2019 (1) TMI 1847 - AT - Income Tax

Unexplained cash credit u/s 68 - onus upon the assessee to discharge the burden so cast upon - HELD THAT - Commissioner of Income Tax (Appeal) found that the assessee discharged the primary onus cast upon it by offering complete explanation of the transaction of the share application money and proved the identity, genuineness and creditworthiness of investing companies, which are the essential conditions provided under section 68 - Assessing Officer made independent enquiry by issuing notices under section 133(6) of the Act to the share applicant and they have complied with the same by submitting necessary details, meaning thereby, the assessee also explained the source of funds. Thus, we are in agreement with the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal) and find no infirmity in the same. In the present appeal, the necessary documents were duly filed by the investors and responded to the notices issued under section 133(6) of the Act.The copy of the share application form, copy of confirmation of share holders, copy of bank statement, copy of PAN card and annual report of the company with respect to M/s Alka Securities Ltd. are available - Identical documents are available with respect to M/s Alpha Graphics India Ltd. and Alka Broking Ltd.. Similarly, identical documents are available in the paper book, filed by the assessee with respect to remaining investing companies/entities. It is not the case that new document has been filed before the Tribunal for the first time. The material facts available on record clearly established that the requirement of section 68 has been duly fulfilled by the assessee. - Decided against revenue.

Summary

Issues Involved:
1. Legitimacy of addition under Section 68 of the Income Tax Act, 1961, regarding share capital/share premium as unexplained cash credit.
2. Burden of proof on the assessee to satisfactorily explain credit entries in the books of accounts.
3. Examination of the identity, genuineness, and creditworthiness of the creditor.
4. Relevance and applicability of judicial precedents and case laws cited by both parties.

Issue-wise Detailed Analysis:

1. Legitimacy of Addition under Section 68:
The Revenue challenged the deletion of an addition amounting to ?2,15,00,000/- made under Section 68 of the Income Tax Act, 1961, as unexplained cash credit. The original assessment was framed under Section 143(3) on 06/11/2009, where the claim of the assessee was accepted after due inquiry. The addition was based on a statement recorded on 01/10/2013, which was later retracted. The Tribunal noted that the assessee had provided necessary documents and explanations during the original assessment and subsequent proceedings.

2. Burden of Proof on the Assessee:
Section 68 places the onus on the assessee to satisfactorily explain the credit entries in their books of accounts. The Tribunal emphasized that the burden must be discharged with positive material evidence. The assessee is required to prove the identity, capacity, and genuineness of the transactions. The Tribunal cited various judicial precedents, including Oceanic Products Exporting Company vs CIT and P. Mohankala (291 ITR 278), to support this view.

3. Examination of Identity, Genuineness, and Creditworthiness:
The Tribunal observed that the assessee had issued 8,60,000 equity shares at a premium to eighteen parties and had provided necessary documents, such as PAN, bank accounts, and balance sheets, to establish the identity and creditworthiness of the creditors. The Assessing Officer had conducted independent inquiries by issuing notices under Section 133(6), to which the parties responded with requisite documents. The Tribunal found that the assessee had satisfactorily explained the transactions and fulfilled the conditions under Section 68.

4. Relevance and Applicability of Judicial Precedents:
The Tribunal considered the cases cited by the Revenue, including Navodaya Castle (P.) Ltd. vs CIT and Pawankumar M. Sanghvi vs Income Tax Officer. However, it found that these cases were based on different facts and did not apply to the present case. The Tribunal noted that in the present case, the investors had responded to notices and provided necessary documents, unlike in the cited cases where the creditors were found to be shell companies or did not respond to notices.

Conclusion:
The Tribunal upheld the decision of the First Appellate Authority, finding no infirmity in the deletion of the addition under Section 68. The appeal of the Revenue was dismissed, and it was concluded that the assessee had satisfactorily explained the share capital/premium transactions with necessary documentary evidence. The Tribunal emphasized that the conditions under Section 68 were duly fulfilled by the assessee, and the Revenue's appeal lacked merit based on the facts and evidence presented.