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2021 (6) TMI 1027 - AT - Income TaxAddition u/s 68 - unexplained cash credit - Can the amount of share money be regarded as undisclosed income under section 68 ? - CIT-A deleted the addition - assessee has issued share warrants to M/s BDPL during the year - HELD THAT - The transactions were duly reflected in the financial statements of the investor entity. The transactions have taken place through banking channels. After going through all these facts and evidences, we find that the onus casted upon assessee in terms of requirement of Sec.68 to prove the identity of the investor, their respective creditworthiness and the genuineness of the transactions, was duly discharged by the assessee. The onus, had thus shifted on Ld. AO, to disprove the assessee s documents and to bring on record any material to prove that assessee s own money flew back to it in the shape of share warrant application money. However, noting of that sort is available in the assessment order. The documents, which in the opinion of Ld. AO could not be furnished, include correspondence with M/s BDPL prior to issue of warrants, details of introducers of directors of M/s BDPL, details of services taken from investment banker, proof of receipt of share warrant application form, proof of dispatch of notice of AGM along with postal records, proof of dispatch of share warrants and shares. However, all these documents, as rightly noted by Ld. CIT(A), were not of much relevance since the transactions were duly confirmed by the investor entity as supported by other vital documentary evidences. So far as the applicability of the provisions of Sec.56(2)(viia) is concerned, the same do not apply to the assessee since the assessee is not the recipient of any property rather it is only an issuer of share warrants only and therefore, these provisions do not apply to the assessee. As settled position of law that to avoid the rigors of Section 68, the assessee must prove the identity, creditworthiness of the lenders / investors to advance such monies and genuineness of the transactions. Once these three ingredients are shown to be fulfilled by the assessee, the primary onus casted upon him, in this regard, could be said to have been discharged and accordingly, the onus would shift upon revenue to dislodge the assessee s claim by bringing on record material evidences and unless this onus is discharged by the revenue, no addition could be sustained u/s 68. The assessee had discharged the onus of proving the fulfillment of primary requirements of Section 68 and the onus was on Ld. AO to disprove the same. In the absence of any such facts on record, the impugned additions could not be sustained in the eyes of law and therefore, Ld. CIT(A) has rightly deleted the same. - Decided against revenue.
Issues Involved:
1. Whether the Ld. CIT(A) erred in holding that the allegations in the assessment order were either not relevant or contrary to facts. 2. Whether the Ld. CIT(A) erred in deleting the addition of ?8,20,00,000/- under Section 68 of the Income Tax Act, 1961. 3. Whether the Ld. CIT(A) erred in ignoring the fact that the decisions of the Hon’ble Supreme Court in the cases of Vijay Kumar Talwar vs. CIT and CIT vs. Orissa Corpn. Pvt. Ltd. were not considered. Issue-wise Detailed Analysis: 1. Allegations in the Assessment Order: The revenue contested that the Ld. CIT(A) erred in holding that the allegations contained in the assessment order were either not relevant or contrary to facts. The Ld. CIT(A) found that the allegations were largely irrelevant or contrary to the facts on record. The case laws cited by the Assessing Officer (AO) were distinguishable from the facts of the case and did not apply to the assessee’s case. 2. Deletion of Addition under Section 68: The primary issue was the deletion of ?8,20,00,000/- added under Section 68 of the Income Tax Act, 1961. The assessee, a corporate entity engaged in the manufacturing and sale of liquor products, had issued share warrants to M/s Bottomline Distributors Pvt. Ltd. (BDPL) to meet urgent fund requirements and reduce borrowings. The AO treated the share warrant application money received by the assessee as unexplained cash credit under Section 68, citing incomplete information and lack of proof of identity, creditworthiness, and genuineness of transactions. During the assessment proceedings, the assessee provided various documents, including the income tax return, audited financial statements, bank statements, and board resolutions of BDPL. Despite this, the AO found the evidence insufficient and raised concerns about the creditworthiness of BDPL, which had reported a loss and no business income. The Ld. CIT(A), however, noted that BDPL was a duly registered entity with valid PAN and sufficient paid-up capital and reserves. BDPL had been assessed under scrutiny in earlier years, and the transactions were through banking channels. The Ld. CIT(A) concluded that the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions, and therefore, the additions could not be sustained. 3. Ignoring Supreme Court Decisions: The revenue argued that the Ld. CIT(A) ignored the fact that the decisions of the Hon’ble Supreme Court in the cases of Vijay Kumar Talwar vs. CIT and CIT vs. Orissa Corpn. Pvt. Ltd. were not considered. However, the Ld. CIT(A) relied on other relevant judicial pronouncements, such as CIT vs. Gangeshwari Metal P. Ltd., CIT vs. Divine Leasing & Finance Ltd., and others, which supported the deletion of the addition under Section 68. Judgment: The Tribunal upheld the Ld. CIT(A)’s decision to delete the addition of ?8,20,00,000/- under Section 68, finding that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. The AO failed to disprove the assessee’s documents or bring any material evidence to suggest that the assessee’s own money flowed back to it as share warrant application money. The Tribunal found no infirmity in the Ld. CIT(A)’s order and dismissed the revenue’s appeal for both Assessment Years 2011-12 and 2012-13. Conclusion: Both appeals by the revenue were dismissed, and the additions made by the AO under Section 68 were deleted, as the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions. The Tribunal’s decision was pronounced on 28th June, 2021.
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