2022 (9) TMI 763 - AT - Income Tax

Unexplained money u/s 68 - share application money received from five companies - share holding companies did not personally appear in response to the summons issued u/s 131 - HELD THAT - We find that during the assessment proceeding as well as proceedings for remand report, the identity and creditworthiness of investor companies could not be established by the assessee and it can rightly be inferred that companies were having existence on papers only. Moreover, behind the payment of premium of share also could not be explained by the assessee neither before the AO nor ld. CIT(A). The assessee even before this Tribunal could not produce any documents or submission in support of its claim to negate the view taken by the AO as well as CIT(A) and examining the facts and circumstances of the case and going through the documents available on record, we find that the order passed by the CIT(A) need not required to be interfere. We accordingly sustain the order passed by the ld. CIT(A) and the appeal of the assessee is dismissed.

Issues involved:
1. Disallowance of transactions procuring share capital.
2. Failure to compel shareholding companies' directors to appear before income tax authorities.
3. Non-consideration of expenditures for the whole year in computing total assessed income.
4. Discrepancy in valuation of shares.
5. Failure to appreciate caution exercised by the appellant in share transfer.
6. Delay in filing the appeal before the Tribunal.
7. Lack of establishment of identity and creditworthiness of investor companies.

Analysis:

1. The appellant challenged the disallowance of transactions procuring share capital, arguing that the directors of the shareholding companies did not appear personally before the income tax authorities. The appellate authority upheld the addition of Rs. 1,35,00,000 as unexplained money under section 68 of the Act, as the companies were deemed to exist only on paper, lacking credibility and failing to explain the premium on shares. The Tribunal found no justification for interference and dismissed the appeal.

2. The appellant contended that there was no provision to compel the directors of shareholding companies to appear before the income tax authorities. However, the lack of establishment of the identity and creditworthiness of the investor companies led to the conclusion that they existed only on paper. The Tribunal upheld the decision of the appellate authority, as the appellant failed to provide evidence to counter the AO's findings.

3. The appellant argued that the assessing authority failed to consider expenditures for the whole year, rendering the demand against the assessee null and void. However, the Tribunal found no merit in this argument, as the appellant did not provide substantial evidence to support this claim.

4. The discrepancy in the valuation of shares was raised by the appellant, claiming the actual value was higher than assessed. The Tribunal noted that the appellant failed to provide adequate justification for the valuation, and the AO's decision was upheld by the appellate authority and subsequently by the Tribunal.

5. The appellant highlighted the caution exercised in share transfer, emphasizing the lower transfer price compared to the escalated share value. The Tribunal acknowledged this argument but found it insufficient to overturn the decisions of the lower authorities, as the lack of credibility of the investor companies remained unresolved.

6. The delay in filing the appeal was condoned by the Tribunal due to sufficient cause shown by the appellant. The Tribunal accepted the reasons provided for the delay and allowed the appeal to proceed despite the delay.

7. The failure to establish the identity and creditworthiness of the investor companies was a crucial issue in the case. The Tribunal concurred with the lower authorities' findings that the companies existed only on paper, and the lack of substantiating evidence from the appellant led to the dismissal of the appeal.

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