2024 (6) TMI 819 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Addition u/s 68 - HELD THAT - In our view, the Assessing Officer had sufficient material to form a prima facie belief that the assessee had introduced own unaccounted income in term of bogus share capital, thereby leading to escapement of income. Therefore, we find no infirmity in the order of Ld. CIT(Appeals) when he held that issuance of notice under section 147 of the Act was valid in the instant set of facts. Addition u/s 68 - Assessee failed to establish creditworthiness of share applicant or genuineness of transaction, AO was justified in making additions under section 68 and concluding that assessee routed its own money in books of account through conduit of investor companies. Assessee has adopted colourable means to introduce its own unaccounted money in the form of share capital and clearly engaged in dubious activities and is introducing its own unaccounted money through a maze of colourable set of transaction, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. Decided against assessee.

Issues Involved:
1. Validity of reassessment proceedings u/s 147.
2. Addition of Rs. 10,00,000/- u/s 68 for share money of Chandrakant V Solanki.
3. Addition of Rs. 15,00,000/- u/s 68 for share money of Hitendra V Solanki.
4. Addition of Rs. 30,00,000/- u/s 68 for share money of Parshwanath Sales Ltd.
5. Addition of Rs. 35,00,000/- u/s 68 for share money of Chaturbhai G Patel.
6. Treatment of share money as unexplained credit when identity of the share applicant is not in doubt.
7. Acceptance or rejection of additional ground of appeal purely a question of law.

Summary:

1. Validity of reassessment proceedings u/s 147:
The Tribunal upheld the validity of reassessment proceedings initiated by the AO based on search action which revealed that the assessee was engaged in issuing bogus share capital to introduce unaccounted money. The Tribunal cited several judicial precedents, including Raymond Woollen Mills Ltd. v. ITO and Priya Blue Industries (P.) Ltd. v. ACIT, to affirm that the AO had "valid reasons to believe" that income had escaped assessment, and the sufficiency or correctness of the material is not to be considered at this stage.

2. Addition of Rs. 10,00,000/- u/s 68 for share money of Chandrakant V Solanki:
The AO observed that Chandrakant V Solanki was issued 10,000 shares at a premium of Rs. 90 per share. The AO found that Mr. Solanki had no idea about the premium paid, was not in possession of original share certificates, and had sold the shares at cost price. The funds for the investment were traced back to Solsons Exports Pvt. Ltd., where Mr. Solanki was a director, indicating a non-genuine transaction. The Tribunal upheld the addition as the assessee failed to prove the genuineness of the transaction.

3. Addition of Rs. 15,00,000/- u/s 68 for share money of Hitendra V Solanki:
The AO noted that Hitendra V Solanki was issued 15,000 shares at a premium of Rs. 90 per share. Similar to Chandrakant Solanki, the funds were traced back to Solsons Exports Pvt. Ltd., and the shares were sold at cost price. The AO found that Mr. Solanki had not filed returns since A.Y. 2010-11, and his declared income was minuscule compared to the investment. The Tribunal upheld the addition due to the non-genuine nature of the transaction.

4. Addition of Rs. 30,00,000/- u/s 68 for share money of Parshwanath Sales Ltd.:
The AO found that Parshwanath Sales Ltd. was issued 30,000 shares at a premium of Rs. 90 per share. Notices to the company were returned unserved, and the assessee failed to produce the party. The AO observed that the company had no substantial income and the funds for the investment were provided by entities related to the assessee. The Tribunal upheld the addition as the identity and creditworthiness of Parshwanath Sales Ltd. were under serious doubt.

5. Addition of Rs. 35,00,000/- u/s 68 for share money of Chaturbhai G Patel:
The AO observed that Chaturbhai G Patel was issued 35,000 shares at a premium of Rs. 90 per share. Notices to Mr. Patel were returned unserved, and the assessee failed to provide any details or evidence to prove the identity, capacity, and creditworthiness of the party. The Tribunal upheld the addition as the identity of Mr. Patel was unknown and the transaction was non-genuine.

6. Treatment of share money as unexplained credit when identity of the share applicant is not in doubt:
The Tribunal noted that merely furnishing PAN, filing returns, and making payments through banking channels do not prove the genuineness of the transaction. The Tribunal cited several judicial precedents, including Sumati Dayal vs. Ld. CIT(A) and CIT v. Durga Prasad More, to emphasize the importance of surrounding circumstances and the test of human probabilities in determining the genuineness of transactions.

7. Acceptance or rejection of additional ground of appeal purely a question of law:
The Tribunal did not find any merit in the additional ground of appeal raised by the assessee regarding the initiation of reassessment u/s 147, as the AO had valid reasons to believe that income had escaped assessment.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, up

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