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2023 (1) TMI 954 - AT - Income TaxUnexplained cash credit as provided in Section 68 - AO who determined the amount of fresh share capital introduced including the premium - HELD THAT - Since the assessee has placed sufficient documents and materials on record to prove the identity and creditworthiness of the shareholders and the genuineness of the transaction of receiving share capital and share premium, invoking the provisions of Section 68 was not justified in the instant case. We, therefore, reverse the finding of the CIT(A) and delete the addition made u/s 68 of the Act and allow all the grounds raised by the assessee.
Issues Involved:
1. Addition of fresh share capital and share premium as unexplained cash credit under Section 68 of the Income Tax Act, 1961. 2. Non-appearance of directors before the Assessing Officer (AO). 3. Reliance on the case of Bisakha Sales Pvt. Ltd. by the AO. 4. Discharge of onus by the assessee to prove identity, creditworthiness, and genuineness of transactions. 5. Applicability of judicial precedents and relevant case laws. Detailed Analysis: 1. Addition of Fresh Share Capital and Share Premium as Unexplained Cash Credit: The assessee, a private limited company, declared an income of Rs. 1,79,701/- for AY 2012-13. During scrutiny, the AO noticed the issuance of share capital of Rs. 5,60,000/- and share premium of Rs. 1,34,40,000/-. The AO added Rs. 1.40 Cr as unexplained cash credit under Section 68 of the Act, citing non-appearance of directors despite providing complete details and documents. 2. Non-Appearance of Directors Before the AO: The AO stressed the personal appearance of directors of both the assessee and investor companies. Despite the directors complying with summons and filing necessary details, the AO was not satisfied and made the addition due to their non-appearance. 3. Reliance on the Case of Bisakha Sales Pvt. Ltd.: The AO applied the decision of the Tribunal in Bisakha Sales Pvt. Ltd., which was related to a revisionary order under Section 263 of the Act. The Tribunal found this reliance misplaced as the facts of the current case, involving detailed proceedings under Section 143(3), were distinguishable from Bisakha Sales Pvt. Ltd. 4. Discharge of Onus by the Assessee: The assessee provided extensive documentation to prove the identity, creditworthiness, and genuineness of the transactions, including: - Party-wise details of share capital raised. - Forms filed with ROC. - Memorandum and Articles of Association. - Bank statements. - Share application forms. - Audited accounts. - Photo identity and address proof of directors. The Tribunal noted that the AO did not find any defects in these documents and that the assessee had successfully discharged its onus. 5. Applicability of Judicial Precedents and Relevant Case Laws: The Tribunal referenced several judicial precedents supporting the assessee's position, including: - CIT vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 0078 (SC): The Supreme Court held that the burden shifts to the Department to establish the lack of creditworthiness if the assessee provides names and addresses of creditors. - Dy. CIT vs. Rohini Builders [2002] 256 ITR 360: The Gujarat High Court ruled that non-appearance of creditors cannot be a ground to treat loans as non-genuine. - Tradelink Carrying (P.) Ltd. vs. ITO [2020] 113 taxmann.com 520 (Kolkata-Trib.): The Tribunal held that the AO must disprove the documents furnished by the assessee to draw an adverse view. - Satyam Smertex (P.) Ltd. vs. DCIT [2020] 117 taxmann.com 93 (Kolkata-Trib.): The Tribunal emphasized that additions cannot be sustained merely based on inferences or surmises. Conclusion: The Tribunal concluded that the assessee had successfully discharged its onus by providing sufficient evidence to prove the identity, creditworthiness, and genuineness of the share subscribers. The AO's addition was based on conjectures and surmises without disproving the material placed before him. Consequently, the Tribunal reversed the CIT(A)'s decision and deleted the addition of Rs. 1.40 Cr made under Section 68 of the Act, allowing the assessee's appeal. Result: The appeal filed by the assessee was allowed.
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