstances, we uphold the order of the Ld. CIT (A) in deleting the addition made u/s. 68 - Appeal is dismissed.

Summary

Issues:
Challenge to Tribunal's decision on addition under Section 68 of the Income Tax Act.

Issue 1 - Identification of Subscriber Company:
The main issue was whether the Tribunal was correct in upholding the decision of the CIT (A) to delete the addition of a specific amount under Section 68 of the Income Tax Act. The Revenue challenged this decision based on the identification of subscriber companies. The Tribunal relied on the decision in the case of Creative World but ignored the recent Supreme Court decision in Navodaya Castle. The key argument was whether the certificate of incorporation, PAN, etc., were sufficient for the identification of subscriber companies.

Issue 2 - Creditworthiness of Alleged Subscriber Companies:
The second issue revolved around the creditworthiness of the alleged subscriber companies. The Assessing Officer had made an addition under Section 68 of the Act, suspecting the transactions' genuineness. The CIT (A) deleted the addition after considering confirmations, PAN details, bank statements, and income tax returns provided by the Assessee. The Assessing Officer raised concerns about the financial standing of the alleged subscriber companies, pointing out their small incomes and losses. The question was whether the Tribunal was correct in ignoring these concerns and upholding the CIT (A)'s decision.

Detailed Analysis:
The case involved an Assessee who was a limited company and had shown borrowings in its income tax return for the assessment year 2010-11. The Assessing Officer deemed the transactions as not genuine and added a specific amount under Section 68 of the Act. The CIT (A) allowed the Assessee's appeal, noting that the lenders were parties to whom the Assessee had allotted shares. The CIT (A) found the transactions genuine based on confirmations, bank statements, and income tax returns provided by the lenders. The Assessee established the source and creditworthiness of the lenders to the satisfaction of the CIT (A).

The Tribunal upheld the CIT (A)'s decision, emphasizing that the Assessee had proven the identity, genuineness of the transaction, and creditworthiness of the lenders. The Tribunal noted that all lenders had advanced money to the Assessee through bank transfers, and the Assessing Officer did not dispute the genuineness of these transfers. The Tribunal found that the Assessee had provided sufficient evidence to support the legitimacy of the transactions. The Tribunal dismissed the Revenue's appeal, stating that the Assessee had met the requirements regarding the creditworthiness and identity of the creditors, as well as the genuineness of the transaction.

The High Court, after reviewing the evidence, found that the issue was based on the appreciation of evidence. The Court noted that both the CIT (A) and the Tribunal had reached concurrent conclusions based on facts that were not shown to be perverse. The Court concluded that no question of law arose and dismissed the appeal.