2022 (2) TMI 1088 - AT - Income Tax

Unexplained cash credit u/s 68 - Bogus share capital and share premium - AO observed that assessee has not discharged primary onus satisfactorily and observed that the bank statement of the investor, justification and share premium etc, was not provided with, hence the assessee has also failed to prove capacity and creditworthiness of creditors - AO was also was not satisfied with the working of share premium amount - HELD THAT - We note that the assessment year was involved is 2008-09. The extant provisions of section 68 did not provide for the assessee to satisfy the AO regarding the source of source. The amendment was brought into the statute by Finance Act, 2012 w.e.f. 1.04.2013, which provided that in case of share capital and share premium receipt, it will be necessary for the assessee to satisfy the AO about the nature and source of credit of the person from whom, such sum is received. Since, the present assessment year is 2008-09, there is no onus on the assessee to prove the source of source in this case. Hence, the AO s act of drawing adverse inference in this regard is not at all sustainable. Furthermore, the adverse inference on account of share premium is also not sustainable as necessary amendment by way of insertion of section 56(2)(viib) of the Act was also brought into statute books from AY 2013-14 and the same is not at all applicable for the current assessment year. The assessee has discharged its onus. There was no requirement of proving the source of source in the impugned assessment year. Also the necessary mandate of the Act for addition of share premium was also not there in the said assessment year. In this view of the matter on the touchstone of decisions VEEDHATA TOWER PVT. LTD. 2018 (4) TMI 1004 - BOMBAY HIGH COURT AND M/S. ORCHID INDUSTRIES PVT. LTD. 2017 (7) TMI 613 - BOMBAY HIGH COURT , we do not find any infirmity in the well reasoned order of ld.CIT(A) on the merits of the case. Hence, we uphold his order in this regard and revenue s appeal stands dismissed.

Summary

Issues Involved:

1. Deletion of addition made by the Assessing Officer (AO) on account of unexplained cash credit under Section 68 of the Income Tax Act.
2. Validity of the reopening of the assessment under Section 148 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68:

The primary issue was whether the addition of ?1,50,00,000 made by the AO under Section 68 of the Income Tax Act was justified. The AO observed that the assessee failed to provide sufficient evidence regarding the identity, creditworthiness, and genuineness of the share capital and premium received from M/s Great Eastern Infrastructure Corporation Pvt. Ltd. The AO noted that the assessee did not furnish the share application form, justification for the premium, and the capacity and creditworthiness of the investors. The AO issued a notice under Section 133(6) to the investor, but no response was received. Consequently, the AO concluded that the transaction was not genuine and added the amount as unexplained cash credit under Section 68.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, noting that the provisions of Section 56(2)(viib) were applicable only from AY 2013-14 and not for AY 2008-09. The CIT(A) observed that the assessee had provided sufficient documentation, including the investor's Income Tax Return (ITR), Profit & Loss (P&L) statement, balance sheet, bank statements, and valuation report. The CIT(A) held that the identity, creditworthiness, and genuineness of the transactions were established, and the AO did not bring any contrary evidence to disprove the assessee's claims.

The Tribunal upheld the CIT(A)'s order, emphasizing that the assessee had discharged its onus by providing relevant documents. The Tribunal noted that the AO's adverse inference regarding the share premium and the source of the source was not sustainable, as the relevant provisions were applicable only from AY 2013-14. The Tribunal referred to various case laws, including CIT vs. Lovely Exports and CIT vs. Gangandeep Infrastructure Pvt. Ltd., which supported the assessee's position. Consequently, the Tribunal dismissed the revenue's appeal on merits.

2. Validity of Reopening under Section 148:

The assessee challenged the validity of the reopening of the assessment under Section 148. The CIT(A) upheld the reopening, citing various judicial precedents that allowed reassessment even if the information was obtained from the materials on record or from any enquiry or research into facts or law. The CIT(A) referred to several case laws, including Praful Chunilal Patel vs. ACIT and Raymond Woolen Mills Ltd. vs. ITO, which supported the legality of the reopening.

The Tribunal, however, did not engage with the issue of the validity of the reopening in detail, as it had already decided the issue in favor of the assessee on merits. The Tribunal treated the assessee's cross-objection challenging the reopening as infructuous, given that the primary issue had been resolved.

Conclusion:

The Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order, which deleted the addition under Section 68. The Tribunal also treated the assessee's cross-objection regarding the validity of the reopening as infructuous, thereby concluding the matter in favor of the assessee.