9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (10) TMI 1445 - AT - Income TaxAddition u/s 68 - bogus share application money received - cash credits, which are essentially share capital/share premium money received by the assessee - Addition both on substantive basis and protective basis - HELD THAT - It is noticed that it is not the case of the AO that the assessee did not discharge the initial burden placed upon it with regard to the share capital/share premium money received by it. The assessee has furnished all the details relating to the investors in order to discharge the burden placed upon it u/s 68. We noticed from the record that the assessee has filed following documents in order to discharge the burden placed upon it. From the details submitted it can be seen that the identities of share subscribers stand proved. Since they have made payments from their bank accounts through account payee cheques, these transactions cannot be treated as bogus. Since the payments have been made from of funds available with them, the credit worthiness would also stand proved. We notice that the AO has observed that these subscribers are either showing loss or meager profits and such meager profits are not commensurate with the investments made by them. However, there is no bar under the law that a person could not make investments out of borrowed funds. In the instant case, it is not the case of the AO that the applicants did not have funds available with them for making investments in the assessee company. In fact, the said investments have been routed through the bank accounts of the assessee as well as the subscribers. Further, these investments are duly reflected in their books of account. We notice that the AO has mainly relied upon the report of investigation wing to come to the conclusion that the assessee has availed only accommodation entries. He has also referred to the non-reply of the notices issued by them and non-furnishing of details called for. But the fact would remain that the assessee has furnished the relevant details before the AO and all those details were earlier filed with either Income tax department or with Registrar of Companies, i.e., with Government authorities. Hence the authenticity of those documents could not be doubted with. When all the relevant details are available with the AO, it is the requirement that the AO should examine those documents and could reject them, only if he finds fault with those documents. We notice that the AO did not find any deficiency or fault with the evidences produced by the assessee. 17. With furnishing of all these documents, in our view, the assessee has discharged initial burden placed upon it u/s 68 of the Act by furnishing above said documents. Hence the source as well as the source of source also stands proved by the subscribers. Whether the Assessing Officer could have made addition u/s 68 by relying upon report of investigation wing or the statement given by the alleged accommodation entry providers? - The Hon ble Bombay High Court has held in the case of CIT vs. Orchid Industries (P) Ltd. 2017 (7) TMI 613 - BOMBAY HIGH COURT that the addition u/s 68 could not be made once the assessee had produced the documents to prove the cash credits. It was further held that non-appearance of the share subscriber before the AO will not change this position. Assessee appeal allowed.
Issues Involved:
1. Addition under Section 68 of the Income Tax Act concerning share application money received by the assessee. 2. The validity of statements made under Section 132(4) of the Income Tax Act during search operations. 3. The reliance on investigation reports and non-response to notices by subscriber companies. 4. The burden of proof regarding the identity, genuineness, and creditworthiness of the share subscribers. Issue-Wise Detailed Analysis: 1. Addition under Section 68 of the Income Tax Act: The assessee was aggrieved by the partial confirmation of the addition of Rs. 50 lakhs under Section 68 of the Act by the CIT(A) concerning share application money received from M/s Zenstar Marketing P Ltd. The revenue was aggrieved by the relief granted by the CIT(A) regarding the addition made under Section 68 on both substantive and protective bases. The assessee contended that it had provided all necessary documents to prove the identity, genuineness, and creditworthiness of the share subscribers, including incorporation certificates, PAN cards, bank statements, and financial statements. The AO, however, did not accept these contentions, citing the lack of response from subscriber companies and their inability to substantiate the share premium amounts. The CIT(A) held that the assessee failed to discharge the onus placed upon it, as the subscriber companies were not available at their addresses and did not respond to notices. However, the CIT(A) deleted the protective additions related to M/s Starpoint Dealers P Ltd and M/s Morpan Merchant P Ltd, as the credits in these companies were confirmed at the first appellate level. 2. Validity of Statements Made Under Section 132(4): During the search proceedings, key persons of the assessee group admitted to the inability to trace certain companies/directors who subscribed to the shares and agreed to offer the amounts as undisclosed income. The assessee later contended that these admissions were made under pressure and retracted their statements, providing all necessary details to prove the genuineness of the share application money. The CIT(A) observed that the AO did not solely rely on these statements and that the retraction was bald and did not elaborate on how the earlier statement was false. The Tribunal, however, found merit in the retraction, noting that the evidences furnished by the assessee outweighed the statements given during the search. 3. Reliance on Investigation Reports and Non-Response to Notices: The AO relied on the investigation wing's report, which indicated that the assessee received share capital from paper companies providing accommodation entries. The AO also noted the non-response or unserved notices issued to subscriber companies and their inability to substantiate the share premium amounts. The Tribunal held that the AO should have examined the documents furnished by the assessee, which were earlier filed with government authorities. The authenticity of these documents could not be doubted, and the AO did not find any deficiency or fault with the evidences produced by the assessee. 4. Burden of Proof Regarding Identity, Genuineness, and Creditworthiness: The Tribunal noted that the assessee had discharged the initial burden placed upon it under Section 68 by furnishing documents to prove the identity, genuineness, and creditworthiness of the share subscribers. The AO's reliance on the investigation wing's report and non-response to notices was insufficient to disprove the assessee's claim. The Tribunal referred to several judicial precedents, including decisions by the Bombay High Court, which held that once the assessee produced documents to prove the cash credits, the burden shifted to the revenue to disprove the claim. The Tribunal concluded that the addition under Section 68 was not justified and directed the AO to delete all the additions made under this section. Conclusion: The Tribunal allowed the assessee's appeal and dismissed the revenue's appeal, holding that the addition under Section 68 of the Act was not justified in the facts and circumstances of the case. The Tribunal directed the AO to delete all the additions made under Section 68 of the Act.
|
