2022 (10) TMI 1047 - AT - Income Tax

Addition u/s 68 - unexplained share capital - deemed income - HELD THAT - We find that Section 68 does not talk about any beneficiaries but is added in the hands of each and every person where Assessee fails to prove identity, creditworthiness and genuineness of the transaction to the satisfaction of AO. It is deemed income in the hands of the assessee who fails to explain nature and source of the same before the AO. Deeming fiction applies in the hands of the person in whose book s sums are credited. There it ends, such deeming fiction cannot travel to other assessee for satisfying ingredients of section 68 of the Act as held by ld. CIT A in this case. This addition needs to be tested u/s 68 in the hands of the assessee irrespective of the fact whether the sum is added in the hands of other assessee or not or beneficiaries are different. There is no concept of beneficial ownership of income u/s 68 of the act. Importing the same in section 68 is in clear violation of simple provisions of that section. We set aside the whole issue in the appeal of AO back to the file of AO with a direction to the assessee to prove identity and creditworthiness of the deposits as well as the genuineness of the transactions. AO should examine the claim of the assessee in light of various statements of entry operators recorded during the course of survey and search and there after decide the issue afresh in accordance with law. Needless to say initial onus would be on the assessee to prove the cash credit to the satisfaction of ld. AO. AO may carry out the inquiry as well as examination of various persons, if found proper, either directing assessee or by use of powers vested in him, before deciding the issue afresh.

Issues Involved:
1. Deletion of protective additions by the CIT (A) considering the substantive addition in another entity has not reached finality.
2. Reopening of assessment and the validity of reassessment proceedings.
3. Application of Section 68 of the Income Tax Act regarding unexplained cash credits.
4. The determination of the correct assessee for the addition under Section 68.

Detailed Analysis:

1. Deletion of Protective Additions:
The primary issue was whether the CIT (A) was justified in deleting the protective additions in the cases of Jogia Properties Limited and Vidisha Properties Limited on the grounds that the substantive addition in the case of Shree Global Tradefin Limited had not reached finality. The CIT (A) had deleted the additions made under Section 68 of the Income Tax Act in the hands of the two entities, reasoning that the amounts were ultimately received by Shree Global Tradefin Limited, and thus, the addition should be made in its hands.

2. Reopening of Assessment:
The assessee challenged the reopening of the assessment on several grounds, arguing that the initiation of reassessment proceedings was bad in law and contrary to the provisions of the Income Tax Act. The appellant contended that the notice issued under Section 148 was not valid as the conditions of Section 147 were not satisfied. They also argued that the reassessment was based on a change of opinion by the Assessing Officer and that the objections raised during the reassessment proceedings were not adequately addressed.

3. Application of Section 68:
The Tribunal examined whether the addition under Section 68, which pertains to unexplained cash credits, was correctly applied. The CIT (A) had held that the amounts received by the assessee as share application money lacked creditworthiness and genuineness. However, the CIT (A) deleted the addition in the hands of the assessee, reasoning that the amounts were already added in the hands of Shree Global Tradefin Limited, which was considered the ultimate beneficiary.

4. Determination of Correct Assessee:
The Tribunal noted that the money was credited in the books of the assessee, and thus, the provisions of Section 68 should be applied in the hands of the assessee. The Tribunal found that the CIT (A) erred in holding that Section 68 additions should be made only in the hands of the beneficiary. The Tribunal emphasized that Section 68 does not consider the concept of beneficial ownership and that the addition should be made in the hands of the person where the cash credit is found.

Conclusion:
The Tribunal set aside the issue back to the file of the Assessing Officer with directions to the assessee to prove the identity, creditworthiness, and genuineness of the transactions. The Assessing Officer was instructed to examine the claim of the assessee in light of various statements of entry operators and decide the issue afresh in accordance with the law. The Tribunal also restored the cross objections to the file of the Assessing Officer for reconsideration.

Result:
All the appeals filed by the Assessing Officer and the cross objections filed by the assessee were allowed for statistical purposes with the directions provided. The Tribunal's order emphasized the need for a thorough examination of the facts and proper application of Section 68 in the hands of the correct assessee.

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