2016 (8) TMI 1086 - AT - Income Tax

Addition on unexplained cash credit under sec. 68 - share application money - Held that - The assessee had furnished details of the share applicants supported with some evidence. The first category was of those share applicants who had paid share application money in cash and the second category of the share applicants was those paid share applicant money through cheque. In the first category of share application, the assessee had furnished their details and confirmations by their affidavit and in case of some parties their PANs were also furnished. Besides, it was also explained that they had received their money back from the assessee upon cancelation of their application for allotment of shares. This refund of money to them was made in the next financial year and the same has been accepted by the Assessing Officer in the assessment of the next year. It is also an important aspect of this category of share applicants that during the course of assessment proceedings, they had appeared before the Assessing Officer and had confirmed of paying and receiving back their respective share application money from the assessee. We are thus of the view that the assessee had discharged its primary onus to establish genuineness of this category of the share applicants. Thereafter, the onus was shifted upon the Assessing Officer to dislodge the claim of the assessee by disproving those evidences and submissions made by the assessee discussed above. In absence of conducting such exercise by the Assessing Officer, the Assessing Officer was not justified in making the addition of ₹ 8,27,500 received in cash. The Assessing Officer is thus directed to delete this addition made under sec. 68 of the Act. The second category of the said share applicants are those who had paid the share application money through cheques. Their details were also furnished by the assessee to the Assessing Officer supported with their affidavits, income-tax returns and bank statements. Besides, it was also submitted that assessee had allotted shares to these applicants. Thus, we find that the assessee had discharged its primary onus by furnishing the above evidences and submissions that shares were allotted by the assessee to them. The onus thereafter was shifted upon the Assessing Officer to rebut those evidences and submissions of the assessee to justify the addition of ₹ 7,84,000 made by the Assessing Officer on this account. Merely on the basis that cash was deposited in their account immediately before issuance of share application money by them from their respective bank account an addition under section 68 of the Act cannot be made on the basis of mere suspicion that it was the unaccounted money of the assessee which was deposited in the bank account of those share applicants which was issued by them through cheques to the assessee. The Assessing Officer ought to have examined the source of money of those shares subscribers. We thus find that the Assessing Officer in this regard also has failed to discharge his onus to justify the above addition of share application money paid through cheques. The Assessing Officer is thus directed to delete the addition of ₹ 7,84,000. In total, the addition of ₹ 16,11,500 (Rs.8,27,500 ₹ 7,84,000) is directed to be deleted. - Decided in favour of assessee.

Issues involved:
1. Addition of unexplained cash credit under sec. 68 of the Act.

Analysis:

Issue 1: Addition of unexplained cash credit under sec. 68 of the Act.

The appellant challenged the addition of ?16,11,500 made in respect of unexplained cash credit under sec. 68 of the Act. The assessee, a non-banking finance company, contended that income pertaining to non-performing assets should not be considered as income as per RBI guidelines. The Assessing Officer raised queries about share application money, and upon unsatisfactory explanations, made the addition under sec. 68. The appellant argued that the share application money was received in the normal course of business and presented evidence to support the transactions. The Assessing Officer doubted certain credits and added them under sec. 68. The appellant provided affidavits and confirmations from share applicants, stating that the money was refunded upon cancellation of share applications. The ITAT held that the primary onus was on the assessee to establish the genuineness of the claim, which was done by providing details and evidence for both cash and cheque transactions. The ITAT found that the Assessing Officer failed to disprove the evidence presented by the assessee, leading to the direction to delete the additions made. The ITAT allowed the appeal, directing the deletion of the total addition of ?16,11,500. The order was pronounced on 26.07.2016.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the decision rendered by the ITAT Delhi regarding the addition of unexplained cash credit under sec. 68 of the Act.

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