2019 (11) TMI 520 - AT - Income Tax

Stay of demand of disputed tax and interest - Addition u/s 68 - HELD THAT - Investing entities are having minimal income and the investments made in assessee are preceded by credit of similar amounts in their bank accounts. Thus, the genuineness of these transactions as well credit worthiness of the creditors is doubted by authorities below, Even before us, no such evidences/material is placed to prove to contrary and rather bald statement is made that assessee is not in a position to pay any amount and it is heading for liquidation. No balance sheet/bank statements/ other evidences to prove precarious financial position of the assessee as on date is filed. The assessee could not made out any prima facie case nor is able to show how balance of convenience is in favour of the assessee. Nor the assessee could prove financial difficulties faced by it with evidences such as Balance Sheet/ Bank statements etc as no evidence whatsoever is filed before us to prove financial difficuties faced by it rather only bald statement is made that assessee is heading for liquidation. Rather recent decision of Hon ble Supreme Court in the case of PCIT v. NRA Iron and Steel Private Limited 2019 (3) TMI 323 - SUPREME COURT support the stand of Revenue. An application filed by assessee to recall aforesaid judgment of Hon ble Supreme Court in the case of NRA Iron and Steel Private Limited(supra) has been dismissed by Hon ble Supreme Court in the case of PCIT v. NRA Iron and Steel Private Limited reported in 2019 (10) TMI 1178 - SUPREME COURT . Thus, in our considered view , no case whatsoever has been made by assessee for stay of demand on all the grounds of Prima-facie case, balance of convenience, irreparable loss and financial difficulties before and hence this stay petition stand dismissed.

Summary

Issues Involved:
1. Reopening of assessment under Section 147 of the Income-tax Act, 1961.
2. Addition under Section 68 of the Income-tax Act, 1961.
3. Stay of demand for outstanding tax and interest.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147 of the Income-tax Act, 1961:
The assessee, a trader in steel, originally filed a return declaring an income of ?66,170, which was processed under Section 143(1) of the Income-tax Act, 1961. The Assessing Officer (AO) received information from the Directorate of Income Tax (Investigation) regarding the assessee receiving share capital from nine entities identified as paper/shell companies. The AO observed that these entities had meager incomes and had made share application payments on the same date. This led the AO to reopen the assessment under Section 147 by issuing a notice under Section 148, as it was believed that income chargeable to tax had escaped assessment.

2. Addition under Section 68 of the Income-tax Act, 1961:
The AO noted that the nine entities were controlled by one person and had credited similar amounts in their bank accounts before investing in the assessee company. The AO concluded that the assessee introduced its unaccounted money in the form of share capital and share premium, leading to an addition of ?3.50 crores under Section 68. The assessee failed to prove the creditworthiness of the investors and the genuineness of the transactions, despite providing details such as PAN, bank statements, and confirmations. The AO's assessment order was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], and the issue was decided against the assessee.

3. Stay of Demand for Outstanding Tax and Interest:
The assessee filed a stay petition seeking a stay on the outstanding demand of ?2,24,83,719, citing severe financial crisis and impending liquidation. The assessee argued that it had provided all necessary documents and that no additions were warranted under Section 68. The Revenue opposed the stay, and the tribunal noted that the assessee failed to prove financial difficulties with evidence such as balance sheets or bank statements. The tribunal emphasized that Section 68 requires the assessee to prove the identity, creditworthiness, and genuineness of the transactions. The tribunal found that the assessee had not made a prima facie case for a stay and dismissed the stay petition, referencing the Supreme Court decision in PCIT v. NRA Iron and Steel Private Limited.

Conclusion:
The tribunal dismissed the stay petition, holding that the assessee did not demonstrate a prima facie case, balance of convenience, irreparable loss, or financial difficulties. The tribunal clarified that it had not commented on the merits of the appeal, which remained pending.