2016 (6) TMI 1376 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - Merely because the investment of 2.94 crore has come from a KYC compliant NRO account is not enough to prove either the genuineness of the transaction or creditworthiness of Shri Vakil. It is not fair on the part of the first appellate authority to put the entire onus on the Assessing Officer to prove that the transaction is not genuine or Shri Vakil has no creditworthiness. When the AO in his remand report has clearly stated that the assessee neither submitted the documentary evidence called for nor produced Shri Vakil for examination to ascertain his creditworthiness as well as genuineness of the transaction the AO could not have accepted the transaction as genuine in the absence of proper evidence. We are inclined to set aside the impugned order of the Commissioner (Appeals) and restore the matter back to the file of the AO to examine the issue relating to genuineness of the investment made of 2.94 crore by Shri Vakil in share application money of the assessee company and decide the issue after providing adequate opportunity of hearing to the assessee. The assessee is at liberty to furnish necessary evidences either documentary or by producing Shri Vakil to prove the genuineness of the investment made by him and also his creditworthiness.- Ground raised by the Department is partly allowed for statistical purposes.

Summary

Issues involved:
Appeal against deletion of addition under section 68 of the Income Tax Act for unexplained cash credit.

Analysis:
1. The appeal was filed against the order of the Commissioner (Appeals) for the assessment year 2007-08. The Department raised a ground regarding the deletion of an addition of ?8,12,44,700 made by the Assessing Officer under section 68 of the Income Tax Act.
2. The assessee, a company dealing in property and trading shares, received ?8,12,44,700 as share application money from a shareholder. The Assessing Officer treated this amount as unexplained cash credit due to lack of evidence regarding the genuineness of the transaction and creditworthiness of the shareholder.
3. During the appeal hearing, the assessee provided documents to prove the identity and creditworthiness of the shareholder. The Commissioner (Appeals) found that a portion of the amount was received in a previous year and directed the Assessing Officer to take action for that year. For the remaining amount, the Commissioner found the documents provided by the assessee to be satisfactory in establishing the genuineness of the transaction.
4. The Department argued that the burden of proof lies on the assessee to show the source of investment for share application money. The Departmental Representative contended that the transaction lacked genuineness and creditworthiness.
5. The Authorized Representative for the assessee argued that the documents submitted, including bank certificates and net worth certificates, proved the genuineness of the transaction. It was also argued that the proviso to section 68 does not apply to non-residents.
6. The Tribunal observed that a portion of the amount was received in a previous year and could not be added in the current assessment year. For the remaining amount, the Tribunal found that the assessee failed to conclusively prove the creditworthiness and genuineness of the transaction, despite submitting some documents. The Tribunal set aside the Commissioner's order and directed the Assessing Officer to re-examine the issue.
7. The Department's appeal was partly allowed for statistical purposes, and the cross objection by the assessee was dismissed as not pressed.

This detailed analysis covers the issues raised in the appeal, the arguments presented by both sides, and the Tribunal's decision to set aside the Commissioner's order for further examination by the Assessing Officer.