2024 (4) TMI 751 - HC - Income Tax

Addition u/s 68 on account of share capital and premium - addition made on absence of identity of the creditors, genuineness and creditworthiness of the entire transaction - ITAT deleted addition - HELD THAT - Findings recorded by the Tribunal, is not supported by facts. AO has held that the assessee was a Private Limited company which cannot issue shares in the same manner in which Public Limited company does and in so far as creditworthiness of the share subscribers is concerned, there must be positive evidence to show the nature and source of resources of the share subscribers and if the assessee was serious enough to establish his case, it ought to have complied with the notices/letters issued by the Assessing Officer and ought to have produced the directors of the subscribing companies before the AO so that they could explain the sources from which the share subscription was made. As stated that there is no complaints either from the end of the assessee company or from the end of the alleged subscriber company. This finding recorded by the AO as affirmed by the CIT(A), if required to be set aside by the Tribunal, reasons have to be assigned. Therefore, we find that the conclusion arrived at by Tribunal is insufficient to support its ultimate conclusion in allowing the assessee s appeal. Therefore, we are of the view that the matter has to be remanded back to the Tribunal for fresh consideration. Revenue appeal is allowed. The order passed by the learned Tribunal is set aside and the matter is remanded to the Tribunal to take a fresh decision.

Summary

Issues involved:
The appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2012-13.

Issue a):
The substantial question of law is whether the Income Tax Appellate Tribunal erred in law in deleting the addition of Rs. 4,78,50,000/- under Section 68 of the Act due to lack of identity, genuineness, and creditworthiness of the creditors.

The Assessing Officer concluded that the assessee failed to prove the required ingredients under Section 68 of the Act, as no documents were produced to substantiate their claim. The Commissioner of Income Tax (Appeals) upheld this decision, emphasizing the lack of explanation for the share premium charged. However, the Tribunal set aside these findings, noting that all share applicants were income tax assessees, filed their returns, and provided necessary documents, such as share application forms and bank statements. The Tribunal's decision was found to be unsupported by facts, and the matter was remanded back for fresh consideration.

Issue b):
The question is whether the Tribunal erred in law in deleting the addition of Rs. 4,78,50,000/- made by the Assessing Officer due to the absence of personal attendance by directors of the share allottee companies during assessment proceedings.

The Assessing Officer emphasized the need for positive evidence regarding the creditworthiness of share subscribers and criticized the lack of compliance with notices and letters. The Tribunal's decision was deemed insufficient to support its conclusion, leading to the remand of the matter for fresh consideration.

Issue c):
The issue is whether the Tribunal erred in law by not appreciating the principle laid down by the Supreme Court regarding the duty of the Assessing Officer to investigate the creditworthiness of creditors and verify the genuineness of transactions.

The Assessing Officer's findings were upheld by the Commissioner of Income Tax (Appeals), highlighting the lack of effort to justify the share premium charged. However, the Tribunal's decision to allow the appeal was based on the documents provided by the share applicants, which the Assessing Officer found insufficient. The Tribunal's conclusion was considered unsupported by facts, leading to the remand of the matter for fresh consideration.

Judge's Separate Judgement:
No separate judgment was delivered by the judges in this case.