2024 (1) TMI 359 - AT - Income Tax

Unexplained cash credit u/s 68 - Original assessment proceedings the assessee did not appear before the AO nor any compliance was made to the summons issued u/s 131 of the Act - CIT(A) came to the conclusion that the assessee has satisfied all the ingredients of Section 68 of the Act while allowing the appeal and analyzed the credentials of the subscribers through financial data - HELD THAT - CIT(A) has taken a reasoned view by passing a detailed and speaking order which does not require any interference at our end. Moreover the contentions of the revenue does not carry any force when the AO has examined all the details, evidences, share subscribers and issued summons u/s 131 of the Act. In most of the cases we observe that where the subscribers did not appear personally , they filed all the details/evidences in compliance to summons issued u/s 131 of the Act. Meaning thereby that the identity, creditworthiness of the subscribers and genuineness of the transactions were substantially proved. We also note that the ld CIT(A) has also considered the issue that there is no bar on issuing shares at a price higher than the FMV in the instant assessment year as provisions of section provisions of section 56(2)(viib) of the Act are effective from assessment year 2013-14. While allowing the appeal of the assessee we observe that the ld. CIT(A) has relied on a series of decisions as discussed by ld CIT(A) in his order and also distinguished the Hon ble Apex Court decision in the case of CIT Vs NRA Steel 2019 (3) TMI 323 - SUPREME COURT In our opinion the ld CIT(A) arrived at a correct conclusion after considering all the facts of the assessee s case and the ratio laid down in various decisions as referred to in the appellate order. Therefore, we do not find any merit in the appeal of the revenue and consequently the same is dismissed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Addition of Rs. 5,10,00,000/- on account of unexplained cash credit under Section 68 of the Income Tax Act.

Summary:

1. Delay in Filing the Appeal:
The revenue's appeal was delayed by 173 days due to the time taken in processing the file through various stages of hierarchy. The delay was condoned as the reasons were found to be sufficient and the assessee did not oppose the admission of the appeal.

2. Addition of Rs. 5,10,00,000/- on Account of Unexplained Cash Credit:
The assessee filed a return of income declaring Rs. 13,906/-. The case was selected for scrutiny, and the AO made an addition of Rs. 5,10,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act. The AO observed that the assessee, a private limited company with meager income, issued equity shares at a high premium without justification. The AO required the assessee to furnish various proofs, but there was no compliance from the assessee, leading to the addition being made under Section 144 of the Act.

In appellate proceedings, the assessee submitted all required evidences, including ITRs, audited reports, financial statements, and bank statements. The Ld. CIT(A) considered these evidences and the remand report from the AO, which indicated that most share subscribers appeared and their statements were recorded. The Ld. CIT(A) allowed the appeal, noting that the assessee had discharged the initial onus of proving the identity, creditworthiness, and genuineness of the transactions. The AO had accepted the share capital as genuine but doubted the creditworthiness of the share premium due to low profits of the investing companies. The Ld. CIT(A) emphasized that net worth and availability of funds, not just profits, determine creditworthiness.

The Tribunal upheld the Ld. CIT(A)'s decision, noting that the AO did not provide concrete evidence against the assessee's submissions. The Tribunal also highlighted that the amendment to Section 68 requiring explanation of the source of source was effective from AY 2013-14 and not applicable for AY 2012-13. The Tribunal found that the AO's reliance on certain judicial precedents was misplaced and that the assessee had satisfactorily explained the transactions.

The appeal of the revenue was dismissed, and the Tribunal pronounced the order in the open court on 5th January, 2024.