2022 (8) TMI 446 - AT - Income Tax

Addition u/s 68 - Unexplained share application money - onus to prove - only grievance of the revenue that the assessee has accepted the amount in cash and the director of the company did not submit the clear reason as to why the share application money has been received in cash when the bank account transaction is possible in all most all the share application subscribers - HELD THAT - In this case assessee has filed to sufficient details to prove satisfactorily the source of cash received the assessing Officer is entitled to draw the inference that the receipts are of an income nature and it is not necessary for him to locate their exact source. As the Supreme Court laid down in Kalekhan Mohammed Hanif 1963 (2) TMI 33 - SUPREME COURT the onus is on the assessee to explain the nature and source of cash credits, whether they stand in the assessee s account or in the account of a third party. The question of burden of proof cannot be made to depend exclusively upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, through the onus might shift to the AO under certain circumstances. Where the assessee shows that entries regarding cash credit in a third party s account are genuine and the sums were in fact received from the third party as loans or deposits, he has discharged the onus. In that case it is for the third party to explain the source of the moneys, and they cannot be charged as the assessee s income in the absence of any material to indicate that they belong to the assessee. Here in this case assessee has established the identity, capacity and genuineness of the transaction so far as it relates to all the share applicant. Based on the above facts and precedents applicable to these facts, as narrated above, we are of the considered view that the primary onus is discharged by the assessee so far as the share application money received in the year under consideration. Therefore, we are not inclined to accept the contention of the AO in any manner and hence the addition so made by the assessing officer is not sustainable and therefore, we vacate the addition so made based on the evidences placed before us and we hold that the addition is unwarranted and requires to be deleted. Thus, the Ground raised by the assessee is hereby allowed.

Issues Involved:
1. Rejection of additional evidence under Rule 46A.
2. Disallowance of Rs. 46,875/- of prior period expenses.
3. Disallowance of Rs. 55,040/- of travelling expenses.
4. Disallowance of Rs. 3,00,000/- of rent payment.
5. Addition of Rs. 8,64,000/- by disallowing interest on advances.
6. Addition of Rs. 6,00,000/- by disallowing interest on capital expenses.
7. Partial disallowance of salary of Rs. 4,56,583/-.
8. Addition of Rs. 18,25,000/- under section 68 out of share application money.
9. Disallowance of Rs. 10,83,521/- out of various expenses.
10. Disallowance of Rs. 21,378/- for want of TDS.

Issue-wise Detailed Analysis:

1. Rejection of additional evidence under Rule 46A:
The assessee argued that the Ld. CIT(A) erred in rejecting additional evidence under Rule 46A. However, the judgment did not provide a detailed analysis or conclusion on this issue within the provided text.

2. Disallowance of Rs. 46,875/- of prior period expenses:
The assessee contended that the disallowance of Rs. 46,875/- of prior period expenses by the ld. ACIT and sustained by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

3. Disallowance of Rs. 55,040/- of travelling expenses:
The assessee argued that the disallowance of Rs. 55,040/- of travelling expenses by the ld. ACIT and sustained by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

4. Disallowance of Rs. 3,00,000/- of rent payment:
The assessee contended that the disallowance of Rs. 3,00,000/- of rent payment by the ld. ACIT and sustained by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

5. Addition of Rs. 8,64,000/- by disallowing interest on advances:
The assessee argued that the addition of Rs. 8,64,000/- by disallowing interest on advances by the ld. ACIT and sustained by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

6. Addition of Rs. 6,00,000/- by disallowing interest on capital expenses:
The assessee contended that the addition of Rs. 6,00,000/- by disallowing interest on capital expenses by the ld. ACIT and sustained by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

7. Partial disallowance of salary of Rs. 4,56,583/-:
The assessee argued that the partial disallowance of salary of Rs. 4,56,583/- out of total disallowance of Rs. 9,21,527/- by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

8. Addition of Rs. 18,25,000/- under section 68 out of share application money:
The primary issue adjudicated upon in this judgment was the addition of Rs. 18,25,000/- under section 68 out of share application money. The assessee had received share application money in cash from various individuals, all of whom were directors or close relatives. The AO found the transactions suspicious due to the cash nature and lack of compelling circumstances for cash transactions. The AO added Rs. 19,25,000/- as income under section 68, which was later reduced by Rs. 1,00,000/- by the ld. CIT(A).

The Tribunal noted that the assessee had provided confirmations, bank statements, and income tax returns of the share applicants. The share applicants had appeared before the AO and confirmed the transactions. The Tribunal found that the primary onus to prove the identity, genuineness, and creditworthiness of the share applicants was discharged by the assessee. The Tribunal concluded that the addition of Rs. 18,25,000/- was unwarranted and required to be deleted.

9. Disallowance of Rs. 10,83,521/- out of various expenses:
The assessee contended that the disallowance of Rs. 10,83,521/- out of various expenses by the ld. ACIT and sustained by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

10. Disallowance of Rs. 21,378/- for want of TDS:
The assessee argued that the disallowance of Rs. 21,378/- for want of TDS by the ld. ACIT and sustained by the ld. CIT(A) was unjustified. The judgment did not provide specific details or conclusions on this issue within the provided text.

Conclusion:
The Tribunal allowed the appeal concerning the addition of Rs. 18,25,000/- under section 68, deleting the addition made by the AO and sustained by the ld. CIT(A). The judgment did not provide detailed analyses or conclusions on the other issues raised by the assessee. The order was pronounced in the open Court on 02/08/2022.

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