2019 (10) TMI 829 - AT - Income Tax

Unaccounted cash credit u/s 68 - HELD THAT - Neither the assessee had discharged the obligation that was cast upon it to substantiate the identity of the subscribers, their credit-worthiness, and also the genuineness of the transaction of receipt of share application money from the aforesaid six share applicants, as per the mandate of law, nor the lower authorities had in discharge of their statutory obligation carried out the necessary verifications. As a matter of fact, we find that the lower authorities had not put up any serious effort to verify the authenticity of the documents which were filed by the share applicants and/or the assessee with them. The matter in all fairness requires to be revisited by the A.O. We thus restore the matter to the file of the A.O, who shall after making necessary verifications as regards the identity of the applicant companies, their creditworthiness, and also the genuineness of the transactions of receipt of share application money by the assessee company from the aforementioned six applicant companies re-adjudicate the matter afresh. A.O in the course of the set aside proceedings shall remain at a liberty to make necessary verifications, as he may deem fit. Needless to say, the assessee in the course of the set aside proceedings will be afforded a reasonable opportunity of being heard, and would be at a liberty to substantiate the authenticity of the transaction of receipt of share application money from the aforesaid six share applicants by placing on record fresh material. Appeal of the revenue is allowed for statistical purposes.

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, 1961.
2. Genuineness of transactions and creditworthiness of parties.
3. Involvement of companies in Hawala Entry Operations.
4. Onus to prove identity, creditworthiness, and genuineness under Section 68.
5. Examination of the CIT(A)'s decision to delete the addition.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 68 of the Income Tax Act, 1961:
The revenue challenged the deletion of an addition of ?1,35,00,000/- made under Section 68 by the CIT(A). The Assessing Officer (A.O) had treated the share application money received by the assessee as unaccounted cash credit. The CIT(A) observed that the assessee had provided necessary evidence to substantiate the genuineness of the share application money, which the A.O had ignored. However, the Tribunal noted that the A.O had specifically called for the bank statements from the share applicants, which were not furnished, raising doubts about the genuineness of the transactions.

2. Genuineness of Transactions and Creditworthiness of Parties:
The A.O issued notices under Section 133(6) to verify the authenticity of the share application money. The replies from the share applicants were incomplete, and they did not submit the bank statements or reasons for subscribing to shares at a high premium. The Tribunal found that the assessee failed to provide the bank statements of the share applicants, which were crucial to verify the genuineness of the transactions. The CIT(A) had accepted the assessee's claim without proper verification.

3. Involvement of Companies in Hawala Entry Operations:
Two of the share applicants, M/s Duke Business Pvt. Ltd. and M/s Atharva Business Pvt. Ltd., were identified as entities controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider. The A.O had received information from the DGIT (Inv.), Mumbai, regarding these companies. The Tribunal emphasized that the lower authorities should have carried out in-depth verification of the transactions involving these entities.

4. Onus to Prove Identity, Creditworthiness, and Genuineness Under Section 68:
The Tribunal reiterated that under Section 68, the assessee is obligated to explain the nature and source of any sum credited in its books of accounts. The assessee must prove the identity, creditworthiness of the creditors, and the genuineness of the transactions. The Tribunal found that the assessee had not discharged this obligation satisfactorily, and the lower authorities had not conducted proper verification.

5. Examination of the CIT(A)'s Decision to Delete the Addition:
The Tribunal found that the CIT(A) had summarily accepted the assessee's contentions without proper verification of the bank statements and other crucial details. The Tribunal observed that the CIT(A) had failed to address the material aspects raised by the A.O. The Tribunal concluded that the matter required a fresh examination by the A.O, with a focus on verifying the identity, creditworthiness, and genuineness of the transactions.

Conclusion:
The Tribunal set aside the order of the CIT(A) and restored the matter to the file of the A.O for fresh adjudication. The A.O was directed to make necessary verifications regarding the identity of the applicant companies, their creditworthiness, and the genuineness of the transactions. The assessee was to be given a reasonable opportunity to substantiate the authenticity of the transactions. The appeal of the revenue was allowed for statistical purposes.

← Previous Next →