2017 (11) TMI 312 - AT - Income Tax

Addition u/s 68 - initial onus to discharge evidence - identity, creditworthiness and genuineness of the subscribers - Held that - The evidence on record in support of the identity, creditworthiness and genuineness of the subscribers as examined and reported by the Assessing Officer does not contain any material which could be stated to be false, factitious or otherwise contrived. As agreeing with the arguments of the assessee that in terms of case laws including Nova Promoters & Finlease Pvt. Limited 2012 (2) TMI 194 - DELHI HIGH COURT Assessing Officer has shifted back the initial onus discharged by the assessee with repudiatory evidence and materials the assessee cannot be visited with adverse consequence u/s 68 of the Act. I find that no such material has been brought on record by the Assessing Officer to displace the evidence marshalled by the assessee. In the circumstances the addition as sustained by the CIT(A) in a sum of ₹ 47 lakhs u/s 68 of the Act is unsustainable and the same is directed to be deleted. Accordingly, all the three Grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Addition under Section 68 of the I.T. Act.
2. Identity, creditworthiness, and genuineness of share applicants.
3. Application of legal precedents and principles.

Issue-wise Detailed Analysis:

1. Addition under Section 68 of the I.T. Act:
The primary issue in this case was whether the addition of ?47,00,000 under Section 68 of the Income Tax Act, 1961, was justified. The Assessing Officer (AO) had added this amount, claiming that the assessee failed to establish the identity, genuineness, and creditworthiness of the share applicants. The CIT(A) upheld this addition, citing that the appellant did not provide sufficient evidence regarding the profit-making apparatus of the subscribers.

2. Identity, Creditworthiness, and Genuineness of Share Applicants:
The assessee contended that it had submitted all necessary documents, including confirmations, bank statements, and details of share allotments, to prove the identity, creditworthiness, and genuineness of the share applicants. The AO and CIT(A) rejected this evidence, arguing that the profit-making apparatus of the subscribers was not established. However, the Tribunal found that the AO did not bring any material on record to disprove the evidence provided by the assessee. The Tribunal noted that all transactions were through banking channels, and there was no indication of cash deposits to clear the cheques issued for share subscriptions.

3. Application of Legal Precedents and Principles:
The assessee's counsel argued that the authorities misapplied legal precedents, including CIT vs. Steller Investments Ltd. and CIT vs. Lovely Exports (P) Ltd., which state that the onus is on the assessee to provide prima facie evidence of identity, creditworthiness, and genuineness. The Tribunal agreed with the assessee, citing that the AO did not displace the initial onus with any repudiatory evidence. The Tribunal also referred to the jurisdictional High Court's ruling in Nova Promoters & Finlease Pvt. Limited, which emphasizes that the AO cannot merely reject the evidence without carrying out any verification or enquiry.

Conclusion:
The Tribunal concluded that the addition of ?47,00,000 under Section 68 was unsustainable as the AO failed to displace the evidence provided by the assessee. The Tribunal directed the deletion of the addition, allowing all grounds raised by the assessee. Consequently, the appeal of the assessee was allowed.