2023 (8) TMI 273 - AT - Income Tax

Addition u/s 68 - unexplained cash credits shown as share capital/share premium received - Discarding the 3rd party confirmation - as per DR assessee failed to prove the identity of share applicants, genuineness of transactions and creditworthiness of the share applicants to invest in Assessee Company - HELD THAT - AO has not brought any material on record to dislodge the sanctity of documents submitted that after the filing of the documents the burden casted upon the assessee, stood discharge and the burden is on revenue to refute the documentary evidences filed by assessee with cogent material. It is not a case of share application money or a case where there is any information of investigation wing vis- -vis generation of share application money/long term capital gain etc. It is settled position of law that no 3rd party would come forward with false evidence to oblige an assessee. Reference can be made to the judgment of Sheo Narian Duli Chand 1968 (9) TMI 32 - ALLAHABAD HIGH COURT wherein it was held that there is no presumption that a witness appearing for an assessee come forward to give false evidence to oblige an assessee. Similarly provisions of section 277A (For third party) provides that if any person willfully helps another person for falsification of books of accounts then such person would be punishable with imprisonment and fine. Therefore discarding the 3rd party confirmation without bringing any material on record is arbitrary. Further, non service of summons by inspector or the presumption that investor companies are not in existence, without refuting the documentary evidences, alone cannot be a ground to make addition under section 68 - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, 1961.
2. Failure to prove identity, genuineness, and creditworthiness of share applicants.
3. Discharge of onus by the assessee.
4. Admission of additional evidence by CIT(A).

Issue 1: Deletion of Addition under Section 68
The Revenue contested the deletion of Rs. 2.3 crore added by the Assessing Officer (AO) under Section 68 for unexplained cash credits. The AO had noted that the share capital was received from seven corporate entities, with shares issued at a premium. Despite compliance with notices under Section 133(6) and responses to summons under Section 131, the AO made the addition due to unserved summons to some directors and low returned income of the entities.

Issue 2: Identity, Genuineness, and Creditworthiness of Share Applicants
The AO questioned the identity, genuineness, and creditworthiness of the share applicants. However, the CIT(A) found that the assessee provided sufficient evidence, including income tax returns, audited balance sheets, confirmations of transactions, and bank statements. The CIT(A) concluded that the existence of the entities was established, and their financials showed adequate net worth, thereby satisfying the requirements of Section 68.

Issue 3: Discharge of Onus by the Assessee
The CIT(A) held that the assessee discharged its burden of proof by submitting comprehensive documentation. The AO failed to bring any material evidence to disprove the assessee's claims. The CIT(A) emphasized that the AO did not provide sufficient material to suggest that the share application money was the assessee's unaccounted income.

Issue 4: Admission of Additional Evidence by CIT(A)
The CIT(A) admitted additional evidence submitted by the assessee, which was forwarded to the AO for comments. The AO did not provide any new comments or evidence to refute the additional documents. The CIT(A) relied on several judicial precedents to support the deletion of the addition, emphasizing that the AO's action was contrary to the law and facts of the case.

Conclusion:
The Tribunal upheld the CIT(A)'s order, stating that the AO did not provide any material to dislodge the documentary evidence submitted by the assessee. The Tribunal noted that the burden of proof shifted to the Revenue, which failed to refute the evidence provided. The appeal of the Revenue was dismissed, and the addition of Rs. 2.3 crore under Section 68 was deleted.