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2023 (5) TMI 995 - AT - Income TaxAddition u/s 68 - AO observed that unexplained money of the assessee brought into its business in the guise of share capital/share premium - HELD THAT - AO found credits in the name of M/s. Pushpanjali Exports Pvt. Ltd. in the books of account of the assessee on different dates from 03.12.2011 to 15.12.2011. He asked for explanation as to the nature and source of the above credit entries. The explanation offered by the assessee was put to test. As not found satisfactory by the Ld. AO. We may refer to the decision in CIT vs. Precision Finance Pvt. Ltd. 1993 (6) TMI 17 - CALCUTTA HIGH COURT wherein held that it is for the assessee to prove the identity of the creditor, his creditworthiness and the genuineness of transaction. Mere furnishing of particulars is not enough. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. For the cogent reasons recorded by the AO, he made the impugned addition u/s 68 which has been upheld by the Ld. CIT(A). We endorse the findings of the AO/CIT(A) and reject ground of the assessee.
Issues Involved: 1. Validity of the addition of Rs. 4,80,00,000 under Section 68 as unexplained cash credit.2. Validity of the addition of Rs. 9,60,000 as unexplained expenditure for commission. 3. Confirmation of penalty proceedings under Section 271(1)(c). 4. Allegations of procedural improprieties and violation of natural justice. Issue 1: Addition of Rs. 4,80,00,000 under Section 68 as unexplained cash credit The assessee, a private limited company, declared an income of Rs. 8,164 for AY 2012-13. The AO added Rs. 4,80,00,000 under Section 68, citing the inability of the assessee to prove the identity, creditworthiness, and genuineness of the transaction. The AO noted that the director of the investor company, M/s. Pushpanjali Export Pvt. Ltd., did not appear despite summons, and the financials of the investor company did not support the substantial investment. The CIT(A) upheld this addition, emphasizing that the assessee failed to justify the premium charged on shares and the creditworthiness of the investor. The Tribunal endorsed the findings of the AO and CIT(A), rejecting the assessee's grounds.Issue 2: Addition of Rs. 9,60,000 as unexplained expenditure for commission The AO added Rs. 9,60,000 as commission at 2% for arranging the entry of Rs. 4,80,00,000, considering it unexplained expenditure. The CIT(A) confirmed this addition, reasoning that such an accommodation entry would not be possible without incurring commission expenses. The Tribunal upheld this addition, agreeing with the lower authorities.Issue 3: Confirmation of penalty proceedings under Section 271(1)(c) The CIT(A) confirmed the initiation of penalty proceedings under Section 271(1)(c). However, the Tribunal dismissed this ground as premature.Issue 4: Allegations of procedural improprieties and violation of natural justice The assessee argued that the CIT(A)'s order was perverse, erroneous, and contrary to natural justice. However, the Tribunal found no merit in these allegations and dismissed the appeal, endorsing the findings of the AO and CIT(A).Conclusion The Tribunal dismissed the appeal, upholding the additions made by the AO and confirmed by the CIT(A), and found no procedural improprieties or violations of natural justice. The penalty proceedings under Section 271(1)(c) were deemed premature and dismissed.
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