2022 (9) TMI 234 - AT - Income Tax

Unexplained cash credit u/s 68 - Whether assessee proved identity and creditworthiness of the investors and genuineness of the transaction? - CIT-A deleted the addition as observed that AO could not find any document or material acceptable or which could not be explained and assessee had discharged its onus to prove the identity, creditworthiness of all the investors and genuineness of the transaction - HELD THAT - AO himself noted that the assessee had produced all the details and evidences before him as were called upon by him and even the director of the assessee company and that of investors personally appeared before him who were subjected to examination/cross-examination. AO without pointing out any discrepancy in the evidences furnished by the assessee simply made a one line observation that the assessee had failed to justify the primary source etc. of capital raised. In view of the above discussion, we do not find any infirmity in the order of the CIT(A). This grounds of appeal of the Revenue is hereby dismissed. Revenue contended that as per the provisions of section 68 any explanation offered by the assessee company shall be deemed to be not satisfactory, unless such explanation in the opinion of the AO has been found to be satisfactory - The above ground of the appeal of the Revenue does not have any basis. There is no such legal provision u/s 68 of the Act. In view of this, we do not find any infirmity in the order of the CIT(A) and the same is upheld. The appeal of the Revenue is hereby dismissed.

Summary

Issues involved:
Revenue appeal against deletion of addition under section 68 of the Income Tax Act.

Analysis:
1. The Revenue appealed against the deletion of an addition of Rs.3,00,00,000 made by the Assessing Officer as unexplained cash credit under section 68 of the Income Tax Act.
2. During assessment, the Assessing Officer questioned the source of capital raised by the assessee company through share issuance to various entities against a high premium. The assessee provided evidence of identity, creditworthiness of investors, and genuineness of the transaction.
3. The CIT(A) found the company genuine, complying with statutory formalities, and the investors were group companies of the assessee. All required details were submitted, and the audited accounts showed sufficient capital and assets for investments.
4. The investments were made through account payee cheques, and the shareholders had ample funds for investments. Statements were recorded justifying the premium charged for shares.
5. The CIT(A) concluded that the Assessing Officer's addition lacked basis, as the assessee had proven identity, creditworthiness, and genuineness of the transaction. The onus shifted to the Assessing Officer to disprove the evidence, which was not done.
6. The Tribunal upheld the CIT(A)'s order, noting that the Assessing Officer's assessment was cryptic and lacked justification for the addition. The Tribunal found no infirmity in the CIT(A)'s decision.
7. The Revenue's argument that explanations under section 68 should be deemed unsatisfactory unless accepted by the Assessing Officer was dismissed, as no such provision exists in the Act.
8. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision, and concluded that the third ground of appeal was of a general nature and did not require adjudication.

This detailed analysis of the judgment highlights the key issues, arguments, and conclusions reached by the Tribunal in the case.