2019 (2) TMI 706 - AT - Income Tax

Unexplained u/s 68 - non-genuine transactions - Held that - The assessment order and the order of CIT(A) and noted that the AO noticed from the Bank Account submitted by the assessee that these are non-genuine transactions. The entire basis of the AO was on the investigation done by the office of DGIT Investigation, Mumbai. From the above assessment order, it is clear that the AO has not made any enquiry or investigation and no evidence to controvert the factual details submitted by the assessee was brought on record by the AO. The statement of Shri Pravin Kumar was supplied and no cross-examination was provided. There nothing on record about the result of investigation having done by the DGIT(Investigation), Mumbai. The papers filed by the assessee clearly demonstrate that the identity, creditworthiness and genuineness of the transaction is proved. The assessee has prima-facie discharged its onus and AO has not carried out any inquiry. We confirm the order of CIT(A) and this issue of Revenue s appeal is dismissed.

Summary

Issues Involved:
1. Deletion of addition of ?2.04 crores as unexplained share capital under Section 68 of the Income Tax Act.
2. Establishing the identity, creditworthiness, and genuineness of the share capital transactions.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?2.04 Crores as Unexplained Share Capital:
The Revenue contested the CIT(A)'s decision to delete the addition of ?2.04 crores made by the AO as unexplained share capital under Section 68 of the Income Tax Act. The AO had received information from DIT(I&CI), Mumbai, indicating the assessee company was a beneficiary of accommodation entries from eight concerns controlled by Pravin Kumar Jain. These entries were allegedly provided in exchange for a commission. Despite the assessee submitting PAN cards, IT return copies, bank statements, confirmations, affidavits, and audited accounts to prove the genuineness of the transactions, the AO did not accept the explanation, primarily relying on statements made by Pravin Kumar Jain during a search operation.

The CIT(A) deleted the addition, observing that the assessee had provided sufficient documentary evidence to establish the identity, creditworthiness, and genuineness of the transactions. The CIT(A) noted that the AO had not conducted any independent enquiry or provided the assessee an opportunity to cross-examine Pravin Kumar Jain. The CIT(A) emphasized that the transactions were made through banking channels, and the shares were issued at face value without any premium, reducing the scope for doubting the genuineness of the transactions.

2. Establishing the Identity, Creditworthiness, and Genuineness of the Transactions:
The CIT(A) analyzed the evidence provided by the assessee, including PAN details, IT returns, bank statements, and confirmations from the share applicants. The CIT(A) found no inconsistency in the documentary evidence and noted that the AO had not provided any corroborative evidence to prove that the transactions were sham or fictitious. The CIT(A) highlighted that the AO had relied excessively on the statements made by Pravin Kumar Jain without conducting any independent verification or enquiry.

During the Tribunal hearing, the Revenue argued that the identity of the share applicants could not be established as the assessee failed to produce them for examination. The Revenue also contended that the share capital was bogus, relying on Pravin Kumar Jain's admission of providing accommodation entries during a search operation. However, the Tribunal noted that the AO had not conducted any independent enquiry and had not provided the assessee with an opportunity to cross-examine Pravin Kumar Jain. The Tribunal found that the assessee had discharged its onus by providing sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the transactions.

The Tribunal referenced previous decisions, including those of the Bombay High Court and other Tribunal cases, where similar issues were considered, and additions were deleted based on the assessee providing sufficient documentary evidence. The Tribunal confirmed the CIT(A)'s order, dismissing the Revenue's appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of ?2.04 crores as unexplained share capital under Section 68, concluding that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal dismissed the Revenue's appeal on merits, and as a result, the assessee's appeal was not pressed. Both appeals were dismissed.