2023 (10) TMI 629 - HC - Income Tax

Addition u/s 68 - assessee could not establish the creditworthiness of the shareholders as shown in the share capital investment during the relevant financial year - observations of the Tribunal that the appellant had not provided any documents or details before the lower authorities and/or not participated in the proceedings before the CIT Appeals - HELD THAT - CIT(A) had come to a conclusion upon considering the documents and the submissions made by the assessee. Therefore, it may not be correct to state that no evidences have been produced by the assessee to prove the identity and creditworthiness of the investors as well as the genuineness of the transaction. What was required to be considered was whether the documents produced by assessee and the stand taken by them to the identity and creditworthiness of the investors as well as the genuineness of the transaction on the materials which were on the file of CIT(A) as well as the assessing officer. The assessee has to be partly blamed for the present situation as the assessee failed to respond to the notice issued to the assessee through e-mail as well as electronically. In any event, since the appellant s remedy before the learned tribunal is a very valuable remedy as the learned tribunal is the last fact finding forum which will be able to appreciate and re-appreciate the facts, we are of the opinion that the appeal should be decided by the learned tribunal on merits. Appeal is allowed and the order passed by the learned tribunal is set aside and the matter stands remanded to the learned tribunal for fresh consideration of the appeal on merits and in accordance with law.

Summary

Issues Involved:
The judgment involves issues related to income tax assessment, specifically focusing on the identity and creditworthiness of share subscribers, genuineness of transactions, and the appellant's failure to participate in the proceedings.

Issue A:
The first issue raised in the judgment questions the findings of the Tribunal regarding the appellant's failure to provide necessary documents or details to establish the identity and creditworthiness of share subscribers and the genuineness of the transaction.

Issue B:
The second issue revolves around the appellant's argument that by providing details of share subscribers, income tax returns, audited accounts, and other transaction-related documents, the onus shifted to the Assessing Officer to prove the transaction's lack of genuineness or the doubtfulness of share subscribers' identity and creditworthiness.

Issue C:
The third issue questions whether doubts regarding the identity and creditworthiness of share subscribers and the genuineness of share subscription transactions can be solely based on the non-appearance of the appellant's director to summons, despite the appellant providing all necessary documents and the share subscribers responding to inquiries.

Judgment Details:
The appellant filed an appeal under section 260A of the Income Tax Act against the Tribunal's order. The Tribunal dismissed the appeal, stating that the appellant failed to prove the identity and creditworthiness of investors and the genuineness of the transaction. The assessing officer added back the share capital investment under section 68 of the Act due to the appellant's inability to establish the creditworthiness of shareholders.

The [CIT(A)] considered the appellant's submissions, relevant records, and various documents, including PAN details, income tax returns, and bank statements. The [CIT(A)] also reviewed the balance sheets and bank accounts of relevant parties. Despite the appellant's failure to respond to notices, the [CIT(A)] found that the appellant had made efforts to establish the identity, creditworthiness, and genuineness of the transaction.

The High Court allowed the appeal, setting aside the Tribunal's order and remanding the matter for fresh consideration. The Court emphasized that the Tribunal is the final fact-finding forum and should assess the case on its merits. The Court left all questions of fact and law open for further examination by the Tribunal.