2024 (12) TMI 1114 - HC - Income Tax

Addition u/s 68 - Assessee not discharged its burden of substantiation of the identity, creditworthiness and genuineness of the transactions involving receipt of share application money - Tribunal justification in deleting the addition - substantial question of law or not? - HELD THAT - In the present case, the decision of the Second Appellate Tribunal being based on evidence, the same cannot be therefore said to be perverse. It is evident that the Second Appellate Tribunal has specifically held that the genuineness and creditworthiness of the transaction in question has been fully established by the assessee respondent. In our opinion, the aforesaid finding being a finding of fact, this Court cannot upset such finding of fact in this appeal filed under Section 260A - In fact, the first substantial question of law whether the learned Tribunal erred in law in holding that the assessee had discharged its burden of substantiation of the identity, creditworthiness and genuineness of the transaction involving receipt of share application money being essentially a question of fact is not a substantial question of law. Second substantial question of law that whether the learned Tribunal was justified in deleting the addition u/s 68 of IT Act of share application money received from M/s. Shantidham Marketing Pvt. Ltd and M/s. Orchid Finlease Pvt. Ltd. is also essentially a question of fact and is not a substantial question of law. Both the Appellate Authority and the Second Appellate Tribunal has recorded findings in respect of the genuineness of the transaction in question and the creditworthiness of the shareholders concerned based on evidences and materials placed by the assessee and hence, such finding once recorded by both the authorities on the basis of evidence, the same is not liable to be interfered with by the Third Appellate Court, unless an error of law as contemplated under Section 260A of the IT Act is made out. No question framed by this Court involves any substantial question of law within the meaning of Section 260A of the IT Act, nor any perversity as such is pointed out in the impugned findings and hence, this Court cannot interfere in the impugned finding of fact recorded by the Second Appellate Tribunal. Decided against revenue.

Summary

Issues Involved:

1. Whether the Tribunal erred in law in holding that the assessee had discharged its burden of substantiation of the identity, creditworthiness, and genuineness of the transactions involving receipt of share application monies.
2. Whether the Tribunal was justified in deleting the addition under Section 68 of the Income Tax Act for share application money received from certain companies.

Issue-Wise Detailed Analysis:

1. Discharge of Burden of Proof by the Assessee:

The primary issue was whether the assessee had adequately substantiated the identity, creditworthiness, and genuineness of the transactions involving receipt of share application monies. The Appellate Authority and the Second Appellate Tribunal both found that the assessee had discharged its burden. The Tribunal examined the evidence, including the details provided by the shareholders, such as names, PAN, addresses, and banking transactions, which were verified by the Assessing Officer. The Tribunal noted that the Assessing Officer had failed to bring any material evidence to suggest that the amounts credited did not belong to the shareholders but to the assessee. The Tribunal concluded that the initial burden under Section 68 was discharged by the assessee, and the findings were based on a thorough examination of the evidence.

2. Justification for Deleting Addition under Section 68:

The second issue was whether the Tribunal was justified in deleting the addition of Rs. 34,69,54,848/- under Section 68 of the Income Tax Act. The Tribunal found that the transactions were genuine and the identity and creditworthiness of the shareholders were established. The Tribunal noted that no fresh credit was received in the financial year in question, and the unsecured loan was converted into equity capital by a journal entry. The Tribunal held that the provisions of Section 68 could not be invoked as there was no fresh credit during the relevant year. The Tribunal also accepted the explanation for the source of the source provided by the assessee, finding no adverse material linking the cash deposits to the assessee.

Conclusion:

The High Court, acting as the Third Appellate Court under Section 260A of the Income Tax Act, emphasized that it cannot reappreciate evidence or disturb concurrent findings of fact unless they are perverse or based on no evidence. The Court found that the Tribunal's decision was based on evidence and was not perverse. The Court reiterated that the questions framed did not involve substantial questions of law but were essentially questions of fact. The appeal was dismissed, affirming the Tribunal's decision that the assessee had adequately substantiated the identity, creditworthiness, and genuineness of the transactions, and the deletion of the addition under Section 68 was justified.