2017 (3) TMI 1332 - AT - Income Tax

Addition u/s 68 - Held that - Since the credit edition has been made without any evidence by only to protect the revenue leakage, there does not arise any verification of the creditors for assessment year 2003-04 and 2004-05.Accordingly appeal filed by assessee on Limited grounds remanded stands allowed and appeal filed by the revenue stands dismissed. Addition u/s 68 -Assessment year 2006-07 to 2009-10 - assessee either offers no explanation for the credit entries in the books of accounts, or explanation offered by it, is found to be unsatisfactory - Held that - We are of the considered opinion that might have Ld. AO the Ld.CIT (A) has made any enquiry towards the amount credited in the books of the either as share capital or as sale of shares which is in the profit and loss account. The Ld.Counsel and Ld. CIT. DR, agreed that such enquiries can only be conducted at the level of Ld. AO. Therefore we set aside the issue for examination of cash credits either as share capital and premium or as sale of shares from back to the file of Ld. AO. The Ld. AO shall 1st grant an opportunity to assessee to discharge its initial onus by providing the identity, creditworthiness and most importantly genuineness of the transactions as per section68 of the act. After the discharge of initial onus by assessee, the Ld. AO may conduct any enquiry that he may deem fit and proper to inquire about the veracity of the evidences/information submitted by the assessee in respect of the credit entries. Ld. AO may take all necessary steps in order to identify, examine the creditors and decide the issue on merits neatest say that adequate opportunity may be granted to the assessee to support the case.

Summary

Issues Involved:
1. Deletion of additions under section 68 of the Act based on the absence of material found during the search.
2. Validity of search and subsequent additions under section 153A/143(3) of the Act.
3. Validity of additions made in non-abated assessments.
4. Examination of whether the findings of the ITAT are perverse.

Detailed Analysis:

Issue 1: Deletion of Additions under Section 68 of the Act
The ITAT had deleted the additions made under section 68 of the Act on the ground that they were not based on any material found as a result of the search on the assessee company. The High Court observed that the ITAT had not examined the facts specific to the assessee and had instead relied on the case of Pranjul Overseas (P) Ltd. The High Court remanded the matter to the Tribunal to examine the facts relevant to the assessee for determining whether an addition under Section 68 of the Act was sustainable. The Tribunal was directed to verify the details of the share capital/application money received by the assessee during the years under consideration.

Issue 2: Validity of Search and Additions under Section 153A/143(3)
The High Court noted that the ITAT had stated that the assessee had not pressed the legal issues involved in its appeal and had not challenged the assumption of jurisdiction under Section 153A of the Act. Therefore, the High Court concluded that questions regarding the validity of the search and subsequent additions did not arise from the impugned orders passed by the ITAT.

Issue 3: Validity of Additions in Non-Abated Assessments
Similar to the second issue, the High Court found that the ITAT had not addressed the validity of additions in non-abated assessments, as the assessee had not pressed these legal issues. Therefore, this question was also considered not to arise from the ITAT's orders.

Issue 4: Examination of ITAT's Findings
The High Court found that the ITAT had not examined the specific facts related to the assessee and had relied on another case. The High Court remanded the matter to the Tribunal to examine the identity, creditworthiness of persons, and the genuineness of transactions related to the credit entries in the assessee's books.

Tribunal's Examination Post-Remand:

Assessment Years 2003-04 and 2004-05
The Tribunal noted that the only activity carried on by the assessee during these years was the sale of shares, which were purchased and settled without taking delivery. The AO had added a lump sum of ?50,00,000/- to protect revenue leakage, but no business activity such as receipt of share application money was found. Thus, the Tribunal concluded that there was no issue of unexplained cash credits under section 68 for these years, and the appeals filed by the assessee were allowed, while those by the revenue were dismissed.

Assessment Years 2006-07 to 2009-10
The Tribunal examined the additions made by the AO for alleged unexplained credits in the bank account vis-a-vis investment made with the SVP group. The Tribunal scrutinized the identity, creditworthiness, and genuineness of the transactions. The Tribunal observed that the assessee had not provided sufficient evidence to establish the genuineness of the credit entries. The affidavits submitted by the assessee were found to be insufficient to discharge the initial onus.

The Tribunal emphasized that under section 68, the assessee must prove the identity of the creditor, the genuineness of the transaction, and the creditworthiness of the creditor. The Tribunal found that the assessee failed to discharge this initial onus and thus set aside the issue for further examination by the AO. The AO was directed to grant the assessee an opportunity to provide the necessary evidence and to conduct any further inquiries deemed necessary.

Conclusion:
The appeals filed by the revenue for the assessment years 2006-07 to 2009-10 were allowed for statistical purposes, and those by the assessee were dismissed. The Tribunal directed the AO to re-examine the credit entries in the books of the assessee and to provide an opportunity for the assessee to support its case. The AO was instructed to take all necessary steps to identify and examine the creditors and decide the issue on merits.