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2018 (8) TMI 983 - AT - Income TaxAdditions u/s 68 - increase in share capital was not through public issue but by way of investment in equity share directly through fully convertible warrants - AO noted that the assessee is merely showing bogus sale and purchase - creditworthiness and genuineness of the transaction - CIT(A) deleted the additions by admitted additional evidences - Held that - It is not in dispute that assessee produced sufficient documentary evidence before the authorities below to prove identity, creditworthiness of the investors and genuineness of the transaction in the matter with regard to payments like cheque no. date, confirmation copy of the ledger account with explanation for credit entries, bank statement, PAN, ITR and copy of the balance sheet of all the investor companies before A.O. The A.O. instead of making any inquiry on the documents filed before him, ignored the same and made the addition against the assessee without application of mind. In the absence of any challenge to the admission of additional evidences which were already part of the record of the A.O, the contention of the Ld. D.R. is rejected that additional evidences should not be admitted by the Ld. CIT(A). Therefore, the totality of the facts and circumstances of the case, clearly prove that the assessee discharged its initial onus to prove the identity of the investor companies, their creditworthiness and genuineness of the transaction in the matter. No material is produced before us to rebut the finding of fact recorded by the Ld. CIT(A). - Decided against the revenue.
Issues Involved:
1. Deletion of addition of ?16.95 crores under section 68 of the Income Tax Act, 1961. 2. Compliance with statutory notices by the assessee. 3. Admission of additional evidence by the CIT(A). Issue-wise Detailed Analysis: 1. Deletion of Addition of ?16.95 Crores under Section 68: The Revenue challenged the deletion of the addition of ?16.95 crores under section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) noted that the assessee, a listed company, increased its share capital by ?16.95 crores through fully convertible warrants. The AO found discrepancies in the creditworthiness and genuineness of the transactions, noting that the entities investing in the assessee company lacked their own creditworthiness, had minimal business activities, and their bank accounts showed transactions only around the time of investment. The AO concluded that the assessee failed to prove the creditworthiness of the investor companies and the genuineness of the transactions. The CIT(A) admitted additional evidence under Rule 46A(1)(c) of the IT Rules, considering it essential for adjudicating the matter. The CIT(A) found that the assessee provided sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the transactions, including bank statements, PAN numbers, ITR acknowledgments, balance sheets, and share application forms. The CIT(A) relied on various judicial precedents, including the Delhi High Court's judgment in CIT vs. Virgin Securities and Credits P. Ltd., to conclude that the additional evidence was crucial for the disposal of the appeal. 2. Compliance with Statutory Notices by the Assessee: The AO issued several notices under sections 143(2) and 142(1) of the Act, which the assessee allegedly failed to comply with. The AO claimed that the assessee deliberately avoided the proceedings, leading to the addition of ?16.95 crores. The assessee contended that the notices were issued mechanically and without specifying the requirements, contrary to the Board's Instruction No. 1367 dated 18.11.1980, which mandates that notices under section 143(2) should specify the points on which clarification is needed. The CIT(A) found that the assessee submitted various replies and documents during the assessment proceedings, but the AO did not conduct any independent inquiry or cross-verification of the facts. 3. Admission of Additional Evidence by the CIT(A): The CIT(A) admitted additional evidence under Rule 46A(1)(c) of the IT Rules, considering that the assessee was prevented by sufficient cause from producing the evidence during the assessment proceedings. The CIT(A) noted that the additional evidence was essential for deciding the issue and relied on the Delhi High Court's judgment in CIT vs. Virgin Securities and Credits P. Ltd., which permits the admission of additional evidence if it is crucial for the disposal of the appeal. The CIT(A) found that the AO did not make any inquiry on the documents filed by the assessee and merely rejected the explanation without any just reasons. Conclusion: The Tribunal upheld the CIT(A)'s order, noting that the assessee provided sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the transactions. The AO failed to conduct any inquiry on the documents filed by the assessee and merely rejected the explanation on irrelevant grounds. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of ?16.95 crores under section 68 of the Act. The Tribunal also noted that the Revenue did not challenge the CIT(A)'s admission of additional evidence, and no material was produced to contradict the findings of the CIT(A).
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