2024 (2) TMI 455 - AT - Income Tax

Unexplained cash credit u/s. 68 - CIT(A) confirmed part addition - CIT(Appeals) was of the view that as the assessee company had failed to substantiate the authenticity of its claim of having received genuine share application money from two share applicants, thus partly made addition - HELD THAT - Though the assessee company had duly discharged the primary onus that was cast upon it as regards proving the identity and creditworthiness of the share applicants and genuineness of the transaction of having received share application money from the aforementioned persons, but the A.O could not rebut the same based on any cogent evidence. As the A.O had not cared to discharge the onus that was cast upon him, therefore, as observed in the case Commissioner of Income Tax Vs. Kamdhenu Steel and Alloys Ltd. 2011 (12) TMI 394 - DELHI HIGH COURT for this negligence on the part of the A.O, he could not be provided with fresh innings . We, thus, in terms of our aforesaid observation finding no infirmity in the view taken by the CIT(Appeals) to the extent he had vacated the aforementioned additions made by the A.O by treating the money received from the said persons as unexplained cash credits u/s. 68 of the Act, and uphold the same. Sustainability of the addition with respect to two share applicants viz. Shri Ramesh Bind and Shri Dalla Nisad - The fact that Shri Ramesh Bind had returned his income of Rs. 1,78,100/- undeniably raises serious doubts about the veracity of his unsubstantiated claim of having made an investment of Rs. 18 lacs with the assessee company. Also, the financial statement of Shri Ramesh Bind, viz. balance sheet and capital account does not inspire any confidence for the reason that the nature of his business/sources of income cannot be gathered therefrom. Apart from that, the fact that the cash aggregating to Rs. 8 lacs was deposited in the aforesaid persons bank account in two tranches of Rs. 4 lacs each on the same date on which the amount was transferred to the assessee company read a/w. the fact that the said person had no substantial sources of income, thus, raises no confidence as regards the genuineness of the investment claimed by him to have been made with the assessee company. Also, the source out of which an amount of Rs. 10 lacs was transferred by the aforementioned person to the assessee company is not discernible from the record. At this stage, we may also herein observe that though Shri Ramesh Bind (supra) had filed an affidavit wherein he had accepted the fact of having made an investment of Rs. 18 lacs with the assessee company, but despite specific direction by the A.O, the aforesaid company had failed to produce him for necessary examination in the course of the assessment proceedings before the A.O. Shri Dallu Nisad - As nothing is discernible from the records, which would substantiate the creditworthiness of the aforementioned person who has stated to have made an investment of Rs. 1.08 crore (approx.) with the assessee company, we find no infirmity in the view taken by the A.O who had rightly dubbed the same as unexplained cash credit u/s. 68. We concur with the view taken by the CIT(Appeals) who had rightly observed that the assessee company had failed to establish the genuineness of the assessee s claim of having received share application money from the aforementioned person by placing on record supporting documentary evidence, which would reveal his annual income and availability of funds a/w. sources of the same, therefore, we uphold the same. Both the appeal of the assessee and appeal of the revenue are dismissed in terms of our aforesaid observations.

Summary

Issues Involved:
1. Addition of share application money raised by the assessee.
2. Deletion of addition by CIT(A) of share application money under Section 68 of the Income-tax Act, 1961.
3. Verification of identity, genuineness, and creditworthiness of the investor companies and individuals.

Issue-wise Comprehensive Details:

1. Addition of Share Application Money Raised by the Assessee:
The assessee challenged the CIT(A)'s decision to sustain the addition of Rs. 1,26,09,000/- made by the AO on account of share application money. The assessee argued that the addition was "bad in law, against the law of natural justice and uncalled for."

2. Deletion of Addition by CIT(A) of Share Application Money Under Section 68:
The revenue contested the CIT(A)'s deletion of Rs. 10,03,14,000/- out of the total addition of Rs. 11,19,23,000/- made by the AO under Section 68 of the Act. The revenue argued that the CIT(A) ignored the facts brought on record by the AO, which showed that the assessee failed to prove the identity, genuineness, and creditworthiness of the investor companies.

3. Verification of Identity, Genuineness, and Creditworthiness:
The AO observed that the assessee received Rs. 11,19,23,000/- as share application money from six parties. Notices issued to verify the transactions were returned as "not known." The AO directed the assessee to substantiate the genuineness of the transactions and produce the shareholders for examination. Despite the director of the assessee company confirming the investments, the AO was not satisfied with the explanations and added the entire amount to the income of the assessee u/s. 68.

Tribunal's Findings:

On Revenue's Appeal:
- Shri Ashish Jaiswal (Rs. 3,50,000/-): The Tribunal found that the identity, creditworthiness, and genuineness of the transaction were established through documentary evidence, including PAN, ITR, and share application forms. The addition was rightly deleted by the CIT(A).

- M/s. Arcade Dealcom Pvt. Ltd. (Rs. 50,00,000/-): The Tribunal noted that the company's identity and creditworthiness were established through supporting documents, and the AO failed to disprove the genuineness of the transaction. The CIT(A)'s deletion of the addition was upheld.

- M/s. Hector Dealers Pvt. Ltd. (Rs. 6,79,00,000/-): Similar to the above, the Tribunal found that the identity, creditworthiness, and genuineness of the transaction were substantiated by documentary evidence. The CIT(A)'s decision was upheld.

- Raja Kaimoor Buildcon Pvt. Ltd. (Rs. 2,70,64,000/-): The Tribunal upheld the CIT(A)'s deletion of the addition, noting that the identity and creditworthiness of the company were established and the AO failed to provide contrary evidence.

On Assessee's Appeal:
- Shri Ramesh Bind (Rs. 18,00,000/-): The Tribunal found that the assessee failed to prove the creditworthiness of Shri Ramesh Bind, whose returned income was Rs. 1,78,100/-. The addition was rightly sustained by the CIT(A).

- Shri Dallu Nisad (Rs. 1,08,09,000/-): The Tribunal noted that the assessee failed to produce sufficient evidence to establish the creditworthiness and genuineness of the transaction. The addition was upheld.

Conclusion:
The Tribunal dismissed both the appeals of the assessee and the revenue, upholding the CIT(A)'s decision to partly allow the appeal of the assessee and delete the additions made by the AO under Section 68 for certain parties while sustaining the additions for others. The Tribunal emphasized the need for the AO to provide substantial evidence to disprove the documentary evidence provided by the assessee.