2020 (8) TMI 60 - AT - Income Tax

Unexplained cash credit - addition on account of share capital u/s 68 - CIT-A deleted the same only on the ground that the same amount was added in the hands of share subscribing company - HELD THAT - M/s. SNR Trading Co. (P) Ltd. was assessed to tax u/s 143(3) of the Act and the amount of share capital said to have been invested in the assessee company is explained because source of money in question was assessed in the hand of investor company. The identity of M/s. SNR Trading Co. (P) Ltd., genuineness of transaction and creditworthiness is proved. Therefore, the addition made in the hands of assessee is not maintainable to the fact the source of share capital and premium is found to be explained in terms of provisions u/s 68 of the Act. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Thus, only issue raised by the revenue is dismissed.

Summary

Issues:
- Delay in filing appeal by Revenue
- Justification of deleting addition made by AO on account of share capital u/s 68 of the Act

Delay in filing appeal by Revenue:
The Revenue filed an appeal with a delay of 25 days, which was condoned after the ld. DR submitted reasons for the delay. The Tribunal, after perusing the petition and hearing both parties, allowed the appeal to proceed despite the delay.

Justification of deleting addition made by AO on account of share capital u/s 68 of the Act:
The AO added the share capital and premium of the Assessee company under unexplained cash credit u/s 68 of the Act, as the company failed to produce directors of the subscribing company during scrutiny proceedings. However, the Ld. CIT(A) deleted the addition, citing a similar transaction involving M/s. SNR Trading Co. (P) Ltd., an existing shareholder in the Assessee company. The Tribunal noted that M/s. SNR Trading Co. (P) Ltd. is an RBI registered NBFC Company with investments in group companies. The Ld. CIT(A) held that since the same transaction was assessed in the hands of M/s. SNR Trading Co. (P) Ltd., no addition in the Assessee company is maintainable. The Tribunal found that the source of share capital was explained in the hands of the investor company, proving identity, genuineness of transaction, and creditworthiness. Therefore, the addition made by the AO in the Assessee's hands was deemed unjustified, and the order of the CIT(A) was upheld.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the deletion of the addition made by the AO on the share capital under section 68 of the Act. The decision was based on the explanation of the source of share capital in the hands of the investor company, M/s. SNR Trading Co. (P) Ltd. The judgment was pronounced on 06.02.2020 in an open court session.