2021 (1) TMI 735 - AT - Income Tax

Addition u/s 68 - Assessee received as preference share capital including share premium front parties unexplained - admission of additional evidence by CIT-A while deleting the addition - HELD THAT - CIT(A) has admitted the additional evidence relying on the facts and the judicial decisions in particular of Coordinate Bench of Hon'ble tribunal in the case of Shahrukh Khan and DCIT 2006 (7) TMI 532 - ITAT MUMBAI where it was held, that after calling for remand report from the A.O. on merits as envisaged in Rule 46A of IT Rules, 1962, the CIT(A) has no discretion to refuse to admit the additional evidence. Considering the overall facts in respect of admission of additional evidence, the Ld CIT(A) plays a vital role in exercising his powers and they are co terminus in line with the A.O. and further opportunity was provided to the A.O. by calling for the remand report. The assessee was provided time to file the counter arguments therefore, the CIT(A) action in admitting the additional evidence is within his jurisdiction supported by the judicial decisions and facts and in accordance with law. The Revenue cannot agitate that the CIT(A) should not have admitted the additional evidence. Addition u/s 68 - We find that the Ld. AR has substantiated his arguments with the judicial decisions and the material facts with the evidences which cannot be disputed and the Ld. CIT(A) has also considered the legal aspects and the remand report and took a reasonable decision. We also find that in respect of third ground raised by the revenue, that the CIT(A) has not considered the findings of the A.O. in the remand report in respect of two investors who have nothing to do with the investment but only accommodating operations. Whereas, the Ld CIT(A) having received the remand report has dealt at para 6.4.1 of the order, where these companies have been tested and investigated by the DDIT, (Inv) Ahmedabad and the documentary evidence was filed. CIT(A) accepts that these companies actually exist and have capacity to make investments in assessee company as it was proved in the case of the investigation at Ahmedabad and Baroda. The CIT(A) also observed that the assessee has discharged his onus of burden of proof in respect of identity of investor, creditworthiness and genuineness of the transaction. As relying on M/S. AMI INDUSTRIES (INDIA) P. LTD. 2020 (2) TMI 269 - BOMBAY HIGH COURT we find that the CIT(A) has passed a reasonable and logical order considering the provisions of law, judicial decisions, remand report and the assessee's own case, and applied the ratio of the judicial decisions to the present case and deleted the addition. The Ld. DR has submitted that the order of the Ld. CIT(A) is bad in law and supported his arguments relying on the order of the A.O. and remand report and could not controvert the findings of the CIT(A) with any new or cogent evidence - Decided against revenue.

Summary

Issues Involved:
1. Admission of additional evidence by the CIT(A).
2. Identity, creditworthiness, and genuineness of the transactions of the investors.
3. Allegations of accommodation entries by certain investor companies.

Detailed Analysis:

1. Admission of Additional Evidence by the CIT(A):

The CIT(A) admitted additional evidence under Rule 46A of the IT Rules, which was forwarded to the Assessing Officer (A.O.) for comments and a remand report. The A.O. issued notices under section 133(6) to the investors, who responded with the required details. The CIT(A) considered the remand report and found that the A.O. did not point out any discrepancies in the information provided by the investors. The CIT(A) relied on judicial precedents, including the case of Shahrukh Khan vs. DCIT, to justify the admission of additional evidence, emphasizing that the CIT(A) has no discretion to refuse such evidence if it goes to the root of the case. The Tribunal upheld the CIT(A)'s decision, noting that the A.O. had ample opportunity to verify the evidence during the remand proceedings.

2. Identity, Creditworthiness, and Genuineness of the Transactions:

The CIT(A) examined the details provided by the assessee regarding the identity, creditworthiness, and genuineness of the transactions. The investors submitted their income tax returns, financial statements, PAN card copies, and confirmations of investments. The CIT(A) found that the investors had sufficient financial capacity to make the investments and that the transactions were genuine. The CIT(A) also noted that the investors continued to hold the shares and that there was no rotation of money. The Tribunal confirmed the CIT(A)'s findings, emphasizing that the assessee had discharged its burden of proof under section 68 of the Income Tax Act. The Tribunal referred to various judicial decisions, including the case of Gagandeep Infrastructure Pvt. Ltd., to support its conclusion.

3. Allegations of Accommodation Entries by Certain Investor Companies:

The A.O. alleged that two of the investor companies, Alken Management and Financial Services Pvt. Ltd. and Shree Ganesh Spinners Ltd., were involved in providing accommodation entries. The CIT(A) addressed these allegations by noting that the statements made during the search in the case of J Kumar Infraprojects Ltd. were not put to the assessee for cross-examination. The CIT(A) also observed that these companies were investigated by the DDIT (Inv) Ahmedabad and found to be genuine. The Tribunal upheld the CIT(A)'s findings, emphasizing that the identity, creditworthiness, and genuineness of the transactions were established through documentary evidence.

Conclusion:
The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s decision to admit additional evidence and accept the assessee's explanations regarding the identity, creditworthiness, and genuineness of the transactions. The Tribunal found no infirmity in the CIT(A)'s order and upheld the deletion of the addition made under section 68 of the Income Tax Act.