2021 (6) TMI 981 - AT - Income Tax

Unexplained cash credits u/s 68 - HELD THAT - As assessee has filed the documentary evidence pertaining to investor(s) along with confirmation letters claiming to have discharged its onus to satisfy genuineness, credit worthiness of the impugned share capital money It fails to dispute that the legislation has introduced 1st proviso to sec.68 of the Act vide Finance Act, 2012 w.e.f. 1.4.2013 that such a taxpayer must also prove source of source as well (clause a ) which has remained totally uncomplied with. We make it clear that we are in AY. 2013-14 whereas case law cited before us pertains to AY 1962-63 and upto 2009-10 only. Hon ble apex court s judgement in NRA Iron and Steel Corporation Ltd. 2019 (3) TMI 323 - SUPREME COURT has made it clear that mere filing of documents does not absolve an assessee to prove genuineness and creditworthiness of its investor(s) parties. We thus express our complete agreement with the learned CIT(A) s detailed findings affirming impugned unexplained cash credits addition - The assessee fails in its sole substantive ground.

Summary

Issues:
Challenge to treating share capital as unexplained cash credits under section 68 of the Income Tax Act for Assessment Year 2014-15.

Analysis:
The appellant contested the treatment of its share capital as unexplained cash credits under section 68 of the Income Tax Act. The CIT(A) and Assessing Officer found discrepancies in the share capital received from M/s Twinkle Commonsales Pvt. Ltd. The appellant failed to provide satisfactory explanations regarding the source of funds and the legitimacy of the transaction. The appellant could not establish the creditworthiness of the investor or the genuineness of the transaction, leading to the assessment of the amount as unexplained income. The appellant's argument that transactions were through banking channels was rejected as insufficient proof. Various legal precedents were cited emphasizing the obligation to prove the genuineness, identity, and creditworthiness of investors. The Tribunal upheld the decision to treat the share application money as unexplained credit under section 68 of the Act.

The appellant presented a detailed paper book containing submissions, returns, confirmation letters, and other documents to support its case. However, the Tribunal noted that the appellant did not comply with the requirement to prove the source of source as per the 1st proviso to section 68 introduced in the Finance Act, 2012. The Tribunal highlighted that the case law cited by the appellant was from earlier assessment years and did not absolve the appellant from proving the genuineness and creditworthiness of the investor parties. The Tribunal agreed with the CIT(A)'s findings and dismissed the appeal, affirming the addition of unexplained cash credits.

In conclusion, the Tribunal dismissed the appellant's appeal, upholding the decision to treat the share capital as unexplained cash credits under section 68 of the Income Tax Act for Assessment Year 2014-15. The appellant's failure to provide sufficient evidence regarding the legitimacy of the transaction and the creditworthiness of the investor led to the affirmation of the addition by the Tribunal. The legal precedents cited emphasized the importance of proving the genuineness, identity, and creditworthiness of investors in such cases.