2018 (1) TMI 1045 - HC - Income Tax

Addition u/s 68 - Held that - The cheque numbers have been mentioned in the said affidavits. The dates of cheques mentioned in all affidavits are 23rd August, 2006 and cheques had been drawn on Vijaya Bank, Borivali branch. The last digit of cheque numbers is 1 and that is how a finding has been recorded that cheque books issued to all the 23 persons were of the same series and first leaf was used by all of them for allegedly making payment of the subscription. The findings of fact of the Appellate Tribunal are completely borne out from the record. As stated earlier, neither before the CIT (A) nor before the Appellate Tribunal, the appellant offered to procure presence of those 23 persons. Therefore, there is finding of fact recorded by the Appellate Tribunal confirming the observation of the Assessing Officer that the appellant - assessee had failed to establish the creditworthiness of the subscribers and even genuineness of the transactions. - Decided against assessee

Summary

Issues:
1. Addition of share application money under section 68 of the Income Tax Act.
2. Burden of proof regarding identity, capacity, and genuineness of transaction.
3. Validity of the Tribunal's decision based on relevant considerations.

Analysis:
1. The appellant, a private limited company, filed a return of income for the assessment year 2007-08. The Assessing Officer noticed an increase in share capital and general reserve. Despite submitting a list of 23 parties who allegedly subscribed to the share capital, the Assessing Officer found a lack of basic evidence to corroborate the case. Consequently, an amount claimed as equity share subscription was treated as unexplained cash credit and added to the total income of the assessee.

2. An appeal was made to the Commissioner of Income Tax (Appeals) [CIT (A)], who ordered a remand. The Assessing Officer, in the remand report, noted discrepancies in the affidavits submitted by the appellant, leading to a lack of evidence to establish the identity and genuineness of the shareholders.

3. The CIT (A) allowed the appeal by deleting the unexplained cash credit. However, the Income Tax Appellate Tribunal reversed this decision, restoring the Assessing Officer's order. The Tribunal found that the appellant failed to produce the alleged shareholders for examination, leading to a lack of creditworthiness and genuineness of the transactions.

4. The appellant argued that they had produced affidavits of the 23 persons and should have been given the opportunity to procure their presence for verification. However, the Tribunal upheld the findings, emphasizing the failure to establish the creditworthiness and genuineness of the shareholders. The Tribunal's decision was based on factual aspects and the failure of the appellant to provide essential evidence.

5. The High Court upheld the Tribunal's decision, emphasizing the importance of establishing the identity, genuineness, and capacity of the alleged shareholders. The Court found no merit in the appeal and dismissed it, with no order as to costs.