2025 (3) TMI 34 - AT - Income Tax

Addition u/s 68 - unexplained cash credit in the garb of share application money/premium - CIT(A) deleted addition - HELD THAT - Considering the fact that the transactions have been done through banking channel one cannot doubt the genuineness of the transaction. Assessee has established the initial onus as required u/s 68 of the Act therefore it is for the AO to bring the material on record to controvert the claim of the Assessee or to discredit the evidence produced by the Assessee. In the assessment order in one breath A.O. confirmed that all the notices issued u/s 133(6) of the Act were served on the Investor Companies and contrary to the same the existence of those Companies in the address have been doubted based on enquiry conducted by Income Tax Inspector however no date of inspection report and no reference of date of inspection has been mentioned in the assessment order. AO has not collected any evidence to prove that the transactions in questions were not genuine or the share application money/share premium received by the Assessee during the year was its own undisclosed income. It is well settled law that mere non production of Directors of share applicant cannot be termed that the entire transactions are not genuine as held in the case of CIT vs. Orissa Corporation Pvt. ltd. 1986 (3) TMI 3 - SUPREME COURT Appeal of the Revenue is dismissed.

Summary

The present appeal before the Appellate Tribunal involved the Department of Revenue challenging the order of the Commissioner of Income Tax Appeals-2 for the Assessment Year 2012-13. The core legal questions considered in this case were related to the addition made under section 68 of the Income Tax Act amounting to Rs. 3,00,00,000/- received by the assessee company as unexplained cash credit in the form of share application money/premium. The issues revolved around the genuineness, creditworthiness, and identity of the transactions, as well as the acceptance of creditworthiness and genuineness based on banking channel transactions.The Department of Revenue contended that the assessee failed to prove the genuineness of the transactions as required under section 68 of the Act. They argued that the investing companies were not found to be running businesses at the given addresses, and in some cases, share capital/share premium was not received through banking channels, indicating that the transactions were a way to avoid taxation. The Departmental Representative criticized the CIT(A) for allegedly passing a non-speaking order and erroneously holding that the assessee had proven all the necessary elements under section 68.On the other hand, the Assessee's Representative argued that all transactions were conducted through banking channels, and the assessee had established the initial onus by providing evidence of the existence and creditworthiness of the share applicant parties. They emphasized that all seven shareholder companies were live companies with PAN numbers, filed income tax returns, and had high net worth, indicating their ability to invest in the assessee company. The representative contended that the AO made the addition without bringing any material to disprove the assessee's claims.The Tribunal examined the evidence and arguments presented by both parties. It noted that all seven subscriber companies were live companies with PAN numbers and had replied to notices issued by the AO. The Tribunal found that the creditworthiness of the share applicant parties was not in doubt based on their bank statements and balance sheets. Additionally, it observed that all transactions were conducted through banking channels, with no cash deposits in the assessee's bank account before receiving funds. The Tribunal emphasized that the assessee had fulfilled the initial burden under section 68, and it was the AO's responsibility to provide evidence to counter the assessee's claims.Ultimately, the Tribunal found no error or infirmity in the CIT(A)'s decision to delete the addition made by the AO. Therefore, the appeal of the Revenue was dismissed.In conclusion, the Tribunal's decision hinged on the assessee's ability to establish the genuineness, creditworthiness, and identity of the transactions under section 68, which it successfully did through evidence of banking channel transactions and the creditworthiness of the shareholder companies. The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO, emphasizing the importance of fulfilling the initial burden of proof and the AO's obligation to provide evidence to refute the assessee's claims.