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2019 (4) TMI 281 - AT - Income TaxAddition u/s 68 - case selected for scrutiny u/s 143(2) - AO alleged that assessee company has failed to prove the identity, creditworthiness and genuineness of the share subscriber companies - HELD THAT - 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 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 the facts and circumstances of the case as discussed above, no addition was warranted u/s 68 - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act, 1961. 2. Identity, creditworthiness, and genuineness of share subscribers. 3. Onus of proof and shifting of burden between the assessee and the Assessing Officer (AO). 4. Legal precedents and judicial interpretations of Section 68. Detailed Analysis: 1. Deletion of Addition under Section 68: The main grievance of the Revenue was that the CIT(A) erred in deleting the addition of ?1,60,00,000/- made by the AO under Section 68 of the Income Tax Act, 1961. The AO had added this amount as unexplained cash credit because the assessee failed to prove the identity, creditworthiness, and genuineness of the share subscriber companies. 2. Identity, Creditworthiness, and Genuineness of Share Subscribers: The assessee provided detailed documentation to support the identity, creditworthiness, and genuineness of the share subscribers. These included PAN details, ROC details, bank statements, audited financial statements, and confirmations from the share subscribers. The AO issued notices under Section 133(6) to the share subscribers, who confirmed the transactions and provided necessary documentation. 3. Onus of Proof and Shifting of Burden: The Tribunal noted that the assessee had discharged its onus by providing sufficient evidence to prove the identity, creditworthiness, and genuineness of the share subscribers. The onus then shifted to the AO to disprove the evidence provided by the assessee. The AO's failure to conduct further inquiries or provide contrary evidence meant that the addition under Section 68 was not justified. 4. Legal Precedents and Judicial Interpretations: The Tribunal relied on several judicial precedents to support its decision: - CIT vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC): The Supreme Court held that if the share application money is received from alleged bogus shareholders whose names are given to the AO, the Department is free to proceed to reopen their individual assessments. - CIT vs. Dataware Pvt. Ltd. (Calcutta High Court): The court held that the AO of the assessee cannot dispute the creditworthiness of the creditor if the creditor is an income tax assessee. - CIT vs. Gangeshwari Metal (P) Ltd. (Delhi High Court): The court emphasized the need for the AO to conduct meaningful inquiries and not merely reject the evidence provided by the assessee without proper investigation. - CIT vs. Roseberry Mercantile (P) Ltd. (Calcutta High Court): The court held that once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds. Conclusion: The Tribunal concluded that the assessee had adequately discharged its burden of proof by providing sufficient evidence to establish the identity, creditworthiness, and genuineness of the share subscribers. The AO failed to disprove this evidence or conduct further inquiries. Therefore, the deletion of the addition of ?1,60,00,000/- by the CIT(A) was justified, and the appeal of the Revenue was dismissed.
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