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2023 (3) TMI 1315 - AT - Income TaxAddition u/s 68 - unexplained cash credit - assessee failed to prove genuineness of the transactions and creditworthiness of the subscribers - CIT(A) allowed the appeal of the assessee by holding that the assessee has proved all the three ingredients of Section 68 - HELD THAT - In the present case the assessee has filed all the evidences before the AO and AO in stead of carrying of further investigation only harped on the plea that summons u/s 131 of the Act were not complied with and thus the transactions remained unexplained. CIT(A) appreciated all these facts and after discussing and relying on the various decisions allowed the appeal of the assessee. We observe from the facts before us that all the share applicants were existing assessees under the Act and in some of the cases assessments were framed u/s 143(3) and the assessment orders were also placed before us. Therefore the genuineness of these investors cannot be doubted. Considering all we are inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue.
Issues Involved:
1. Delay in filing the appeal. 2. Deletion of addition of Rs. 7,22,00,000/- under Section 68 of the Income Tax Act. Summary: 1. Delay in Filing the Appeal: At the time of hearing, there was a delay of 49 days in filing the appeal. The Departmental Representative (DR) argued that the delay was due to bona fide reasons and requested condonation. The Assessee's Representative (AR) left the issue to the bench's discretion. The Tribunal, after considering the rival contentions and perusing the condonation petition, condoned the delay, finding sufficient reasons for it. 2. Deletion of Addition under Section 68: The revenue's appeal contested the deletion of an addition of Rs. 7,22,00,000/- by the Commissioner of Income Tax (Appeals) [CIT(A)], which was initially added by the Assessing Officer (AO) as unexplained cash credit under Section 68 of the Income Tax Act. Facts and Findings: - The assessee filed a return declaring total income of Rs. 1,419/-. The case was selected for scrutiny due to large share premium receipts. - The AO issued notices and, after examining the documents provided by the assessee, added Rs. 7,22,00,000/- as unexplained cash credit, citing the non-appearance of the assessee and share subscribers. - The CIT(A) reversed the AO's order, holding that the assessee had proved the identity, creditworthiness, and genuineness of the transactions, thus meeting the requirements of Section 68. Legal Precedents and Analysis: - The CIT(A) noted that the AO did not provide an opportunity to the assessee to explain the nature and source of the share application monies, violating principles of natural justice. - The CIT(A) cited various judicial precedents, including Colonizers vs. ACIT, emphasizing the necessity of providing an opportunity to the assessee. - The CIT(A) found that all share applicants were body corporates, regularly assessed to income tax, and had made payments through account payee cheques, thereby proving their identity and creditworthiness. - The CIT(A) also relied on decisions from the jurisdictional High Court and the Supreme Court, such as CIT vs. Lovely Exports Ltd., which held that if the share application money is received from subscribers whose names are given to the AO, the Revenue can proceed to reopen their individual assessments but cannot add the same to the assessee's income as unexplained cash credit. Conclusion: The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the transactions. The AO's addition was based on presumptions without disproving the evidence provided by the assessee. The Tribunal dismissed the revenue's appeal, affirming that the addition of Rs. 7,22,00,000/- as unexplained cash credit was not justified.
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