2020 (2) TMI 147 - AT - Income Tax

Bogus share application money - Addition u/s 68 - HELD THAT - In this case, the assessee has filed list of shareholders, copy of share application for, copy of share certificates and form no.2 filed with the Registrar of Companies and also the justification for charging the premium on the basis of the future prospect of the respondent company. But by not accepting the explanation, the AO made addition u/s 68 of the Act. The Hon ble Bombay High Court by relying the decision of Lovely Exports (P) Ltd. 2006 (11) TMI 121 - DELHI HIGH COURT upheld the findings of the ITAT that respondent assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to the shares. Similarly in the case of CIT vs. Dwarkadhish Capital Market Pvt. Ltd. 2010 (8) TMI 23 - DELHI HIGH COURT it was held that once the identity of the share applicant has been established by either furnishing PAN or income tax assessment number and proved the genuineness of transactions by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue which has all the powers to trace any person. Addition made by the AO u/s 68 was wrong on the ground that the proviso to section 68 was added by Finance Act 2012 w.e.f. 01.04.2013 which comes in operation from A.Y 2013-14 and on this account also, the addition cannot be sustained. We have also perused the decisions relied upon by the Revenue and found the same as distinguishable on facts. We note that the ld. CIT(A) has taken all the aspects and issues into account while passing his order and, thus we do not find any infirmity or illegality in the order of ld. CIT(A). Accordingly, we uphold the same by dismissing the appeal of the Revenue.

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) on account of bogus share premium.
2. Compliance with notices and opportunity for cross-examination.
3. Reliance on statements and evidence provided by the assessee.
4. Jurisdiction under Section 147 r.w.s. 148 of the Income Tax Act.
5. Condonation of delay in filing cross-objections.

Detailed Analysis:

1. Deletion of Addition Made by AO on Account of Bogus Share Premium:
The core issue raised by the Revenue was the deletion of an addition made by the AO on account of bogus share application money. The AO had added ?1,50,00,000 under Section 68, suspecting the share premium to be bogus as it involved entities controlled by Shri Praveen Kumar Jain, known for providing accommodation entries. The CIT(A) deleted the addition, emphasizing that the investor companies were assessed to tax, their identities were verified, and transactions were confirmed through banking channels. The CIT(A) relied on various judicial precedents, including the Supreme Court's decision in CIT vs. Lovely Exports, which held that if the share application money is received from alleged bogus shareholders whose names are given to the AO, the department can proceed against them individually but cannot treat it as undisclosed income of the assessee company.

2. Compliance with Notices and Opportunity for Cross-Examination:
The CIT(A) noted that the AO did not examine the investors nor carried out any further investigations despite the investors complying with notices issued under Section 133(6). The AO's reliance on the statement of Shri Praveen Kumar Jain, which was retracted, without providing an opportunity for cross-examination, was deemed insufficient to justify the addition. The CIT(A) emphasized the principle of natural justice, stating that conclusions drawn against a person based on a third-party statement must allow for cross-examination.

3. Reliance on Statements and Evidence Provided by the Assessee:
The assessee provided various documents, including PAN cards, confirmation letters, income tax returns, bank statements, and balance sheets of investor companies. The AO's addition was primarily based on the retracted statement of Shri Praveen Kumar Jain without conducting further investigations. The CIT(A) and later the Tribunal upheld that the assessee had sufficiently discharged its onus by providing necessary evidence, shifting the burden to the AO to prove otherwise.

4. Jurisdiction under Section 147 r.w.s. 148 of the Income Tax Act:
The assessee challenged the jurisdiction under Section 147 r.w.s. 148 in their cross-objections. However, the Tribunal found that the cross-objections were filed late, with delays of 490 days for AY 2009-10 and 211 days for AY 2010-11. The reasons provided for the delay were not deemed sufficient, and thus, the cross-objections were dismissed as barred by limitation.

5. Condonation of Delay in Filing Cross-Objections:
The Tribunal dismissed the cross-objections due to the delay in filing. The explanation that the assessee was unaware of the need to appeal against the jurisdictional dismissal until advised by counsel was not considered tenable. The Tribunal held that the reasons for the delay were not germane and sufficient, leading to the dismissal of the cross-objections.

Conclusion:
The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeals and the assessee's cross-objections. The Tribunal reinforced the principle that the onus of proof shifts to the AO once the assessee has provided sufficient evidence to establish the identity, genuineness, and creditworthiness of the transactions. The reliance on retracted statements without further investigation was deemed insufficient to sustain the addition under Section 68. The Tribunal also emphasized adherence to procedural timelines, dismissing the cross-objections due to delayed filing without sufficient cause.

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