2021 (5) TMI 186 - AT - Income Tax

Unexplained cash credit u/s 68 - HELD THAT - The primary onus as casted on the assessee in terms of the requirement of Section 68, was duly fulfilled and the onus was on revenue to controvert the evidences furnished by the assessee. However, we find that nothing has been brought on record by the revenue to substantiate the fact that the assessee s unaccounted money was routed in the books in the garb of share capital. It is trite law that no addition could be made merely on the basis of allegation, suspicion, conjectures or surmises. Upon perusal of assessee s written submissions as placed on record, another pertinent fact to be noted is that all the 16 investor entities has sufficient net worth (shares capital reserves surplus) to make investment in the assessee and the percentage of investment made by them in the assessee company is merely in the range of 0.47% to 5.45% of their respective net worth. As relying on own case 2020 (3) TMI 595 - ITAT MUMBAI we delete the impugned additions. Consequently, the set-off of losses, as allowable under law, would be available to the assessee.

Issues Involved
1. Validity of reopening the case under Section 148.
2. Validity of the assessment order under Section 143(3).
3. Opportunity to rebut material during reassessment.
4. Addition of unexplained cash credit under Section 68.
5. Non-permission of business loss.
6. Initiation of penalty proceedings under Section 274 read with Section 271(1)(c).
7. Calculation of interest under Sections 234A, 234B, and 234C.

Detailed Analysis

1. Validity of Reopening the Case Under Section 148
The assessee challenged the reopening of the case under Section 148, arguing that there was no tangible material linking the assessee to the entities involved in the search operations. The Tribunal found that the Assessing Officer (AO) had authentic information from the investigation wing suggesting possible income escapement, which justified the reopening. Consequently, the Tribunal upheld the reopening of the case, dismissing the assessee's legal grounds.

2. Validity of the Assessment Order Under Section 143(3)
The assessee contended that the assessment order was against the principles of natural justice. The Tribunal noted that the AO had conducted exhaustive inquiries and analysis before concluding that the share capital and premium received by the assessee were not genuine. The Tribunal found no procedural lapses and upheld the validity of the assessment order.

3. Opportunity to Rebut Material During Reassessment
The assessee argued that they were not given an opportunity to rebut the material relied upon by the AO. The Tribunal observed that the assessee had submitted extensive documentary evidence to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal found that the AO had considered these submissions and thus, the principles of natural justice were not violated.

4. Addition of Unexplained Cash Credit Under Section 68
The primary issue was the addition of ?3,22,75,000 as unexplained cash credit under Section 68. The Tribunal observed that the issue was covered in the assessee's favor by earlier decisions in the assessee's own case for AYs 2011-12 and 2012-13. The assessee had provided comprehensive documentary evidence, including share application forms, bank statements, and financial statements of investor entities, to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal found that the AO's reliance on the retracted statement of Shri Rajesh Agarwal, without corroborative evidence, was not sufficient to justify the addition. The Tribunal deleted the addition, noting that the assessee had successfully discharged the onus cast upon it under Section 68.

5. Non-Permission of Business Loss
The Tribunal allowed the set-off of business loss of ?25,879, as the deletion of the addition under Section 68 resulted in the availability of losses for set-off.

6. Initiation of Penalty Proceedings Under Section 274 Read with Section 271(1)(c)
The Tribunal noted that the penalty proceedings were consequential to the quantum addition. Since the addition under Section 68 was deleted, the penalty proceedings under Section 274 read with Section 271(1)(c) were rendered infructuous.

7. Calculation of Interest Under Sections 234A, 234B, and 234C
The Tribunal directed the AO to recompute the interest under Sections 234A, 234B, and 234C in light of the deletion of the addition under Section 68.

Conclusion
The Tribunal partly allowed the appeal, deleting the addition under Section 68 and permitting the set-off of business losses. The reopening of the case under Section 148 and the validity of the assessment order under Section 143(3) were upheld. The penalty proceedings were rendered infructuous, and the AO was directed to recompute the interest under Sections 234A, 234B, and 234C.

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