2021 (2) TMI 71 - AT - Income Tax

Addition u/s 68 - Unexplained share capital - As alleged assessee failed to prove the genuineness of the share application money received - HELD THAT - The assessee has received 3, 50, 000/- from Smt. Renu Rekhan and 6 lacs from Smt. Nisha Rekhan on account of share application money. The assessee has filed their confirmation and copy of the ITR but in the confirmation it is not mentioned whether share application money have been given in cash or through Bank account. No evidence of their creditworthiness have been filed. Thus assessee failed to prove the genuineness of the share application money received from these two ladies. In the absence of adequate evidence the authorities below were justified in making the addition. We therefore confirm the addition and dismiss this ground of appeal. Unsecured loans from 05 parties - parties have not appeared before A.O. in response to the summons under section 131 - In the case of Star Technosoft Pvt. Ltd. assessee has filed letter before A.O. in which assessee has explained that the assessee is making efforts to get the bank statements and in case of urgency the same may be summoned from the concerned Bank of the creditors. The assessee also requested that this creditor may be summoned under section 131 - Since the A.O. did not take any steps in the matter therefore no adverse inference could be drawn against the assessee in respect of the creditor Star Technosoft Pvt. Ltd. A.O. has found that income of the creditor is low as compared to the corresponding transaction but their bank statements clearly show they have sufficient means to give loan to the assessee and in case of two of the creditors even their income was higher as compared to the loan given to the assessee. Merely because low income is shown in the return of income by the creditor is no ground to make any addition against the assessee. In the case of creditor Kshitiz Infratech Pvt. Ltd. the A.O. from the balance sheet found that amount of 50 lakh have been shown as advance against the property but it is a fact that this creditor has given an amount of 50 lakhs to the assessee therefore no further adverse inference could be taken against the assessee. The authorities below have also rejected the explanation of assessee because the creditors did not appear in response to the summons issued by the A.O. Dated 17.05.2018 for the date fix for 24.05.2018. A.O. issued summons under section 131 to enforce the attendance of the creditors at the fag end of the assessment. The first date was fixed for 24.05.2018 only and assessment have been framed on 31.05.2018. Thus the Learned Counsel for the Assessee rightly contended that no sufficient time was given to the creditors to appear before A.O. in response to the summons under section 131 - no time have been given to the assessee to enforce the attendance of these creditors before A.O. It is also well settled Law assessee need not to prove the source of the source. In A.Y. 2010-2011 the same Ld. CIT(A) passed the Order on 06.07.2020 and on production of the sale deed found that creditworthiness of the creditor is established. It is held in this year that mere non-compliance of the summon is not sufficient to make the addition under section 68 of the Income Tax Act 1961 where identity genuineness and creditworthiness stands established. Thus there was no reason for the Ld. CIT(A) to take a different view in assessment year under appeal i.e. 2009-2010. Initial burden upon the assessee to prove identity of the creditors their creditworthiness and genuineness of the transaction have been discharged. A.O. did not bring any evidence on record to disbelieve the explanation of the assessee or the documentary evidence filed on record. In view of the above we set aside the Orders of the authorities below and delete the addition - on account of 05 creditors above. This ground of appeal is allowed.

Issues Involved:
1. Validity of the assessment order under section 153 of the Income-Tax Act, 1961.
2. Addition of ?9,50,000/- on account of unexplained share application money.
3. Addition of ?1.50 crores on account of unexplained unsecured loans.
4. Time-barred assessment and unjustified additions on merit.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order under Section 153 of the Income-Tax Act, 1961:
The assessee challenged the validity of the assessment order passed under section 153 of the Income-Tax Act, 1961. The initial assessment was ex-parte due to non-compliance with statutory notices. The ITAT had previously remanded the matter to the A.O. for examining the confirmation of creditors and making thorough inquiries. The A.O. conducted further assessments but found non-compliance from the assessee on certain dates. The final assessment included additions based on the material available.

2. Addition of ?9,50,000/- on Account of Unexplained Share Application Money:
The assessee received ?3,50,000/- from Smt. Renu Rekhan and ?6,00,000/- from Smt. Nisha Rekhan as share application money. The assessee provided confirmations and ITRs of the share applicants but failed to prove the genuineness of the transactions and the creditworthiness of the applicants. The authorities noted the absence of evidence showing whether the money was given in cash or through a bank account. Consequently, the addition of ?9,50,000/- was confirmed by the authorities, and this ground of appeal was dismissed.

3. Addition of ?1.50 Crores on Account of Unexplained Unsecured Loans:
The assessee received unsecured loans from five parties. The assessee provided confirmations, ITRs, and bank statements for four creditors, showing sufficient bank balances and tax assessments. For Star Technosoft Pvt. Ltd., the assessee requested the A.O. to summon the bank for the creditor's bank statements, which the A.O. did not pursue. The ITAT noted that the A.O. did not make sufficient efforts to enforce the attendance of the creditors or obtain necessary documents, leading to an adverse inference against the assessee. The ITAT observed that the initial burden to prove the identity, creditworthiness, and genuineness of the transactions was discharged by the assessee. The authorities below did not bring any evidence to disbelieve the assessee's explanation. Consequently, the addition of ?1.50 crores was deleted, and this ground of appeal was allowed.

4. Time-barred Assessment and Unjustified Additions on Merit:
The assessee argued that the assessment was time-barred and that the additions were unjustified. The Ld. CIT(A) dismissed these arguments, stating that the onus was on the assessee to prove genuine credits, which was not discharged due to non-compliance with summons. However, the ITAT found that the A.O. did not provide sufficient time for the creditors to respond to the summons and did not assist the assessee in obtaining necessary evidence, leading to the deletion of the addition of ?1.50 crores.

Conclusion:
The appeal of the assessee was partly allowed. The addition of ?9,50,000/- on account of unexplained share application money was confirmed, while the addition of ?1.50 crores on account of unexplained unsecured loans was deleted. The ITAT emphasized the importance of providing sufficient time and assistance to the assessee in proving the genuineness of transactions and the creditworthiness of creditors.

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