2024 (5) TMI 581 - AT - Income Tax

Unexplained cash credit being share capital and premium u/s 68 - director of the subscriber company did not appear in response to the summons issued u/s 131 - Burden of proof - HELD THAT - AO did not examine any of the documents furnished by the assessee to prove the identity, creditworthiness of the share-subscribers and genuineness of the transaction. AO in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the Assessing Officer, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the Assessing Officer. Assessee has rightly placed reliance upon the decision of Paradise Inland Shipping Pvt. Ltd. 2017 (11) TMI 1554 - BOMBAY HIGH COURT as held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Thus no justification on the part of the lower authorities in making the impugned additions and the same are accordingly ordered to be deleted. Decided in favour of assessee.

Issues Involved:

1. Addition of Rs. 12,25,33,500/- u/s 68 of the Act as unexplained cash credit.
2. Non-appearance of Directors in compliance with notice u/s 131.
3. Disregard of binding judgments by CIT(A).
4. Alleged bias in the assessment order.
5. Overlooking explanations filed by capital subscribers u/s 133(6).
6. Application of proviso to section 68.
7. Interest charged u/s 234 A/B/C.
8. Permission to produce additional evidence.
9. Permission to press new or modify grounds of appeal.

Summary:

1. Addition of Rs. 12,25,33,500/- u/s 68 of the Act:
The assessee contested the addition of Rs. 12,25,33,500/- made by the Assessing Officer (AO) treating share capital and share premium as unexplained income u/s 68 of the Act. The AO's order was criticized as non-speaking and mechanical, despite the assessee furnishing all necessary details like ITRs, PANs, financial statements, bank statements, and ROC filings to establish the identity, creditworthiness, and genuineness of the transactions.

2. Non-appearance of Directors u/s 131:
The AO added the amount due to the non-appearance of the directors of the subscriber companies in response to the summons issued u/s 131. The assessee argued that the directors had provided the required details and evidence, and their personal presence was not necessary. The Tribunal agreed that adverse inference could not be taken solely based on their non-appearance.

3. Disregard of binding judgments by CIT(A):
The CIT(A) confirmed the addition without considering the detailed submissions and evidence furnished by the assessee, which was argued as being in disregard of binding judgments of higher courts.

4. Alleged bias in the assessment order:
The assessee claimed the assessment order was biased and based on preconceived notions regarding share capital raising. The Tribunal found the AO's approach mechanical and lacking proper examination of the evidence.

5. Overlooking explanations filed by capital subscribers u/s 133(6):
The AO overlooked explanations and confirmations filed by the capital subscribers in response to notices u/s 133(6), which were on record before the completion of assessment proceedings.

6. Application of proviso to section 68:
The AO applied the proviso to section 68, which is applicable from AY 2013-14, to the assessee's case, which was not justified.

7. Interest charged u/s 234 A/B/C:
The CIT(A) confirmed the interest charged u/s 234 A/B/C, which the assessee argued was unjustified.

8. Permission to produce additional evidence:
The assessee sought leave to produce additional evidence in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963.

9. Permission to press new or modify grounds of appeal:
The assessee sought leave to press new, additional grounds of appeal or modify, withdraw any of the grounds at the time of hearing.

Tribunal's Findings:
The Tribunal found that the AO did not make any independent enquiry to verify the genuineness of the transactions. The assessee had discharged the initial burden of proof, and the AO failed to point out any discrepancies in the evidence provided. The CIT(A)'s order was deemed non-speaking and mechanical, lacking discussion on material facts and failing to justify the addition. Consequently, the Tribunal ordered the deletion of the impugned additions.

Result:
The appeal of the assessee was allowed.

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