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2016 (10) TMI 997 - AT - Income TaxAddition u/s 68 - Held that - In the instant case, we notice that the assessee has furnished copies of Certificate of Incorporation of the share applicants and the PAN numbers. The same establishes their identity. It is not in dispute that the share application money was received through banking channels. In fact, the AO himself has verified the same by calling for account copies from the respective bank accounts. Hence the genuineness of the transaction also stands proved. All the share applicants are also regularly filing return of income and the assessee has furnished copies of returns of income filed by them. It is seen that these companies have made other investments also. Thus, we notice that the assessee has discharged the initial onus placed upon it u/s 68 of the Act. - Decided in favour of assessee
Issues Involved:
1. Addition of Share Application Money under Section 68 of the Income Tax Act. 2. Genuineness and Identity of Share Applicants. 3. Burden of Proof under Section 68. 4. Non-compliance of Share Applicants with Notices and Summons. 5. Applicability of Judicial Precedents. Detailed Analysis: 1. Addition of Share Application Money under Section 68 of the Income Tax Act: The assessee challenged the order confirming the addition of Share Application money of ?96.00 lakhs made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The AO made enquiries about the Share Application money receipts from four entities: M/s Spider Web Solutions Ltd, M/s Saragossa Investment & Finance, M/s Komal Commercial Ltd, and M/s Larite Industries Ltd. 2. Genuineness and Identity of Share Applicants: The AO found that the confirmation letters from the share applicants were on similar printed paper and letterhead, raising suspicion about the genuineness of the transactions. Notices issued under Section 133(6) to verify the genuineness were either returned unserved or not responded to. Further, the AO noted discrepancies in the addresses and the non-appearance of the directors, leading to the conclusion that the addresses were fake and the companies were providing accommodation entries. 3. Burden of Proof under Section 68: The Tribunal reiterated that the initial burden to prove the cash credits under Section 68 lies with the assessee, who must establish the identity, creditworthiness of the creditor, and the genuineness of the transaction. The assessee provided copies of Certificate of Incorporation, PAN details, Annual Reports, and Income Tax Returns of the share applicants, thereby discharging the initial burden of proof. The share application money was received through banking channels, further proving the genuineness of the transaction. 4. Non-compliance of Share Applicants with Notices and Summons: The tax authorities made the addition primarily because the directors of the share applicant companies did not respond to the notices/summons. The AO's suspicion was based on the non-compliance and the pattern of deposits and withdrawals in the bank accounts, which indicated accommodation entries. However, the Tribunal noted that the share applicants were established companies with substantial own funds and regular filings of income tax returns, which supported their creditworthiness. 5. Applicability of Judicial Precedents: The assessee relied on various case laws, but the Ld CIT(A) distinguished them, stating that the conduct of the assessee should be examined by applying the test of human probabilities. The Tribunal compared the present case with the decision of the Delhi High Court in CIT Vs. Nova Promoters & Finlease (P) Ltd, where the addition was upheld due to direct evidence of accommodation entries. In contrast, the present case lacked such direct evidence, and the share applicants were long-established companies. The Tribunal also referred to the decision in CIT Vs. Hospitalities (P) Ltd, where the primary onus was deemed discharged by the assessee. Conclusion: The Tribunal concluded that the assessee had discharged the initial onus under Section 68 by providing necessary documents and evidence. The tax authorities' presumption of accommodation entries was not substantiated with concrete evidence. Therefore, the addition of ?96.00 lakhs was not justified. The Tribunal set aside the order of the Ld CIT(A) and directed the AO to delete the addition. Result: The appeal filed by the assessee was allowed.
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