2019 (11) TMI 589 - HC - Income Tax

Addition u/s 68 - unexplained cash credit - Tribunal confirming the decision of the CIT(A) in deleting the addition - HELD THAT - In the report, AO indicates that notices sent to some of the companies came back un-served, yet thereafter, the companies appeared before him through a representative and made submissions in support of their investments. The impugned order records that change of address was given to the Assessing Officer and yet it appears that notice was served on an incorrect address. Tribunal also records that in fact, one of the Director of the Company which has subscribed the shares, had given also an affidavit, stating that, the Company has paid ₹ 30 lakhs to 30,000 equity shares of ₹ 10/- each at a premium of ₹ 90/- to the Assessee Company. CIT(A) and the Tribunal have both come to a finding of fact that amounts received for share subscription is not hit by Section 68 of the Act as the identity, capacity of the shareholder is proved. Besides, the genuineness of the transactions also stands established. In the above circumstances, the concurrent finding of facts by the CIT(A) and the Tribunal do not call for any inference. Particularly in the absence of the Revenue s showing it to be perverse. No substantial question of law

Summary

Issues: Challenge to order under Section 260-A of the Income Tax Act, 1961 regarding addition of share application money and share premium under Section 68 of the Act for Assessment Year 2008-09.

Analysis:
1. The Respondent, engaged in construction business, filed a return of income declaring 'Nil' income for Assessment Year 2008-09. The Assessing Officer added share application money and share premium of ?19.40 Crores as cash credit under Section 68 of the Act, increasing the income to ?19.40 Crores.

2. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition of ?19.40 Crores after verifying documents submitted by shareholders, confirming their identity, capacity, and genuineness of transactions. The CIT(A) found ?4.90 Crores to be from promoters and an earlier year, not part of the current assessment.

3. The Revenue appealed to the Tribunal challenging the CIT(A)'s decision. The Tribunal upheld the order, stating that the identity, capacity, and genuineness of transactions were established. The Revenue failed to provide evidence to challenge the CIT(A)'s findings.

4. The Revenue contended that letters sent to investing companies were returned undelivered, suggesting non-existence of such companies. However, the CIT(A) and Tribunal noted that companies later appeared through representatives, providing necessary documentation. One company director even submitted an affidavit confirming the investment details.

5. The concurrent findings of fact by the CIT(A) and Tribunal supported the legitimacy of share subscriptions, negating the Revenue's claim under Section 68 of the Act. The absence of evidence proving perversity in the lower authorities' decisions led to the dismissal of the appeal under Section 260-A of the Income Tax Act, 1961.

6. The Court held that the Revenue failed to establish any substantial question of law warranting interference with the lower authorities' decisions. Therefore, the appeal was dismissed, affirming the deletion of the ?19.40 Crores addition from the Respondent's income for Assessment Year 2008-09.