9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (6) TMI 600 - AT - Income TaxAddition u/s. 68 - creditworthiness of the shareholders and genuineness of the transaction could not be explained - HELD THAT - In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the AO, we hold that addition cannot be sustained merely based on inferences drawn by circumstance. 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 assessments u/s 143(3) were placed on 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 the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition made under Section 68 of the Income-tax Act, 1961. 2. Proof of identity, creditworthiness, and genuineness of the transactions involving share capital and share premium. Issue-wise Detailed Analysis: 1. Deletion of Addition Made Under Section 68 of the Income-tax Act, 1961: The main grievance of the revenue was against the deletion of the addition made under Section 68 of the Income-tax Act, 1961 by the Ld. CIT(A). The Assessing Officer (AO) noted that the assessee company raised capital of ?21,07,55,000/- including share premium by issuing shares to different concerns. The AO questioned the premium collected, citing lack of creditworthiness and genuineness of the transactions. Despite the assessee providing documents such as Memorandum & Articles of Association, share application forms, and bank statements, the AO added ?21,07,55,000/- to the income due to non-appearance of directors and returned summons. The Ld. CIT(A) deleted this addition, which led the revenue to appeal. The Appellate Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the assessee had provided sufficient documentation to prove the identity, genuineness, and creditworthiness of the share applicants. The Tribunal noted that the share applicants were assessed under Section 143(3) of the Act, confirming their identity and creditworthiness. The Tribunal referenced several judicial precedents, including the Supreme Court's ruling in CIT v. Smt. P. K. Noorjahan, which highlighted that the unsatisfactoriness of the explanation does not automatically result in deeming the amount credited as income. 2. Proof of Identity, Creditworthiness, and Genuineness of Transactions: The Tribunal examined the evidence provided by the assessee, including the audited balance sheets, bank statements, and assessment orders of the share applicants. It was noted that the share applicants had substantial net worth and had made payments through banking channels, establishing the genuineness of the transactions. The Tribunal cited the Hon'ble Delhi High Court's observation in CIT v. Mayawati, which stated that the capacity of a person is determined by their wealth, not just their income. The Tribunal also referred to the Hon'ble Guahati High Court's decision in Nemi Chand Kothari, which clarified that the onus on the assessee under Section 68 is limited to proving the source from which they received the cash credit. The Tribunal emphasized that the AO should have pursued enquiries with the AO of the share subscribers if there were doubts about their creditworthiness, as held in CIT v. Dataware Private Limited. Additionally, the Tribunal referenced the Hon'ble Calcutta High Court's decision in Crystal Networks (P.) Ltd. v. Commissioner of Income-tax, which stated that failure of creditors to appear cannot be the sole basis for making an addition if basic evidence is on record. The Tribunal concluded that the assessee had discharged its onus by providing comprehensive documentation, and the AO's addition was based on conjectures and surmises. Conclusion: The Tribunal upheld the Ld. CIT(A)'s deletion of the addition made under Section 68, confirming that the assessee had adequately proved the identity, creditworthiness, and genuineness of the share applicants. The Tribunal's decision was supported by multiple judicial precedents, reinforcing the principle that the onus shifts to the AO once the assessee provides sufficient evidence. The appeal of the revenue was dismissed, and the order of the Ld. CIT(A) was confirmed.
|
