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2019 (1) TMI 16 - AT - Income TaxAddition u/s 68 - creditworthiness of the creditor is not proved - share applicant was residing abroad during relevant time - AO noted that the investment in the company remained unproved - money brought into India by non-residents for investment - Held that - It is noted from the available records that Shri Jagjit Singh Gabha r/o of 55, Woodlands Road, Southhall UBI, 1 EJ, London having Passport No. 508223849 had paid a sum of ₹ 85.23 lacs through his Saving Bank A/c No; 15621060000188 held with HDFC Bank, Mansarovar Garden, New Delhi towards share application money to M/s. Shree Nath Heritage Liquor Pvt Ltd. having its registered office at G-1/100, RIICO, Industrial Area, Jhunjhunu (Raj) during the Assessment Year 2013-14. These payments were made to the assessee company through RTGS (PBP 8). It is noted that money had been brought into India through banking channel. Taking into consideration the above facts, circumstances of the case, case laws relied on by the assessee and the CBDT Circular No. 05 dated 20-02-1969, we find that the money brought into India by non-residents for investment or other purposes is not liable to Indian Income Tax. In this view of the matter, the Ground of the assessee is allowed.
Issues Involved:
1. Ex-parte decision by CIT(A) without notice to the assessee. 2. Addition of ?85,23,000/- under Section 68 of the Income Tax Act, 1961. 3. Invocation of Section 115BBE of the Income Tax Act, 1961. 4. Non-allowance of set-off of carried forward losses against the income determined for the year. Detailed Analysis: 1. Ex-parte Decision by CIT(A) Without Notice to the Assessee: The assessee raised a ground that the CIT(A) erred in deciding the appeal ex-parte without serving notice to the assessee. However, during the hearing, the assessee's representative did not press this ground, leading to its dismissal. 2. Addition of ?85,23,000/- Under Section 68 of the Income Tax Act, 1961: The primary issue revolves around the addition of ?85,23,000/- as unexplained cash credits under Section 68. The assessee, a Private Limited Company engaged in the liquor business, declared a loss for the Assessment Year 2013-14. The Assessing Officer (AO) added ?85,23,000/- to the income, citing the inability to prove the creditworthiness and genuineness of the share application money received from Shri Jagjit Singh Gabha, a British citizen. In the first appeal, the CIT(A) confirmed the AO's addition, noting the assessee's failure to provide supporting evidence. However, the assessee later presented additional evidence, including bank statements and financial documents of Shri Jagjit Singh Gabha, to substantiate the share application money's genuineness. The Tribunal considered the additional evidence, emphasizing the importance of equity and justice. It noted that the money was brought into India through banking channels, and various judicial precedents supported the assessee's position. The Tribunal referred to several case laws, including CIT vs. Bhaval Synthetics and CIT vs. Lovely Exports, which established that share application money from non-residents, when proven genuine, should not be added as unexplained income. Consequently, the Tribunal allowed the assessee's ground, deleting the addition of ?85,23,000/-. 3. Invocation of Section 115BBE of the Income Tax Act, 1961: The assessee's representative mentioned that the grounds related to Section 115BBE and the set-off of carried forward losses were consequential and did not require separate adjudication. Hence, the Tribunal did not address these grounds substantively. 4. Non-allowance of Set-off of Carried Forward Losses Against the Income Determined for the Year: Similar to the invocation of Section 115BBE, the issue of non-allowance of set-off of carried forward losses was deemed consequential and not separately adjudicated by the Tribunal. Conclusion: The Tribunal, after considering the additional evidence and relevant judicial precedents, allowed the assessee's appeal regarding the addition of ?85,23,000/- under Section 68. The other grounds related to procedural aspects and were either dismissed as not pressed or deemed consequential, requiring no separate adjudication. The appeal was partly allowed, providing relief to the assessee.
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