2023 (9) TMI 593 - AT - Income Tax

Unexplained cash credit u/s 68 - assessee has raised money from two investor one is individual and second is group corporate - HELD THAT - Decisions in the case of Crystal Networks Pvt. Ltd. 2010 (7) TMI 841 - KOLKATA HIGH COURT wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions, the fact that summon issued were returned un-served or no body complied with them is of little significance to prove the genuineness of the transactions and identity and creditworthiness of the creditors. Similar ratio as in the case of CIT Vs Orchid Industries (P) Ltd 2017 (7) TMI 613 - BOMBAY HIGH COURT by holding that provisions of section 68 can not be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN, financial and bank statements showing share application money. Assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. Besides the investors have also furnished complete details/evidences before the AO which proved the identity, creditworthiness of investors and genuineness of the transactions - we are inclined to set aside the order of Ld. CIT(A) by allowing the appeal of the assessee.

Summary

Issues Involved:
1. Confirmation of addition of Rs. 5,42,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act.

Summary:

Issue 1: Confirmation of Addition of Rs. 5,42,00,000/- as Unexplained Cash Credit

The assessee filed a return of income declaring a total income of Rs. Nil with a carry forward of loss of Rs. 2,42,80,600/-. During the scrutiny, the AO observed that the assessee raised share capital from two subscribers, Pradeep K Dixit and Bajrang Dealmark Pvt. Ltd., amounting to Rs. 5,42,00,000/-. Despite furnishing documents like ITRs, audited accounts, bank statements, and share allotment letters, the AO added Rs. 5,42,00,000/- as unexplained cash credit, citing the non-appearance of shareholders.

In the appellate proceedings, the Ld. CIT(A) dismissed the appeal, stating that the assessee failed to furnish necessary evidence to verify the transactions. The Ld. CIT(A) referenced decisions from the Hon'ble Supreme Court in CIT vs. Durga Prasad More and Sumati Dayal vs. CIT, concluding that the assessee did not prove the three ingredients required under Section 68 of the Act.

The Ld. A.R. argued that all necessary documents were provided, and the authorities failed to identify any deficiencies. The Ld. A.R. stated that the onus shifted to the revenue to investigate further, which was not done. The Ld. A.R. cited several decisions, including CIT vs. Orissa Corporation Ltd., to support the argument that non-production of investors does not justify the addition when sufficient evidence is provided.

The Tribunal noted that the AO did not conduct further investigations and jumped to conclusions without examining the provided documents. The Ld. CIT(A) affirmed the AO's findings without a detailed order, ignoring the evidence. The Tribunal referenced the Supreme Court decision in Orissa Corporation Ltd., emphasizing that the revenue did not pursue the matter further despite having the necessary information.

The Tribunal also cited the Calcutta High Court decision in Crystal Networks Pvt. Ltd. vs. CIT, which held that non-compliance with summons is insignificant if all necessary documents are provided. The Tribunal concluded that the authorities failed to investigate properly and unjustly added the amount as unexplained cash credit.

Therefore, the Tribunal set aside the Ld. CIT(A)'s order and allowed the appeal of the assessee, stating that the mere non-production of shareholders cannot justify the addition when all evidence is provided.

Order pronounced in the open court on 25th July, 2023.