2018 (12) TMI 1322 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - identity, creditworthiness and genuineness of the transaction - Held that - We note that the director of the assessee company, Mr. Siddheswar Halder, vide its letter, dated 20.03.2015, submitted in response to notice u/s.131of the Act, the following information and documents, Viz Copy of PAN Card for identity proof and copy of Driving License as a proof of address, Copy of Income Tax Return for the A.Y. 2010-11, 2011-12 &2012-13, Copy of Profit & Loss Account and Balance Sheet for the F.Y. 2009-10 onwards, Copy of Bank Statement for the relevant period, and other details for his personal identity. We note that source of fund of share applicants viz. Sarvottam Commercial Pvt. Ltd., M/s. Landmark Exim Pvt. Ltd and M/s Ganpati Hirise Pvt. Ltd, is directly from M/s. Emami Biotech Ltd. (now M/s. Emami Agrotech Ltd.) and the source of source of fund of the Share Applicants viz. M/s. Ghazal Textiles and Finance Pvt. Ltd and M/s. Procton Commerce Pvt. Ltd, is also M/s Emami Biotech Ltd. (now M/s. Emami Agrotech Ltd.), which is a highly reputed company. Therefore, assessee has even proved the source of source of share applicants in the instant case. Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source, shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO s record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In these peculiar facts and circumstances and in view of Assessing Officer s supportive remand report as above, no addition is warranted under Section 68 of the Act. That being so, we decline to interfere in the order passed by the ld CIT(A), his order on this issue is hereby upheld - Decided in favour of assessee.

Issues Involved:
1. Inquiry into the genuineness of share capital and share premium transactions.
2. Non-compliance with jurisdictional High Court decision.
3. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Inquiry into the genuineness of share capital and share premium transactions:

The primary issue revolves around the genuineness of the share capital and share premium transactions. The Assessing Officer (AO) added ?5,00,00,000 to the income of the assessee under Section 68 of the Income Tax Act, 1961, citing unexplained cash credits. The AO noted that the assessee company received significant share premium without any visible business activity and failed to provide satisfactory explanations for the high premiums. The AO emphasized that merely submitting documents without personal appearance does not discharge the burden of proof.

The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the addition. The CIT(A) examined the documents and evidences, including additional documents submitted during the appellate proceedings. The CIT(A) found no adverse findings in the remand report from the AO and concluded that the identity, creditworthiness, and genuineness of the transactions were adequately explained.

The Revenue, dissatisfied with the CIT(A)'s decision, appealed to the ITAT. The Revenue argued that the assessee failed to prove the identity, creditworthiness, and genuineness of the share capital and share premium transactions, emphasizing the non-appearance of directors in response to summons under Section 131.

The ITAT, after considering the submissions and documents, upheld the CIT(A)'s decision. The ITAT noted that the assessee provided comprehensive details, including PAN, bank statements, income tax returns, and audited financial statements of the share applicants. The ITAT emphasized that the onus shifted to the AO to disprove the materials placed before him, which the AO failed to do.

2. Non-compliance with jurisdictional High Court decision:

The Revenue contended that the CIT(A) did not follow the jurisdictional High Court's decision in the case of Raj Mandir Estate Private Limited. The ITAT clarified that the Raj Mandir Estate case involved the CIT's direction to the AO to examine the genuineness, creditworthiness, and identity of the share subscribers under Section 263. The ITAT distinguished this case from the present one, noting that the CIT(A) had already examined and verified the necessary details, and thus, the Raj Mandir Estate case was not applicable.

3. Condonation of delay in filing the appeal:

The Revenue's appeal was barred by a delay of 24 days. The ITAT considered the reasons provided in the affidavit and condoned the delay, admitting the appeal for hearing. This procedural issue was resolved in favor of the Revenue, allowing the substantive issues to be addressed.

Conclusion:

The ITAT upheld the CIT(A)'s decision to delete the addition of ?5,00,00,000 under Section 68, concluding that the assessee had adequately proved the identity, creditworthiness, and genuineness of the share capital and share premium transactions. The ITAT emphasized that the AO failed to disprove the evidence provided by the assessee. The ITAT also clarified the inapplicability of the Raj Mandir Estate case to the present facts. The appeal was admitted despite the delay, but the substantive issues were decided in favor of the assessee.

← Previous Next →