2022 (9) TMI 1084 - AT - Income Tax

Unexplained cash credit u/s. 68 - as per AO appellant failed to prove the identity, creditworthiness of the party and genuineness of the transactions, when all the details and evidences were filed to prove the same, the AO made enquiry u/s 133 (6) and did not proceed further and as such the assessee discharged the onus that lay upon him - HELD THAT - The Assessee in this case, as explained about the identity, creditworthiness and financials etc. of each of the share subscriber company individually. However, we note that in the assessment order that the AO has not even mentioned the names of the share subscriber companies and even has not mentioned a word as to which of the share subscriber company or the corresponding transaction thereof was not genuine and on what grounds. AO, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. In this case, as detailed in the written submissions of the assessee, the assessee had duly submitted details and evidences to prove the identity and creditworthiness of each of the share subscribers separately. However, the ld. AO, in the impugned Assessment Order has not recorded any peculiar facts of circumstance which would suggest that the assessee had routed his own money through the above stated subscribers. The AO has not brought any material or evidence on the file to show that these share applicants were fictitious persons. The AO has passed the impugned Assessment Order in a hurried manner even without pointing out any defect or discrepancy in the evidences and details furnished by the assessee. A perusal of the impugned order of the ld. CIT(A) shows that the ld. CIT(A) has not discussed anything about the material facts of the case. He has not pointed out any defect and discrepancy in the evidences and details furnished by the assessee but simply cited certain case laws even without pointing out as to how these case laws were applicable to the facts and circumstances of this case. The order of the CIT(A) is a non-speaking order. By simply reproducing the contents of the case laws without discussing about their application on the facts of the case, in our view, would not make the order of the ld. CIT(A) justifiable speaking order and hence, the same is not sustainable as per law. Appeal of the assessee stands allowed.

Summary

Issues Involved:
1. Addition of share capital including premium as unexplained cash credit under Section 68 of the Income Tax Act.
2. Assessment of the identity, creditworthiness of the parties, and genuineness of the transactions.
3. Examination of evidence and documents provided by the assessee to substantiate the transactions.

Issue-wise Detailed Analysis:

1. Addition of Share Capital Including Premium as Unexplained Cash Credit under Section 68:
The primary issue in the appeal was the addition of Rs. 2,53,00,000/- raised through share capital including premium by the assessee from 15 subscriber companies, which the Assessing Officer (AO) treated as unexplained cash credit under Section 68 of the Income Tax Act. The AO concluded that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions, leading to the addition of the said amount to the total income of the assessee.

2. Assessment of the Identity, Creditworthiness of the Parties, and Genuineness of the Transactions:
The AO issued summons under Section 131 to the directors of the assessee company and the subscriber companies, but many of these summonses were returned unserved. Consequently, the AO inferred that the investment was unexplained cash credits. The assessee contended that all necessary documents, including audited financial statements, bank statements, PAN cards, and income tax returns, were submitted to prove the identity and creditworthiness of the subscribers and the genuineness of the transactions. The assessee argued that the AO did not proceed further with the investigation after receiving these documents and instead insisted on the personal presence of the directors, which was beyond the assessee's control.

3. Examination of Evidence and Documents Provided by the Assessee:
The assessee provided extensive documentation for each of the 15 subscriber companies, including confirmations, audited financial statements, bank statements, and details of the sources of funds. These documents were intended to establish the identity, creditworthiness, and genuineness of the transactions. The assessee also cited various judicial precedents to support its case, arguing that the AO's addition based on the non-appearance of the directors was unjustified. The AO, however, did not point out any specific discrepancies in the documents provided by the assessee.

Tribunal's Findings:
The Tribunal observed that the AO acknowledged the receipt of relevant documents from both the assessee and the subscriber companies but insisted on the personal appearance of the directors without examining the documents for discrepancies. The Tribunal noted that the AO failed to mention the names of the subscriber companies or the specific grounds on which the transactions were deemed non-genuine. The Tribunal emphasized that adverse inference could only be drawn if the AO had pointed out specific discrepancies or insufficiencies in the evidence provided.

The Tribunal also criticized the Commissioner of Income Tax (Appeals) [CIT(A)] for not discussing the material facts of the case or pointing out any defects in the evidence furnished by the assessee. The Tribunal found the CIT(A)'s order to be non-speaking and unsustainable in law.

Conclusion:
The Tribunal concluded that the lower authorities did not justify the addition of Rs. 2,53,00,000/- as unexplained cash credits. The Tribunal ordered the deletion of the impugned additions, thereby allowing the appeal of the assessee.