2020 (1) TMI 355 - AT - Income Tax

Unexplained cash credits u/s 68 - Discharge of onus - HELD THAT - Learned departmental representative at this stage quoted hon'ble apex court s decision in PCIT vs. NRA Iron Steel Pvt. Ltd. 2019 (3) TMI 323 - SUPREME COURT restoring such unexplained cash credits addition in the nature of the share capital / premium invoking accommodation entry providers. We note that their lordships had come across an instance of the concerned assessee having failed to satisfy the above stated three parameters (supra) whereas the facts in the instant case sufficiently reveal that this taxpayer had duly discharged its onus and also responded to section 131 summons. We therefore reject the Revenue s arguments supporting lower authorities action and delete the impugned un-explained cash credits addition. The assessee succeeds in its sole substantive grievance.

Summary

Issues Involved:
1. Treatment of share capital/premium as unexplained cash credits under Section 68 of the Income Tax Act, 1961.
2. Compliance with Section 131 summons for proving identity, genuineness, and creditworthiness of investors.

Issue-wise Detailed Analysis:

1. Treatment of Share Capital/Premium as Unexplained Cash Credits under Section 68:
The primary issue in the appeal was whether the share capital/premium amounting to ?2,01,50,000/- should be treated as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The lower authorities, including the CIT(A), had confirmed the addition made by the Assessing Officer (AO) on the grounds that the assessee failed to prove the genuineness of the transactions and the creditworthiness of the investors. The CIT(A) relied on various judgments, including the Delhi High Court's decision in CIT vs. Nipun Builders Pvt. Ltd. and the Calcutta High Court's decision in Ms. Rajmandir Estates Pvt. Ltd. vs. PCIT, Kolkata, concluding that the transactions were nominal rather than real and the creditworthiness of the shareholders was not proved.

2. Compliance with Section 131 Summons for Proving Identity, Genuineness, and Creditworthiness of Investors:
The assessee contended that it had discharged its primary onus of proving the identity, genuineness, and creditworthiness of all twenty-two investors by submitting audited accounts, income-tax return acknowledgments, certificates of incorporation, bank statements, and source of funds. The assessee argued that these particulars were filed during the assessment process but were not considered by the lower authorities. The Revenue, on the other hand, maintained that the Section 131 summons issued to the directors remained un-complied with, and the investors were accommodation entry providers, thus justifying the addition.

Tribunal's Findings:
The tribunal examined the case records and found that the assessee had indeed responded to the Section 131 summons and provided the necessary documents to prove the identity, genuineness, and creditworthiness of the investors. The tribunal noted that the AO did not make any further inquiries or ask the assessee to produce additional evidence. The tribunal referred to its co-ordinate bench’s decision in the case of Bidit Financial Management Pvt. Ltd. vs. DCIT, which had similar facts and was decided in favor of the assessee. The tribunal also cited various High Court judgments, including Pr. CIT vs. Paradise Inland Shipping (P) Ltd. and CIT vs. Gagandeep Infrastructure (P.) Ltd., which supported the assessee's position that once the genuineness, creditworthiness, and identity of investors are established, no addition under Section 68 is warranted.

Conclusion:
The tribunal concluded that the lower authorities' findings were not in conformity with the case records, and the assessee had sufficiently discharged its onus of proving the three parameters required under Section 68. The tribunal rejected the Revenue's arguments and deleted the addition of ?2,01,50,000/- made by the AO. The appeal was allowed in favor of the assessee, and the order was pronounced in the open court on 08/01/2020.