2014 (2) TMI 1124 - HC - Income Tax

Deletion of addition made u/s 68 of the Act Unexplained credits Onus to prove the genuineness - Whether the ITAT has erred in giving relief on account of addition being unexplained credits on wrong appreciation of law and without any basis substituting its own satisfaction in place of AO's satisfaction despite the fact that the assessee company has not discharged the onus as provided in Section 68 of the I.T. Act, 1961 Held that - Both the CIT(A) and the Tribunal had noted that the assessee had established all the three aspects by producing, during the course of the assessment, necessary documentary material such as the share application forms, copies of bank accounts, income tax returns and balance sheet Relying upon Commissioner of Income Tax Vs. Lovely Exports (P) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA - the assessee had discharged the onus of establishing the identity, credit worthiness and genuineness of the transactions which had formed the basis of the addition that was made under Section 68 - whether the documentary materials which had been produced by the assessee were sufficient to displace the onus is a matter to be decided upon the facts of each case - Both the CIT(A) and the Tribunal having held that the assessee had duly discharged the onus, thus, there is no substantial question of law arises Decided against Revenue.

Issues:
1. Whether the ITAT erred in giving relief on unexplained credits without basis?
2. Whether the addition made by the Assessing Officer was justified?
3. Whether the CIT (A) correctly deleted the addition?
4. Whether the Tribunal's decision was valid regarding the genuineness of the transaction?
5. Whether the statement of the Chartered Accountant holds evidentiary value?
6. Whether the assessee established identity, creditworthiness, and genuineness of the transactions?
7. Whether the judgment of the Supreme Court in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd. applies?

Detailed Analysis:

1. The first issue revolves around the ITAT's decision to provide relief on unexplained credits without a proper basis. The ITAT held that the assessee had submitted documentary evidence proving the genuineness of the share application money, such as share application forms, bank account copies, income tax returns, and balance sheets. The ITAT also noted that the black diary entries were not relevant to the assessment year under consideration, and both companies confirmed the transactions, leading to the conclusion that the assessee had met the burden of proof.

2. The addition made by the Assessing Officer was based on the belief that the share application money was a movement of funds in a colorable manner. However, the CIT (A) disagreed and deleted the addition. The CIT (A) pointed out that the black diary entries were for a different assessment year, and the companies had confirmed the investments with supporting documents. The Tribunal upheld the CIT (A)'s decision, emphasizing that the assessee had established the identity and creditworthiness of the applicant companies.

3. The CIT (A) correctly deleted the addition by highlighting that the Assessing Officer erred in relying on the black diary entries not related to the relevant assessment year. Additionally, the companies confirmed the investments with necessary documentation, which the CIT (A) considered sufficient to disprove the addition.

4. The Tribunal's decision on the genuineness of the transaction was based on the documentary evidence provided by the assessee, including PAN cards, registration certificates, and bank statements. The Tribunal found that the assessee had proven the identity, creditworthiness, and genuineness of the transactions, leading to the conclusion that the addition made by the Assessing Officer was unwarranted.

5. Regarding the evidentiary value of the Chartered Accountant's statement, the Tribunal noted discrepancies in his statements and concluded that his statement lacked credibility, especially since the black diary entries were not relevant to the assessment year in question.

6. The assessee successfully established the identity, creditworthiness, and genuineness of the transactions through documentary evidence, complying with the requirements set forth by the ITAT. Both the CIT (A) and the Tribunal affirmed that the assessee had discharged the burden of proof, leading to the dismissal of the appeal.

7. The judgment of the Supreme Court in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd. was cited to emphasize that if complete particulars of share applicants are furnished and not found false, no addition can be made under Section 68. In the present case, the assessee provided comprehensive documentation to support the transactions, aligning with the principles outlined in the judgment.

The appeal was ultimately dismissed, with costs not awarded.

← Previous Next →