2021 (12) TMI 309 - AT - Income Tax

Bogus share transaction - addition u/s 68 - assessee being not able to prove genuineness and credit worthiness of share capital and securities premium - HELD THAT - It is necessary for the lower authorities, more particularly the ld. CIT(A) to record, as to when the payment for issuance of shares were received by the assessee company in its books of accounts or, in other words, when the amount were credited in the account of the assessee . Since, no discussion have taken place in the entire order passed by the ld. CIT(A) , further, we noticed that in written submissions also no such details have been filed before us, on the basis of which it can be deduced as to the date of credit of the amount in the books of the assessee - interestingly in the balance sheet also there were no outstanding loans/ amount for the earlier years. In absence of these documents and information, it will be against the interest of justice and law to decide the issue merely on the basis of the judgement relied upon by the ld. AR and vague finding of the CIT(A) . CIT(A) has merely relied upon the confirmation letter given by the respective shareholders, confirming the transaction along with the loan transactions before us as well as before the ld. CIT(A). No books of accounts of the assessee were produced before us showing credit entry of the amounts invested in the shares prior to the previous years. For the purposes of section 68, it is essential that there must be credit entry in the books of account in the previous year for which the addition are sought to be made.CIT(A) without verifying the credit entry in the books of the assessee, have deleted the addition merely on the basis of the bank statement of other persons. The matter is required to be remanded back to the file of the ld. CIT(A) with a direction to examine the matter afresh and find out whether the shares were issued at a premium and if, the answer is yes, whether the amount for issuance of shares were credited in the books of account of the assessee company for issuing the shares. If the shares were issued and the amounts were received and credited by the assessee company in earlier years, i.e prior to assessment year under consideration, then the addition may be deleted. However, in case, the A.O. on factual verification conclude that the amounts are credited in the year under consideration, then onus lies on the assessee to show identity, creditworthiness of the depositors and genuineness of transactions to the satisfaction of the ld CIT(A), such is the mandate of section 68 of the Act. Therefore the assessee is directed to discharges its onus first before ld. CIT(A), he may examine the same and decide the issue afresh. Appeal filed by the Revenue is allowed for statistical purpose

Issues Involved:
Appeal against deletion of addition on account of share capital and securities premium for Assessment Year 2007-08.

Detailed Analysis:

1. Transfer of Appeal Jurisdiction:
The Authorized Representative for the assessee informed that the assessee is not pressing for the transfer of the appeal to Goa jurisdiction. Consequently, the application for transfer was dismissed as withdrawn.

2. Issue of Share Capital and Securities Premium:
The main contention revolved around the addition made by the Assessing Officer concerning the genuineness and creditworthiness of share capital and securities premium. The Revenue argued that the addition was justified, while the assessee relied on judgments favoring their case. The CIT(A) had deleted the addition, stating that the share capital and premium were not received in the year immediately preceding the assessment year, hence not chargeable to the income for that year.

3. Verification of Shareholder Transactions:
The Tribunal observed that there was a lack of detail regarding the payments made by certain shareholders in the confirmation letters submitted by the assessee. It was noted that no bank statements were provided for these transactions. The Tribunal emphasized the necessity for the lower authorities to determine when the payments for the shares were received and credited in the assessee's books. The absence of such crucial details led to a remand order by the ITAT, directing a fresh examination of the matter by the CIT(A).

4. Credit Entry in Books of Accounts:
The Tribunal highlighted the importance of verifying credit entries in the books of accounts for the previous years when dealing with additions under section 68 of the Income Tax Act. It was noted that the CIT(A) had deleted the addition without confirming the credit entries in the assessee's books, solely relying on bank statements of other individuals.

5. Remand Order and Fresh Adjudication:
In light of the deficiencies in the assessment and the necessity for further verification, the Tribunal remanded the matter back to the CIT(A) for a fresh examination. The CIT(A) was directed to assess whether the shares were issued at a premium and if the amounts were credited in the assessee's books in earlier years. The onus was placed on the assessee to establish the identity, creditworthiness of depositors, and genuineness of transactions to the satisfaction of the CIT(A) as per the requirements of section 68 of the Act.

6. Final Decision:
Ultimately, the appeal filed by the Revenue was allowed for statistical purposes, and the matter was remanded back to the CIT(A) for a fresh adjudication, emphasizing the need for a thorough examination of the relevant details and compliance with the provisions of section 68.

This comprehensive analysis covers the key aspects and implications of the judgment delivered by the Appellate Tribunal ITAT Mumbai.

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