2018 (6) TMI 1755 - AT - Income Tax

Unexplained credit u/s 68 - HELD THAT - We find that the share application money has been received by the assessee through the banking channels and therefore, the identity of the parties is established. As far as the genuineness and the creditworthiness are concerned, the AO had issued notice to all the three parties. The assessee has also filed confirmation letters from two of the parties and we find that the PAN of the said companies is also given in the said letters. AO has recorded that there is no response from Basukinath Developers (P) Ltd, inspite of service of notice, and the notices to other parties has been returned unserved. There is no evidence on record that this fact has been confronted to the assessee and that the assessee was asked to produce the parties and prove the creditworthiness of the said parties. In such circumstances, when the assessee is not confronted with the return of notices, it is not understandable as to how the assessee is expected to discharge its onus. However, the assessee also has not submitted any evidence with regard to Uplink Vyapar Pvt. Ltd and the copy of the confirmation letter filed in paper book, cannot be considered, as it was not filed before the authorities below earlier. We confirm the addition allegedly received from Uplink Vyapar Pvt. Ltd, Kolkata. As far as the other two parties are concerned, we deem it fit and proper to remand the issue to the file of the AO for reconsideration in accordance with law after giving the assessee due opportunity of producing the parties to prove their creditworthiness.- Assessee s appeal is partly allowed for statistical purposes.

Summary

Issues:
Assessee's appeal for the A.Y 2011-12 against the order of the CIT (A)-3, Hyderabad, dated 27.11.2015 regarding the genuineness of share application money received.

Analysis:
The assessee, engaged in manufacturing, filed its return for A.Y 2011-12 showing receipt of share application money. The AO noticed discrepancies in the details provided by the assessee and requested proof of the genuineness of the transactions. The assessee submitted confirmation letters from two out of three parties but failed to address the share application money from the third party. The AO, after further investigation and lack of response from the parties, treated the entire sum as unexplained credit under section 68 of the Act.

The assessee contended that the transactions were through banking channels, proving the genuineness, and provided PAN details of the companies to establish their identity. The creditworthiness of the parties was questioned by the authorities due to lack of response from one party and unserved notices to others. The DR supported the authorities' decision, emphasizing the assessee's responsibility to prove both genuineness and creditworthiness.

The Tribunal found that the share application money was received through banking channels, establishing the parties' identity. However, the lack of response from one party and unserved notices to others raised doubts about creditworthiness. While confirming the addition of the amount from the third party, the Tribunal remanded the issue of the other two parties back to the AO for reconsideration, granting the assessee an opportunity to prove their creditworthiness.

In conclusion, the assessee's appeal was partly allowed for statistical purposes, with the Tribunal directing a reevaluation of the creditworthiness of the parties involved in the share application money transactions.