2022 (1) TMI 1150 - AT - Income Tax

Addition u/s 68 - unexplained share application money - addition on account of sale proceeds of shares received by invoking the provisions of section 68 of the IT Act on the ground that the existence of the parties at the given address is not verifiable - CIT-A deleted the addition - HELD THAT - We do not find any infirmity in the order of the CIT(A) on this issue. We find, the ld. CIT(A), while deleting the addition, has relied on his decision for AY 2013-14 in the case of Maurya Udyog Ltd. 2019 (1) TMI 204 - ITAT DELHI which is the sister concern of the assessee wherein similar additions were also made by the AO on account of sale of shares of the same parties - we uphold the order of the CIT(A) and the ground raised by the Revenue on this issue is dismissed. Addition on account of unexplained cash - CIT(A) deleted the addition - HELD THAT - We find, the addition made by the AO in the case of Maurya Udyog Ltd. was deleted by the CIT(A) as facts of the case in hand show that the assessee was never found to be in possession of any real money. The addition having been made only on the strength of some notings found in some file extracted from the computer of Shri Rohtash, clearly establish that the provisions of section 69A of the Act do not apply - there is no mention of the assessee's name in the impugned document. The Assessing Officer has simply assumed that the reference to the impugned amount is in relation to the assessee. In our understanding, no addition can be made on the basis of presumptions and surmises. Assuming, yet not accepting that the amounts were received by the assessee, the same were returned back on the very same date as per Exhibit 85 of the paper book. Even on this count, addition is uncalled for - Decided in favour of assessee. Unexplained share application money received from non-genuine parties - CIT-A deleted the addition - HELD THAT - The assessee has established the identity of the share applicants by the KYC particulars forwarded by the assessee's bankers to RBI. Further, the bank has informed the RBI that it has received the proceeds from NRI in the form of inward remittances certificate for each amount received. RBI has noted that the assessee has followed due procedure which is required to be followed for issue of shares to foreign share applicants. Moreover, the Department's query from share applicants during extended period of time barring recorded no adverse remarks. Under these circumstances, we do not find any infirmity in the order of the CIT(A) deleting the addition on this issue. Accordingly, the same is upheld and the ground raised by the Revenue on this issue is dismissed.

Summary

Issues Involved:
1. Addition on account of unexplained share application money.
2. Addition on account of unexplained cash.
3. Addition on account of unexplained share application money received from non-genuine parties.

Issue-wise Detailed Analysis:

1. Addition on account of unexplained share application money:

The Assessing Officer (AO) made an addition of ?6 crores under Section 68 of the IT Act, asserting that the share application money received by the assessee was unaccounted income. The AO noted that the companies involved were dormant with nil business activities and the transactions did not reflect genuine business activities. The AO argued that the assessee failed to prove the identity, creditworthiness of the persons, and the genuineness of the transaction.

The CIT(A) deleted the addition, referencing his own decision in the case of Maurya Udyog Ltd. for AY 2013-14, where similar additions were made and subsequently deleted. The Tribunal upheld the CIT(A)'s order, noting that the facts of the case were identical to those in Maurya Udyog Ltd., where the Tribunal had dismissed the Revenue's appeal. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's ground on this issue.

2. Addition on account of unexplained cash:

The AO made an addition of ?1,14,75,000/- based on incriminating documents found during search operations, which indicated cash payments from the Amrapali group to the Mauria group. The AO proportionately attributed the cash to Mauria Udyog Ltd., Bihariji Ispat Udyog Ltd., and Jotindra Steel & Tubes Ltd. based on their turnover with the Amrapali group.

The CIT(A) deleted the addition, referring to his decision in the case of Bihariji Ispat Udyog Ltd. for AY 2013-14, where similar additions were made and subsequently deleted. The Tribunal upheld the CIT(A)'s order, noting that the facts were identical to those in Maurya Udyog Ltd., where the Tribunal had dismissed the Revenue's appeal. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's ground on this issue.

3. Addition on account of unexplained share application money received from non-genuine parties:

The AO made an addition of ?13,01,395/- on the grounds that the assessee failed to prove the identity, creditworthiness of the share applicants, and the genuineness of the transaction. The assessee had received the amount due to foreign exchange fluctuation from the same parties who had remitted share application money in AY 2010-11.

The CIT(A) deleted the addition, noting that the identity and creditworthiness of the share applicants and the genuineness of the transaction were established through various documents, including KYC particulars, inward remittance certificates, and RBI compliance. The Tribunal upheld the CIT(A)'s order, finding no infirmity in the deletion of the addition and dismissed the Revenue's ground on this issue.

Conclusion:

The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s order in deleting the additions made by the AO on account of unexplained share application money, unexplained cash, and unexplained share application money received from non-genuine parties. The Tribunal found that the CIT(A) had rightly deleted the additions based on detailed analysis and precedents from similar cases.