2017 (9) TMI 1974 - AT - Income Tax

Addition u/s 68 - Discharge of burden of proof - HELD THAT - The assessee has furnished written submissions and therein furnished the details of evidences furnished by it in order to discharge the initial burden of proof placed upon it. The assessee has discharged the initial burden of proof in this year. Accordingly, consistent with the view taken by the co-ordinate bench in AY 2006-07 in the case of Netscape Software P Ltd. 2012 (5) TMI 486 - ITAT, MUMBAI we uphold the order passed by Ld CIT(A) - Appeal filed by the revenue is dismissed.

Summary

Issues Involved:
1. Addition of ?13.92 crores as income under Section 68 of the Income Tax Act.
2. Opportunity for cross-examination of directors of share applicant companies.
3. Burden of proof regarding the identity, creditworthiness, and genuineness of transactions.

Issue-wise Detailed Analysis:

1. Addition of ?13.92 crores as income under Section 68 of the Income Tax Act:
The revenue challenged the deletion of ?13.92 crores added by the Assessing Officer (AO) under Section 68 of the Income Tax Act. This amount comprised ?9.96 crores received as share application money and ?3.96 crores as share allotment money. The AO alleged that the assessee introduced its own money in the form of share application and share capital. However, the CIT(A) deleted this addition, citing that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not conducted any independent inquiry and had relied solely on the investigation report from the ADIT (Investigation), Kolkata.

2. Opportunity for cross-examination of directors of share applicant companies:
The AO based his addition on statements from directors of various Kolkata-based companies, who allegedly admitted to receiving cash from the assessee. The assessee requested the opportunity to cross-examine these directors, but the AO insisted that the assessee should produce them for cross-examination. The Tribunal found this to be a violation of natural justice principles, as the AO should have summoned these directors himself. The Tribunal emphasized that statements used against the assessee without the opportunity for cross-examination cannot be relied upon.

3. Burden of proof regarding the identity, creditworthiness, and genuineness of transactions:
The CIT(A) and the Tribunal both noted that the assessee had provided comprehensive documentation to establish the identity, creditworthiness, and genuineness of the share applicants. These included PAN details, bank statements, board resolutions, and financial statements of the share applicant companies. The Tribunal reiterated that once the assessee provides such evidence, the burden shifts to the AO to disprove it. The Tribunal referenced multiple judicial precedents, including decisions from the Delhi High Court and the Supreme Court, which support the principle that the AO must provide cogent reasons to discredit the evidence provided by the assessee.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition of ?13.92 crores. The Tribunal found that the assessee had discharged its initial burden of proof and that the AO had failed to provide sufficient evidence to justify the addition. The Tribunal also highlighted procedural lapses by the AO, particularly the denial of the opportunity for cross-examination, which violated principles of natural justice. The judgment underscores the importance of following due process and the burden of proof in cases involving unexplained credits under Section 68 of the Income Tax Act.