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2022 (10) TMI 1146 - AT - Income TaxAddition u/s 68 - unexplained cash credit received by the assessee by issuing equity shares at premium - summon issued u/s 131 of the Act to the director of the assessee company remained uncomplied with whereas the AO has not pointed any defect or deficiency in the evidences/details produced qua the said investments by assesse as well as by the investing companies - HELD THAT - The case of the assessee is squarely covered by the decision PCIT vs. Ambition Agencies Pvt. Ltd. 2021 (11) TMI 750 - CALCUTTA HIGH COURT wherein the Hon ble Court has held that where thein the appellate proceedings, the Ld. CIT(A) after calling remand report from the AO on the issue of share application had allowed the appeal of the assessee after following the observations of the AO in the remand report stating therein that transactions of the share holders were duly cross-verified. Hon ble Court upheld the view taken by the Tribunal where Tribunal upheld the order passed by the Ld. CIT(A) deleting the addition on the basis of remand report nonetheless the addition was made in the original assessment order by the AO for the want of information/details u/s 68 of the Act. Similarly the case of assessee find support from the decision of Hon ble Supreme Court in the case of PCIT vs. Paradise Inland Shipping Pvt. Ltd. 2018 (7) TMI 1105 - SC ORDER as upheld the order of Hon ble High Court wherein the Hon ble High Court has taken a view that the assessee has proved genuineness of the transactions after the assessee filed voluminous documents from the public offices and also brought on records the assessment orders passed in the case of said companies. We uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue.
Issues Involved:
1. Deletion of addition of Rs. 3,00,00,000/- under Section 68 of the Income Tax Act on account of unexplained cash credit through equity shares issued at a premium. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68: The primary issue in this appeal is the deletion of an addition of Rs. 3,00,00,000/- by the Commissioner of Income Tax (Appeals) [CIT(A)], which was initially made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. This addition was related to unexplained cash credits received by the assessee through the issuance of equity shares at a premium. Facts and AO's Findings: The assessee filed a return of income declaring a total income of Nil, which was processed under Section 143(1). The case was selected for scrutiny, and the AO issued statutory notices and questionnaires. The AO also issued summons under Section 131 to the directors of the assessee company to verify the identity, creditworthiness of the investors, and genuineness of the transactions. However, there was no compliance. The AO observed that the assessee failed to prove the identity and creditworthiness of the investors and the genuineness of the transactions, noting insufficient business activity to justify the high premium on equity shares. Consequently, the AO added the entire amount of Rs. 3,00,00,000/- to the income of the assessee as unexplained cash credit under Section 68. CIT(A)'s Findings: During the appellate proceedings, the CIT(A) called for a remand report from the AO. The AO noted in the remand report that the assessee had filed all necessary documents, including PAN numbers, investment details, bank accounts, IT returns, and balance sheets, thereby proving the identity, creditworthiness of the investors, and genuineness of the transactions. The AO also noted that all investor companies were assessed to tax. The CIT(A), after considering the remand report, allowed the appeal, stating that the AO had made the additions based on general assumptions without concrete evidence. The CIT(A) found that the transactions were made through proper banking channels, and the investor companies were active and regular in filing income tax returns. The CIT(A) concluded that the identity, creditworthiness, and genuineness of the transactions were duly proved by the assessee. Legal Precedents Cited: The CIT(A) relied on several judicial decisions, including: - PCIT vs. Paradise Inland Shipping (P.) Ltd.: The Supreme Court upheld the High Court's decision that the assessee had proved the genuineness of share transactions with voluminous documents. - PCIT vs. Himachal Fibres Ltd.: The Delhi High Court held that no addition under Section 68 could be made if the assessee had revealed the identity of share applicants and no further enquiry was conducted by the AO. - CIT vs. Nishan Indo Commerce Ltd.: The Calcutta High Court held that once the identity and other relevant particulars of shareholders were disclosed, it was for the shareholders to explain the source of their funds, not the assessee company. Revenue's Argument: The Departmental Representative (D.R.) argued that the CIT(A) ignored several factual issues noted by the AO, such as non-compliance with summons issued under Section 131 and the non-appearance of directors of the assessee and subscribing companies. The D.R. requested that the issue be restored to the AO for fresh verification. Assessee's Argument: The Assessee's Representative (A.R.) contended that the CIT(A) had called for a remand report during the appellate proceedings, and the AO did not find any defects in the documents submitted. The A.R. argued that the assessee had provided all necessary documents, including share application forms, bank statements, balance sheets, and IT returns, proving the identity, creditworthiness, and genuineness of the transactions. The A.R. relied on several judicial decisions supporting their case. Tribunal's Decision: The Tribunal, after hearing both parties and reviewing the material on record, noted that the assessee had produced all necessary evidences during the assessment and appellate proceedings. The AO had not pointed out any defects in these documents. The Tribunal observed that the CIT(A) had relied on the remand report and various judicial decisions to conclude that the identity, creditworthiness, and genuineness of the transactions were duly proved. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal. Conclusion: The appeal of the revenue was dismissed, and the deletion of the addition of Rs. 3,00,00,000/- under Section 68 by the CIT(A) was upheld. The Tribunal found that the assessee had adequately proved the identity, creditworthiness, and genuineness of the transactions, shifting the burden to the revenue to disprove the same, which was not done.
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