2022 (6) TMI 1023 - AT - Income Tax

Addition u/s 68 - unexplained share application money as commission thereon - HELD THAT - From the affidavits furnished by the directors of M/s. Moderate Credit Corpn. Ltd. and Sam Portfolio Pvt. Ltd., it is noticed that share application money was advanced through proper banking channel and equity shares having face value of Rs.10 each with a premium of Rs.40 were allotted to the share applicants on 31.3.2010. No adverse material has been brought on record by the departmental authorities to demonstrate that the unexplained cash of assessee was ploughed back by way of share application money. In fact, the cash transactions noted by the assessing officer in the assessment order are much prior to the impugned assessment year, hence, could not have formed the basis for addition u/s 68. A reading of the assessment order as well as the order of the first appellate authority would make it clear that no independent inquiry was conducted by them to ascertain the real nature of the transaction. Merely relying upon the statement of Shri Aseem Gupta, the additions have been made. As relevant to observe, the statement recorded from Shri Aseem Gupta on 23.11.2011 was subsequently retracted by him on 25th December 2011.That being the factual position, simply relying upon the statement of Shri Aseem Gupta, additions should not have been made. The departmental authorities have failed to bring on record any other corroborative material to demonstrate that the share application money received by assessee are in the nature of accommodation entries. As noted, in an identical nature of dispute arising in case of M/s. Sungrow Impex Pvt. Ltd. 2021 (3) TMI 881 - ITAT DELHI wherein, relying upon the statement of Shri Aseem Gupta, assessing officer had added back the share application money received from Moderate Credit Corpn. Ltd., the Tribunal deleted the addition. The other decisions cited by the learned counsel for the assessee are in similar lines. Thus, after considering the overall facts and circumstances of the case and keeping in view the judicial precedents cited before us by the learned counsel for the assessee, we hold that the addition made as unexplained cash credit under Section 68 of the Act is unsustainable. Accordingly, we delete the addition. For the same reason, addition towards alleged commission paid for availing accommodation entries is also deleted. - Decided in favour of assessee.

Summary

Issues:
Addition of unexplained share application money and commission in assessment year 2010-11.

Analysis:
In the present appeal, the dispute revolves around the addition of Rs.49,00,000 as unexplained share application money and Rs.49,000 as commission. The Assessing Officer observed discrepancies in the financial statements of the assessee, leading to suspicion regarding the source of funds. The Assessing Officer issued a show-cause notice under Section 68 of the Income-Tax Act, treating the share application money as unexplained cash credit. The department relied on statements from individuals linked to providing bogus accommodation entries to conclude that the share application money was suspect.

The assessee contended that the Assessing Officer's presumption lacked concrete evidence linking the share application money to dubious sources. Additional evidence, including affidavits from the share applicants, was submitted to prove the legitimacy of the transactions. The assessing officer's reliance on statements without independent verification was challenged. The assessee highlighted similar cases where additions based solely on statements were overturned by the Tribunal and upheld by the High Court.

Upon review, the Tribunal found no substantial evidence linking the share application money to illegitimate sources. The statements relied upon were not conclusive, and subsequent retractions raised doubts on their reliability. The Tribunal noted that no independent inquiry was conducted to validate the Assessing Officer's claims. Citing precedents, the Tribunal concluded that the additions were unsustainable and deleted the Rs.49,00,000 addition as unexplained cash credit and the Rs.49,000 commission.

The Tribunal's decision was based on the lack of concrete evidence supporting the Assessing Officer's claims and the failure to conduct an independent inquiry. The Tribunal emphasized the importance of substantiated findings and rejected additions solely based on unverified statements. The appeal was allowed, and both additions were deleted, emphasizing the need for thorough investigation and evidence before making such determinations.

This comprehensive analysis highlights the key aspects of the legal judgment, including the initial dispute, arguments presented by both parties, the Tribunal's evaluation of the evidence, and the final decision to delete the additions based on lack of substantiated evidence and reliance on unreliable statements.