2019 (3) TMI 1960 - AT - Income Tax

Addition u/s 68 - unexplained share premium received - Onus to prove - CIT-A deleted addition - HELD THAT - No hesitation in agreeing with the Ld.CIT(A) that the genuineness of the transaction stood established and we do not see any reason to doubt the same. Even the Ld. DR has been unable to point out from the order of the A.O. as to why the impugned transactions were to be looked at with suspicion. The assessee had established the genuineness of the transactions by filing relevant documents and the same was confirmed by the investor companies also, no infirmity in the documents filed either by the assessee or by the investor companies has been pointed out by the Revenue. We fail to understand, therefore, why the impugned transaction should be treated as unexplained/ingenuine. Also having established the genuineness of the transaction with necessary documents, as above, the onus shifted to the Department, and having not pointed out any infirmity in the documents submitted by the assessee, the assessee was not any more required to file further evidences or even produce the directors of the companies. We agree therefore with the Ld.CIT(A) that the share premiums could not be said to be ingenuine merely because the directors of the companies were not produced for examination. Revenue challenge to the deletion of the addition on the ground that the assessee did not discharge its onus during assessment proceedings and adequate opportunity was not given to the AO to complete his inquiry vis a vis the investor companies and further that the CIT(A) admitted the additional evidences without following the procedure laid down in Rule 46A of the Income Tax Rules,1962 for the same is not acceptable since as held above by us the assessee had duly discharged its onus of proving the genuineness of the transaction and the A.O. had been given sufficient opportunity to conduct all inquiries vis a vis the said investors in remand proceedings. Further we find that the CIT(A) had noted the fact that though the assessee had sought time to produce the investors, the AO without giving any further opportunity finalized the assessment. In this backdrop the CIT(A) admitted the evidences filed by the assessee collected from the investors and forwarded them to the AO for his comments. The CIT(A) therefore, we hold, had duly admitted the additional evidences in the circumstances enumerated in Rule 46A of the Rules, which allows the CIT(A) to admit such evidences where the assessee was not given sufficient opportunity to adduce the same earlier. - Decided against revenue.

Summary

Issues Involved:
1. Addition of share premium received by the assessee as unexplained by the Assessing Officer (A.O.).
2. Deletion of the addition by the Commissioner of Income Tax (Appeals) [CIT(A)].
3. Compliance with procedural requirements under Rule 46A regarding admission of additional evidence.

Issue-wise Detailed Analysis:

1. Addition of Share Premium as Unexplained by the A.O.:
During the assessment proceedings, the A.O. noted that the assessee received a share premium of ?93,80,000 from nine parties. The A.O. called for information from these parties under Section 133(6) of the Income Tax Act, 1961, but faced issues such as undelivered notices, non-replies, and incomplete information. Consequently, the A.O. treated the share premium as unexplained and ingenuine under Section 68 of the Act, leading to an addition of the said amount to the assessee's income.

2. Deletion of the Addition by the CIT(A):
The assessee appealed to the CIT(A), arguing that it had discharged its onus by providing necessary documents, including PAN numbers, return acknowledgments, bank statements, and resolutions from the investor companies. The CIT(A) found that the A.O. had accepted the share capital but disallowed the share premium without sufficient grounds. The CIT(A) also noted that the assessee had provided additional information during the appellate proceedings, which was forwarded to the A.O. for comments. The CIT(A) concluded that the identity, creditworthiness, and genuineness of the transactions were established, referring to various judicial precedents supporting the assessee's case, such as CIT vs. Lovely Export (P.) Ltd. and CIT vs. Dwarkadhish Investment (P) Ltd. Consequently, the CIT(A) deleted the addition made by the A.O.

3. Compliance with Procedural Requirements under Rule 46A:
The Revenue contended that the CIT(A) erred in accepting the assessee's version without giving the A.O. an opportunity to complete his inquiry and without admitting fresh evidence following Rule 46A. However, the Tribunal found that the CIT(A) had duly admitted additional evidence under Rule 46A, as the assessee was not given sufficient opportunity during the assessment proceedings. The CIT(A) forwarded the additional evidence to the A.O., who did not find any infirmity in the same.

Tribunal's Conclusion:
The Tribunal upheld the CIT(A)'s order, agreeing that the assessee had discharged its initial onus by providing necessary documents and that the A.O. had sufficient opportunity to verify the information. The Tribunal found no reason to doubt the genuineness of the transactions, noting that the Revenue failed to point out any infirmity in the documents submitted. The Tribunal dismissed the Revenue's appeal, affirming that the share premium could not be treated as unexplained merely because the directors of the investor companies were not produced.

Final Judgment:
The appeal of the Revenue was dismissed, and the order of the CIT(A) deleting the addition of ?93,80,000 was upheld. The Tribunal pronounced the order in the open court.