2023 (8) TMI 29 - AT - Income Tax

Addition u/s 68 - assessee company failed to prove the genuineness and creditworthiness of the investor company - HELD THAT - As in terms of our observations we set-aside the order of the CIT(Appeals) only to the limited extent he had accepted the claim of the assessee company of having received share application money from M/s. Kush Trading Commerce Pvt. Ltd., i.e to the extent the same was sourced from the share application money received by the latter investor company from the aforementioned two concerns, viz. (i). Lectrodryer Marketing Pvt. Ltd; and (ii). Balsasaria Holdings Pvt. Ltd., with a direction to him to re- adjudicate the same after confronting the requisite material and affording a reasonable opportunity of being heard to the assessee company.

Issues Involved:
1. Deletion of addition made u/s 68 of the Act.
2. Genuineness and creditworthiness of the investor company.
3. Concurrent powers of CIT(A) u/s 250(4) of the Act.
4. Consistency with the Supreme Court decision in M/s Rajmandir Estates Pvt. Ltd. vs PCIT-III.
5. Consistency with ITAT, Kolkata 'B' Bench in M/s Subhlakshmi Vanijya (P) Ltd. vs CIT-1.
6. Consistency with ITAT, Kolkata Bench in M/s Bisakha Sales (P) Ltd. vs CIT-II.
7. Factual correctness of the CIT(A)'s findings.
8. Nexus between conclusions and primary facts.
9. General errors in law and facts.

Summary:

1. Deletion of Addition Made u/s 68 of the Act:
The CIT(A) deleted the addition of Rs. 10,72,80,000/- made by the AO u/s 68 of the Act, observing that the AO had not provided any substantial reason for discarding the documentary evidence submitted by the assessee company. The CIT(A) noted that the adverse inferences drawn by the AO were based on material not confronted to the assessee, violating principles of natural justice.

2. Genuineness and Creditworthiness of the Investor Company:
The CIT(A) held that the assessee company had discharged its onus by providing supporting documentary evidence, including bank statements, PAN, and financial statements of the investor company, M/s Kush Trading & Commerce Pvt. Ltd. The AO's reliance on the statement of Shri Abhishek Chokani, an alleged accommodation entry provider, was found insufficient as it was not confronted to the assessee.

3. Concurrent Powers of CIT(A) u/s 250(4) of the Act:
The CIT(A) exercised its concurrent powers u/s 250(4) of the Act, noting that the AO had not drawn any adverse inferences in the assessment of M/s Kush Trading & Commerce Pvt. Ltd. for the same year, thus the AO could not take a contrary view while assessing the assessee company.

4. Consistency with Supreme Court Decision in M/s Rajmandir Estates Pvt. Ltd. vs PCIT-III:
The CIT(A) distinguished the present case from the Supreme Court decision in M/s Rajmandir Estates Pvt. Ltd., noting that the facts were different and the adverse inferences drawn by the AO were not substantiated by any material evidence.

5. Consistency with ITAT, Kolkata 'B' Bench in M/s Subhlakshmi Vanijya (P) Ltd. vs CIT-1:
The CIT(A) observed that the AO had not conducted adequate and proper enquiry, and merely relying on the statements of alleged accommodation entry providers without confronting the same to the assessee was insufficient to justify the addition.

6. Consistency with ITAT, Kolkata Bench in M/s Bisakha Sales (P) Ltd. vs CIT-II:
The CIT(A) noted that the AO had not provided any evidence to disprove the documentary evidence submitted by the assessee, and the addition was made on mere suspicion without any substantial basis.

7. Factual Correctness of the CIT(A)'s Findings:
The CIT(A) found that the AO's findings were factually incorrect and perverse, as the assessee had provided sufficient documentary evidence to prove the genuineness and creditworthiness of the investor company.

8. Nexus Between Conclusions and Primary Facts:
The CIT(A) observed that the AO had failed to establish a nexus between the conclusions drawn and the primary facts on record, and the addition was made without any substantial evidence.

9. General Errors in Law and Facts:
The CIT(A) held that the AO's order was erroneous both in law and on facts, as the addition was made without any substantial basis and in violation of principles of natural justice.

Conclusion:
The ITAT upheld the CIT(A)'s order, noting that the assessee had discharged its onus by providing sufficient documentary evidence, and the AO had failed to disprove the same. The appeal filed by the revenue was partly allowed for statistical purposes, with a direction to the AO to re-adjudicate the issue pertaining to the source-of-source of the investment made by M/s Kush Trading & Commerce Pvt. Ltd. after providing a reasonable opportunity of being heard to the assessee.

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