2023 (9) TMI 545 - AT - Income Tax

Addition u/s 68 - receipt of bogus share capital and share premium - onus on the assessee to furnish the explanation in support of the said cash credits by establishing the identity, creditworthiness and genuineness of the shareholders and transactions not proved - HELD THAT - AO has squirely failed in substantiating that how the onus cast upon the assessee was not discharges u/s 68 of the act. AO further erred by neither making any specific comments nor have demonstrated the reasons for adverse conclusions about the share subscribers which could be supported with the documents or borne out from the records. AO also misplaced in her observations by not distinguishing that how the facts of the present case are different on which binding judgments in the case of Lovely Exports 2008 (1) TMI 575 - SC ORDER and Venkteshwar Ispat 2009 (5) TMI 290 - CHHATTISGARH HIGH COURT relied upon by the assessee, are not applicable. Under such facts and circumstances we concur with the decision of the order of Ld CIT(A) having no infirmity, in absence of any divergent argument advanced by the revenue apart from the contentions raised and considered herein above, or without any cogent material or decision having different binding consequence on the instant case, we do not have any distinct opinion other than that of the opinion of Ld CIT(A), thus, we order to sustain the same. Resultantly grounds raised in the present appeal by revenue are dismissed.

Summary

Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act.
2. Identity, genuineness, and creditworthiness of investor companies.
3. Compliance with legal provisions and precedents.

Summary:

Deletion of Addition under Section 68 of the Act:
The revenue challenged the CIT(A)'s decision to delete the addition of Rs. 3,07,00,000/- made by the AO under Section 68 of the Income Tax Act. The AO had added this amount to the assessee's income, citing the failure to establish the genuineness of the receipt of share capital/premium from certain shareholders. The CIT(A) deleted the addition, observing that the AO did not provide specific reasons for rejecting the documents submitted by the assessee and failed to confront the assessee with the information received about the Kolkata-based companies before making the additions.

Identity, Genuineness, and Creditworthiness of Investor Companies:
The AO had issued notices under Section 133(6) to 12 investor companies, out of which five did not respond. The AO concluded that these companies were merely paper companies without concrete business, and the investment did not match their financial status. The CIT(A) found that the AO did not point out any specific defects in the documents received and did not provide the assessee an opportunity to refute the information. The CIT(A) noted that once the assessee had discharged its onus by furnishing details and documents, the onus shifted to the AO to make further enquiries.

Compliance with Legal Provisions and Precedents:
The CIT(A) relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports and the jurisdictional High Court of Chhattisgarh in M/s Venkateshwar Ispat, which held that if the identity of the shareholders is established, the burden shifts to the revenue to prove that the money received is not genuine. The CIT(A) observed that the AO failed to distinguish how the facts of the present case were different from these binding judgments.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, noting that the AO had failed to substantiate how the onus cast upon the assessee was not discharged under Section 68. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal. Consequently, the cross-objection filed by the assessee became academic and was also dismissed.