2017 (1) TMI 247 - AT - Income Tax

Additions made u/s. 68 - main reason for making the addition was that the shareholders have deposited cash in some other bank account which have come to the depositors with banking channel, and then transferred to assessee thus the genuineness of the transactions was doubted - Held that - AO has not pointed out any evidence which shows that amount invested by these companies were not owned by these companies and the money belong to the assessee. Needless to say that when the assessee has furnished the confirmations, Income Tax Returns, Bank Statements of Borrowers, it cannot be said, without brining into additional evidences which even remotely suggests that the transactions are ingenuine, ld. AO cannot say that the amount invested by the depositors is income of the assessee under section 68 of the I.T. Act. Further, the LD DR could not point out before us and infirmity in the order of the ld CIT (A) in deleting the addition. Further, we also do not find any infirmity in the order of the Ld. CIT(A) in deleting the additions of ₹ 5.20 Crores with respect to 17 companies to whom the share were issued. In the result, both the grounds of appeal of the revenue are dismissed - Decided in favour of assessee

Summary

Issues:
Appeal against deletion of addition under Section 68 of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the order of the Ld. CIT(A)-XVIII, New Delhi, where the addition of ?5,20,00,000/- was deleted by applying the provisions of Section 68 of the I.T. Act, 1961 for allotment of shares. The Revenue raised two grounds challenging the deletion of the addition. The brief facts of the case reveal that the assessee, a Private Limited Company, had allotted shares to 17 share holders who were Private Limited Companies amounting to ?5.20 crores. The AO raised concerns regarding the creditworthiness of the share applicants based on bank account deposits and nominal income shown in the companies' annual reports. The AO assessed the income at ?14,58,068/- to ?5,34,58,068/-, leading to the appeal.

The arguments presented by the Ld. DR emphasized the cash deposits in the shareholders' bank accounts before issuing cheques and their low income levels. On the other hand, the Ld. AR contended that the assessee had provided necessary documents, responses to notices u/s 133(6), and additional evidence during the appeal stage to establish creditworthiness. The AR argued that the AO's findings were adequately addressed through the evidence presented.

The Tribunal carefully examined the contentions of both parties and the orders of the revenue authorities. It was noted that the assessee had fulfilled the initial burden under Section 68 by submitting required documents and the shareholders had responded positively to the notices u/s 133(6). The Tribunal found no fault with the assessee for not producing the creditors as the burden of proof was discharged. The Tribunal also considered the Chart presented by the assessee showing the availability of funds with the companies and their assessment under section 143(3) of the I.T. Act. The Tribunal concluded that the creditworthiness of the companies could not be solely judged based on cash deposits before issuing cheques and nominal income levels. The absence of evidence indicating that the invested amount did not belong to the companies led to the dismissal of the Revenue's appeal.

In the final judgment, the Tribunal dismissed the appeal of the Revenue, upholding the decision to delete the addition of ?5.20 crores with respect to the 17 companies to whom the shares were issued. The order was pronounced in the Open Court on 30/12/2016.