2019 (7) TMI 1725 - AT - Income Tax

Addition u/s 68 - bogus share application money and share premium received as bogus accommodation entries provided by Shri Mukesh Choksi and Shri Shirish Shah - CIT-A deleted the addition - HELD THAT - In the present assessment year assessee has submitted that it has submitted all the information and documents. Not specific defect in the same has been pointed out by the assessing officer. Assessing officer has solely gone on the investigation done in the case of third parties. As a matter of fact, no summons were issued by the assessing officer to the share applicants the present case. For assessment year 2006-07, even notice under section 133(6) were not issued. As assessee has discharged its onus and no addition under section 68 is warranted. Accordingly we uphold the order of learned CIT-A. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer under Section 68 of the Income Tax Act for A.Y. 2006-07 and A.Y. 2010-11 on account of bogus share application money and share premium received as bogus accommodation entries.

Issue-wise Detailed Analysis:

A.Y. 2006-07:
The assessee-company, engaged in manufacturing and trading gold ornaments, filed its return of income declaring a total income of ?1,24,691/-. The case was re-opened via a notice under Section 148 of the Income Tax Act. During re-assessment, the Assessing Officer (AO) observed that transactions with M/s. Mahasagar Securities P Ltd. were sham, treating ?10,00,000/- received as share application money as undisclosed income under Section 68. The AO made this addition without issuing notice to the share applicants, relying on investigations against Mr. Mukesh Choksi.

Upon appeal, the learned CIT(A) noted that the assessee provided all necessary details and referred to several case laws, including the Hon'ble Apex Court decision in CIT Vs. Lovely Exports (P) Ltd. and the Hon'ble Bombay High Court in Gagandeep Infrastructure Pvt. Ltd. and CIT Vs. Orchid Industries Ltd. The CIT(A) concluded that the addition under Section 68 could not be upheld, deleting the ?10,00,000/- addition.

A.Y. 2010-11:
The assessee-company filed its return declaring a total income of ?15,26,598/-. The case was re-opened based on information from the Pr.DIT(INV)-2, Mumbai, following a search action at the premises of Shri Shirish C. Shah. The AO added ?73,50,000/- credited in the assessee's books as undisclosed income under Section 68, stating that the identity, creditworthiness, and genuineness of the transactions were not proved.

Upon appeal, the learned CIT(A) noted that the assessee provided all necessary details, relying on case laws and the decision for A.Y. 2006-07. The CIT(A) concluded that the grounds raised were allowed in favor of the appellant, deleting the addition.

Appeal by Revenue:
The Revenue appealed against the CIT(A)'s order. The learned Departmental Representative relied on the authorities' orders and the Hon'ble Apex Court decision in PCIT Vs. NRA Iron and Steel Ltd. The assessee's counsel argued that all required documents were submitted to establish the identity, creditworthiness, and genuineness of the transactions, with no defects pointed out by the AO. The counsel also stated that the amendment to Section 68 was prospective from A.Y. 2013-14, and the provisions of Section 56(vii) regarding share premium examination were also prospective.

Tribunal's Decision:
The Tribunal noted that the assessee submitted all requisite documents, and no specific defects were pointed out by the AO. The AO relied solely on third-party investigations without issuing summons to the share applicants. The Tribunal referred to several case laws from the Hon'ble jurisdictional High Court, emphasizing that the amendment in Section 68 and provisions of Section 56(vii) were effective from A.Y. 2013-14 and not applicable to the present assessment years. The Tribunal concluded that the assessee discharged its onus, and no addition under Section 68 was warranted, upholding the CIT(A)'s order and dismissing the Revenue's appeal.

Conclusion:
The Tribunal upheld the deletion of additions made under Section 68 for both A.Y. 2006-07 and A.Y. 2010-11, concluding that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the share application money and share premium transactions. The Revenue's appeal was dismissed.