2019 (3) TMI 1897 - AT - Income Tax

Addition on account of share application/share premium/unexplained cash credit u/s 68 - HELD THAT - We observe that the assessee has filed all the necessary evidences to prove identification , genuineness of the transactions and creditworthiness of the investors in the assessment proceedings as well as appellate proceedings. The assessee has discharged the onus cast upon it whereas the AO has not done any further verification and investigation to disapprove the evidences filed by the assessee. AO only harped on the statement of Shri Praveen Kumar Jain which has been retracted later on. Moreover out of five investor, two namely Javda India Impex Ltd and Kush Hindustan Entertainment Ltd were already considered by the coordinate bench of the tribunal Hyderabad in the case of M/S Komal Agrotech Pvt Ltd 2017 (7) TMI 605 - ITAT HYDERABAD wherein the Tribunal held that addition made u/s 68 is bad in law. We also find merits in the arguments of the ld AR that the share capital and share premium can not be added u/s 68 in view of the proviso to section 68 as that is effective and applicable from 1.4.2013.We have perused the decisions relied upon by the assessee and are of the opinion that the case is squarely covered by them. Accordingly we do not find any infirmities in the order of CIT(A) who has passed a very reasoned order and accordingly appeal of the revenue is dismissed.

Summary

Issues:
- Deletion of addition of ?75,00,000 on account of share application/share premium/unexplained cash credit u/s 68 of the Income Tax Act.

Analysis:
1. The Revenue challenged the deletion of the addition of ?75,00,000 by CIT(A) concerning share application money. The AO found that the assessee received share application money from various parties linked to accommodation entries. The AO reopened the assessment based on this information. Despite issuing notices to the parties and the assessee providing documents, the AO treated the amount as unexplained cash credit u/s 68 and added it to the income of the assessee.

2. In the appellate proceedings, the CIT(A) allowed the appeal, noting that the AO failed to provide evidence of the money trail and solely relied on statements without considering retractions. The CIT(A) observed that the assessee submitted substantial documentary evidence, discharged the initial burden, and the AO did not conduct further verification. The CIT(A) emphasized that the burden of proof lies on the taxpayer, but once basic information is provided, the onus shifts to the AO to disprove it. Relying on legal precedents, the CIT(A) deleted the addition.

3. The Revenue argued that the assessee benefited from an accommodation entries racket and the documentary evidence was insufficient. The Revenue contended that the AO's decision should be upheld. However, the assessee presented detailed evidence including share application forms, PANs, and bank statements, proving the genuineness of transactions. The assessee also highlighted that two parties were previously cleared by another tribunal, and the proviso to section 68 exempted share capital and premium before a certain date.

4. The Tribunal found that the assessee provided ample evidence to establish the genuineness of transactions and the AO failed to conduct further investigation. The Tribunal noted the retraction of statements and the favorable decision in a similar case. Considering the legal arguments and evidence presented, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

In conclusion, the Tribunal affirmed the CIT(A)'s decision to delete the addition of ?75,00,000, emphasizing the importance of evidence and proper verification in tax assessments.