2019 (6) TMI 1290 - AT - Income Tax

Unexplained cash credit u/s.68 - money received in the form of preference share capital has come through FDI route - original documents were not submitted before the AO - HELD THAT - We find that money received in the form of preference share capital has come through FDI route with the proper approval of FIPB and RBI by filing requisite statutory forms and complying with the requisite conditions prescribed thereon. There is no question of doubting the genuineness of the said transactions. The assessee has received preference share capital from Aanya Properties (I) Ltd. which is holding 31% equity in the assessee company which means the preference share capital is received from the existing share holder of the assessee company. The assessee has given various documentary evidences pertaining to the investor company i.e. Aanya Properties (I) Ltd. proving the identity and creditworthiness thereon. Hence the three necessary ingredients of Section 68 have been duly complied with by the assessee in the instant case. Merely because the original documents were not submitted before the AO, the photo copy of the said documents cannot be summarily brushed aside and ignored in order to draw the adverse inference against the assessee company. Key management personnel of Aanya Properties (I) Ltd. is stationed at Mauritius and merely because of his non-appearance before the AO, no adverse inference could be drawn against the receipt of preference share capital by doubting the veracity of the same, without rebutting various documentary evidences that are already available on record. Since this is more of a factual issue, we do not deem it fit to adjudicate the various decisions relied upon by the ld. AR before us. There is no need for setting aside of this appeal to the file of the AO as prayed by the ld. DR as it would only tantamount to giving second innings to the AO, which in our considered opinion, would not serve any purpose, as no second view is possible in the instant case and as these details were already before the AO. No infirmity in the order of the CIT(A) who had appreciated the entire facts and documentary evidences available on record, granting relief to the assessee. - Decided against revenue

Summary

Issues Involved:
1. Whether the CIT(A) was justified in deleting the addition of ?8,02,81,790/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961.

Detailed Analysis:

1. Addition of ?8,02,81,790/- as Unexplained Cash Credit:

Background and AO’s Findings:
The assessee, engaged in the business of builders and developers, filed its return of income for AY 2012-13. During scrutiny assessment, the AO observed that the assessee had issued 80,28,179 non-cumulative preference shares at a premium to a foreign entity, Aanya Properties (I) Ltd., Mauritius. The assessee provided photocopies of documents to prove the identity, creditworthiness, and genuineness of the transactions, but the AO insisted on originals and the personal presence of the key management personnel of the investor company, which the assessee could not comply with. Consequently, the AO added ?8,02,81,790/- as unexplained cash credit under Section 68, citing several reasons including the submission of photocopies, inability to produce original documents, and the non-appearance of key managerial personnel.

CIT(A)’s Observations and Reliance on Jurisprudence:
The assessee appealed to the CIT(A), submitting various documents, such as confirmation of investment, bank statements, incorporation certificates, and FIPB approval. The CIT(A) relied on multiple judicial precedents, including decisions from the Delhi High Court and the Supreme Court, which emphasized that once the assessee provides sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions, the onus shifts to the AO to disprove the evidence. The CIT(A) noted that the AO did not make any attempt to rebut the evidence provided by the assessee and made the addition based on suspicion. The CIT(A) concluded that the assessee had discharged its onus and that the AO’s addition could not stand legal scrutiny.

Tribunal’s Analysis and Conclusion:
The Tribunal heard the submissions from both sides. The DR reiterated the AO’s findings and requested a remand for de novo adjudication, while the AR opposed it, arguing that the AO had ignored substantial documentary evidence. The Tribunal noted several factual inaccuracies in the AO’s order, such as the incorrect statement about the shareholding percentage and the misinterpretation of the relationship between Aanya Properties (I) Ltd. and Aanya Holding Ltd. The Tribunal found that the funds were received through the FDI route with proper approvals from FIPB and RBI, and the necessary statutory forms were filed. The Tribunal emphasized that the photo copies of documents could not be summarily dismissed and that the non-appearance of the key management personnel from Mauritius did not justify an adverse inference.

The Tribunal concluded that the assessee had satisfactorily explained the identity, creditworthiness, and genuineness of the transactions as required under Section 68. The Tribunal dismissed the revenue’s appeal, upholding the CIT(A)’s order, and ruled that there was no need to remand the case, as it would not serve any purpose.

Final Judgment:
The Tribunal found no infirmity in the CIT(A)’s order and dismissed the revenue’s appeal, thereby confirming the deletion of the addition of ?8,02,81,790/- as unexplained cash credit.