2023 (5) TMI 1264 - AT - Income Tax

Unexplained cash credit u/s 68 - Onus to prove - directors of the subscriber companies have not come personally in response to the summons issued by the AO - HELD THAT - Assessee in this case, explained about the identity, creditworthiness and financials etc. of each of the share subscriber company individually. However, we note that in the assessment order that the AO has not even mentioned the names of the share subscriber companies and even has not mentioned a word as to which of the share subscriber company or the corresponding transaction thereof was not genuine and on what grounds. AO, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. Assessee has rightly placed reliance upon the decision of Paradise Inland Shipping Pvt. Ltd 2017 (11) TMI 1554 - BOMBAY HIGH COURT wherein held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. A perusal of the impugned order of the ld. CIT(A) shows that the ld. CIT(A) has not discussed anything about the material facts of the case. He has not pointed out any defect and discrepancy in the evidences and details furnished by the assessee but simply upheld the order of the Assessing Officer in mechanical manner. The order of the CIT(A) is a nonspeaking order. The same is not sustainable as per law. Decided in favour of assessee.

Summary

Issues involved:
The appeal against the order of the Commissioner of Income Tax (Appeals)-17, Kolkata under section 250 of the Income Tax Act, 1961 regarding addition of a sum for unexplained cash credit in terms of section 68 of the Act.

Issue 1: Addition of unexplained cash credit:
The case involved the reassessment of the assessee's total income, specifically focusing on the addition of Rs.9,67,00,000 as share capital raised by the assessee. The Assessing Officer issued notices and summons to verify the identity and creditworthiness of the shareholders, but the directors of the assessee company did not comply with the summons. Consequently, the AO treated the share capital as unexplained income. The CIT(A) upheld these additions.

Details of the Judgement:
The assessee contended that all necessary evidence was provided to establish the identity, creditworthiness of the subscribers, and the genuineness of the transaction. They highlighted that transactions were conducted through banking channels and all relevant documents were submitted. The AO, however, insisted on the personal appearance of directors of subscriber companies, which the assessee could not compel. The Tribunal noted that the AO did not point out any discrepancies in the evidence submitted. Referring to legal precedents, the Tribunal emphasized that the burden shifts to the revenue to establish their case once the assessee provides documentary evidence of subscriber companies' existence.

The Tribunal further discussed the powers of the CIT(A) and criticized the non-speaking order of the CIT(A) for not discussing material facts or pointing out defects in the evidence. Ultimately, the Tribunal found no justification for the additions made by the lower authorities and ordered them to be deleted, allowing the appeal of the assessee.