2013 (4) TMI 542 - AT - Income Tax

Unexplained cash credit in respect of share application and share premium money - as per AO the onus to prove the identity and creditworthiness of the share applicants and the genuineness of the transactions which lay upon the assessee was not completely discharged - CIT(A) deleted the addition - Held that - As decided in CIT Vs Lovely Exports (P) Ltd 2008 (1) TMI 575 - SUPREME COURT OF INDIA the share application which share capital cannot be taxed in the hands of the assessee as unexplained cash credit who have followed the procedure of obtaining the share capital in accordance with the provisions of the Companies Act. Share holders could not be bogus therefore, settled the issue to the extent that the Assessing Officer was to reopen the cases of those assessees Companies and not tax the same in the hands of the assessee. The assessee therefore has rightly pointed out that the law has been amended u/s.68 when specifically the share capital and share application money have been inscribed along with the cash credit which may be subjected to verification when the onus which lay upon the assessee remained undischarged has been made applicable w.e.f. 1.4.2013 only. In this view of the matter, CIT(A) is justified in deleting the impugned additions in the instant case, which we uphold and dismiss the appeal of the Revenue. Deletion of the expenses disallowed by the Assessing Officer - CIT(A) has partly sustained the disallowances indicating the nature which part only could be disallowed and has been accepted by the assessee respondent as per their Cross objection on record. As no further material has been placed by the rival parties the order of the CIT(A) upheld - appeal of revenue dismissed.

Summary

Issues:
1. Deletion of addition of unexplained cash credit in respect of share application and share premium money.
2. Deletion of disallowed expenses by the Assessing Officer.

Analysis:

Issue 1: Deletion of addition of unexplained cash credit in respect of share application and share premium money:
The Revenue appealed against the deletion of additions of Rs. 19,70,000 and Rs. 1,77,30,000 made on account of unexplained cash credit related to share application and share premium money. The Assessing Officer noted that the assessee had received share applications from seven companies but did not receive responses to information requests under section 133(6). The Assessing Officer held that the onus to prove the identity, creditworthiness, and genuineness of the transactions was not completely discharged by the assessee. However, the CIT(A) found the procedure followed by the Assessing Officer faulty and considered that the assessee had indeed discharged the onus. The CIT(A) relied on various decisions, including the Supreme Court's decision in the case of CIT v. Vs Lovely Exports (P) Ltd, to support the deletion of the additions. The ITAT upheld the CIT(A)'s order, emphasizing that the law had been amended to specify the treatment of share capital and share application money as cash credit from April 1, 2013, onwards. Therefore, the ITAT upheld the deletion of the additions of Rs. 19,70,000 (share capital) and Rs. 1,77,30,000 (share premium).

Issue 2: Deletion of disallowed expenses by the Assessing Officer:
The learned CIT(A) partly sustained the disallowances of expenses made by the Assessing Officer, indicating the nature of expenses that could be disallowed. The assessee accepted this partial disallowance, as per their Cross objection. As no new material was presented by either party, the ITAT upheld the CIT(A)'s order regarding the disallowed expenses and dismissed the ground raised by the Revenue.

In conclusion, the ITAT dismissed the Revenue's appeal and disposed of the Cross objection filed by the assessee in support of the CIT(A)'s order.