2023 (8) TMI 1305 - AT - Income Tax

Addition u/s 68 - doctrine of fraud - AO based on the information received from DDIT (Investigation)-II, New Delhi that the appellant is a beneficiary of the accommodation entries - HELD THAT - From mere perusal of the assessment order, it could reveal that the respondent-assessee had not discharged the initial onus of proving the identity, genuineness and creditworthiness of the share application money. CIT(A) considering the share application form, board resolution of the company, share receipt letter and confirmation, copy of bank statement of the respondent-assessee etc, had concluded that the respondent-assessee had discharged the initial onus lying upon it. The evidence considered by CIT(A) does not establish the genuineness and creditworthiness of the share application money. Thus, CIT(A) had failed to enquire into the creditworthiness and genuineness of the transactions and there is no evidence brought on record establishing the genuineness and creditworthiness of the share application money. Thus, the order passed by the ld. CIT(A) is perfunctory and not based on any material on record. Thus, the doctrine of fraud can be squarely invoked to the facts of the present case. Decided in favour of revenue.

Summary

Issues Involved:
The issues involved in the judgment are related to the addition made by the Assessing Officer on account of share application money received from entities associated with accommodation entries providers, the discharge of initial onus by the respondent-assessee to prove the genuineness and creditworthiness of the transactions, and the decision of the ld. CIT(A) in deleting the addition.

Addition on Account of Share Application Money:
The Assessing Officer made an addition of Rs. 1,90,00,000/- on account of share application money received from entities associated with accommodation entries providers based on information received from DDIT (Investigation)-II, New Delhi. The respondent-assessee was considered a beneficiary of these accommodation entries. The ld. CIT(A) concluded that the initial onus of proving the genuineness and creditworthiness of the transactions was discharged by the respondent-assessee based on submitted documents like share application form, board resolution, share receipt letter, and bank statements. However, it was noted that these documents did not establish the genuineness and creditworthiness of the share application money. The order of the ld. CIT(A) was deemed perfunctory and not based on any material on record. The doctrine of fraud was invoked, leading to the reversal of the ld. CIT(A)'s order and restoration of the assessment order.

Discharge of Initial Onus by the Respondent-Assessee:
The respondent-assessee contended that the initial onus of proving the genuineness and creditworthiness of the transactions was discharged. The respondent-assessee provided various documents such as share application letter, bank statements, allotment letters, Form 2 filings, annual reports, and income tax return acknowledgments. The ld. CIT(A) held that the initial onus was indeed discharged by the respondent-assessee, as the Assessing Officer failed to provide material to challenge the evidence submitted. Citing a decision of the Hon'ble Gujarat High Court, the ld. CIT(A) deleted the addition of Rs. 1,90,00,000/-.

Decision of the ld. CIT(A) in Deleting the Addition:
The ld. CIT(A) found that the respondent-assessee had successfully discharged the initial onus of proving the genuineness and creditworthiness of the transactions. It was noted that the Assessing Officer did not bring forth any material to refute the evidence provided by the respondent-assessee. Relying on a previous court decision, the ld. CIT(A) deleted the addition. However, the Revenue, being aggrieved by this decision, appealed before the Tribunal. Despite the absence of the respondent-assessee during the hearing, the Tribunal considered the arguments presented by the Revenue and concluded that the ld. CIT(A) had not adequately examined the creditworthiness and genuineness of the transactions, leading to the allowance of the Revenue's appeal and restoration of the assessment order.