2021 (4) TMI 626 - AT - Income Tax

Addition u/s 68 - undisclosed share application monies received from 5 companies - AR submitted that the transactions with the investing companies were genuine and assessee has complied the conditions stipulated in section 68 - HELD THAT - All the transactions were routed through the banking channel which proves that the transaction is genuine. Since assessee has submitted all the relevant document to prove the genuinity of the transaction which led him to come to the conclusion that assessee has discharged the initial onus cast upon him to establish the identity, creditworthiness and genuineness of the transactions. He observed that the onus now shifted to the AO. AO could have carried out independent verification of all the parties by issuing summons under section 131 of the Act. The assessing officer has not made any further investigation to controvert the claims of the assessee but proceeded to make the addition heavily relying on the information of investigation wing and merely on the fact that these transactions involving Shri Praveen Kumar Jain. We notice that Ld DR in her submission brought to our notice from the information contained in bank statements of the parties filed in the paper book. She brought to our notice that the amounts transferred by the parties to the assessee were received from another concern and transferred on the same day. She does not dispute the fact that all the transactions were routed through banking channel and assessee has submitted all the information which were before the assessing officer. The assessing officer should have investigated all the information and could have controverted the submissions made by the assessee or could have found the sources of the money transferred and he could have traced whether any involvement of cash deposits. It is not the case of the assessing officer that unaccounted money were transferred in the above transactions. Further we notice that she brought to notice commonness of email ID and commonness in board s resolutions passed by these companies. These commonness could be the employment of common company secretary or accountant. These evidences will not make any difference to the genuine transaction. We notice that Ld CIT(A) allowed the appeal of the assessee by relying on the case of coordinate bench decision in the case of M/s Arceli reality Ltd 2017 (4) TMI 1268 - ITAT MUMBAI in which similar issue was considered. Facts of the above case is similar to the facts in the present case and we are in agreement with the findings of the coordinate bench in the above paragraph. Therefore the appeal filed by the revenue is accordingly dismissed.

Issues Involved:
1. Validity of addition under Section 68 of the Income Tax Act, 1961.
2. Genuineness of share application money received from certain companies.
3. Credibility of evidence and statements provided by the assessee.
4. Role of the Assessing Officer (AO) in verifying the transactions.
5. Application of judicial precedents and legal principles.

Issue-wise Detailed Analysis:

1. Validity of Addition under Section 68 of the Income Tax Act, 1961:
The AO added ?5,47,50,000 to the assessee's income under Section 68, arguing that the share application money received from five companies was not genuine. The assessee contended that they had provided all necessary documents to prove the identity, creditworthiness, and genuineness of the transactions. The AO relied heavily on information from the investigation wing related to the Praveen Kumar Jain Group, which was accused of providing accommodation entries.

2. Genuineness of Share Application Money Received from Certain Companies:
The assessee provided multiple documents, including confirmations, financial statements, bank statements, affidavits, and share certificates, to prove the genuineness of the transactions. The AO dismissed these documents, citing information from the investigation wing and statements made by Praveen Kumar Jain, which were later retracted. The CIT(A) found that the assessee had sufficiently demonstrated the identity and creditworthiness of the investor companies and the genuineness of the transactions.

3. Credibility of Evidence and Statements Provided by the Assessee:
The CIT(A) observed that the AO did not conduct any independent verification or issue summons under Section 131 to the investor companies. The AO's reliance on third-party statements without cross-examination or further investigation was deemed insufficient. The CIT(A) noted that the AO failed to bring any contrary material on record to disprove the assessee's evidence.

4. Role of the Assessing Officer (AO) in Verifying the Transactions:
The AO was criticized for not conducting independent verification and solely relying on information from the investigation wing. The CIT(A) stated that the AO should have made inquiries from the lenders by summoning them and verifying the evidence provided by the assessee. The AO's failure to do so meant that the initial onus cast upon the assessee was deemed to have been discharged.

5. Application of Judicial Precedents and Legal Principles:
The CIT(A) and the Tribunal relied on several judicial precedents, including the Supreme Court's decision in CIT v. Lovely Exports and the Bombay High Court's decision in CIT v. Creative World Telefilms Ltd. These cases established that if the identity of the investors is proven and the transactions are conducted through banking channels, the burden shifts to the AO to disprove the evidence. The Tribunal also cited its own decision in Arceli Realty Ltd., which involved similar facts and investors, to support the assessee's case.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO under Section 68. It concluded that the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions. The AO's reliance on third-party information without independent verification was insufficient to justify the addition. The appeal filed by the revenue was dismissed, affirming that the share application money received by the assessee was genuine and not unexplained cash credit.

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