2024 (6) TMI 262 - AT - Income Tax

Addition u/s 68 - receipt of share capital/premium from various dummy entities three - assessee is one of the group companies of RPS Group, thus substantive addition made in the hands of RPS Group and protective in the hand of assessee - HELD THAT - We have the benefit of the assessment order of Luminous Infrastructure Pvt Ltd for A.Y 2009-10 framed u/s 143(3)/147 of the Act wherein the share application money received by M/s Luminous Infrastructure Pvt Ltd has been accepted after thorough scrutiny. M/s Luminous Infrastructure Pvt Ltd has invested in shares of the assessee company out of premium received by it and since its source has been accepted after thorough scrutiny, we do not find any reason why source of M/s Luminous Infrastructure Pvt Ltd in the assessee company be not accepted. Same is the fate of M/s Shine Infracon Pvt Ltd whose assessment was also farmed u/s 147 r.w.s 143(3) of the Act and after thorough scrutiny, its financial statements have been accepted as such, which means that investment made by Shine Infracon Pvt Ltd in the assessee company has also been accepted. Investment made in M/s Heaven Infracon Pvt Ltd, we find that in its assessment order framed u/s 143(3) r.w.s 147 of the Act, addition has been made. Investment made in the shares of the assessee company can be safely considered out of funds available with M/s Heaven Infracon Pvt Ltd. Considering the assessment status of all the three share applicant companies, we have no hesitation to hold that the assessee has successfully discharged the initial onus cast upon it by provisions of section 68 of the Act. We, therefore, do not find any reason to interfere with the findings of the assessee ld. CIT(A). Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in the judgment are the deletion of addition of unexplained cash credit u/s 68 of the Act received by the assessee from certain companies, jurisdiction of reopening assessment u/s 147, validity of notice u/s 148, and the source of funds invested in the assessee company.

Revenue's Grievances:
1. The Revenue challenged the deletion of addition of Rs. 16,55,00,000 made by the AO on account of unexplained cash credit u/s 68 of the Act received by the assessee from specific companies.
2. The Revenue questioned the creation of companies with the same directors and modus operandi, suggesting potential irregularities.
3. The Revenue raised concerns about the source of funds invested in the assessee company by the share applicant companies.
4. The Revenue sought permission to add, delete, or amend any grounds of appeal.

Assessee's Cross Objections:
1. The assessee contended that the order passed by the CIT(A) was legally flawed.
2. The assessee argued against the jurisdiction of reopening assessment u/s 147.
3. The assessee challenged the validity of the notice issued u/s 148.
4. The assessee objected to the reopening of assessment without proper compliance with statutory procedures.
5. The assessee disputed the independent application of mind in the reopening of assessment.
6. The assessee claimed that the notice u/s 148 was time-barred.
7. The assessee objected to the lack of reasons for reopening assessment.
8. The assessee argued against the reopening based on a mere change of opinion.

Detailed Judgment:
The Tribunal considered the facts, including the scrutiny assessment and reopening u/s 147, where the assessee received share capital/premium from various companies. The Assessing Officer found discrepancies in the share capital/premium received and made additions based on his findings. The CIT(A) deleted the addition after the assessee provided explanations and evidence under section 68 of the Act, emphasizing the importance of creditworthiness verification.

The Tribunal noted that the substantive addition made in another company's hands had been deleted in a separate case. It also observed that the share applicant companies' assessments were accepted, indicating the legitimacy of the transactions. Based on the assessment status of the companies, the Tribunal held that the initial burden under section 68 was discharged by the assessee, leading to the dismissal of the Revenue's appeal and the cross objections becoming infructuous.

Therefore, the appeal of the Revenue was dismissed, and the cross objections were deemed infructuous, resulting in the maintenance of the CIT(A)'s decision.