2015 (6) TMI 55 - AT - Income Tax

Unexplained credits u/s 68 - assessee received share application money are providers of accommodation entries - CIT(A) deleted the addition - Held that - In view of observations of the AO as well as CIT(A) we clearly note that the AO noted that the assessee expressed its inability to produce copies of IT Return and director or of Officer of the company which provided or contributed share application money and the CIT(A) in para 5.2 at page 16 observes that the assessee has furnished all the relevant details during the course of assessment proceedings and granted relief by relying of decision of Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA). Hence, we are unable to satisfy ourselves as to whether the assessee discharged its onus before AO to prove the identity of the third party or contributor which made payment, its creditworthyness and genuineness of the transaction on casted upon the assessee to escape from addition u/s 68 of the Act to presume that the onus is thus shifted to the Revenue to controvered explanation and supporting evidence and material filed by the assessee while discharging its onus as required as per ratio of the recent decision dated 19.02.2015 of Hon ble High Court of Delhi in the case of CIT Vs. M/s Jasampark Advertising and Marketing (P) Ltd. 2015 (3) TMI 410 - DELHI HIGH COURT . Thus sole issue require verification and examination at the end of the AO. Therefore, the sole issue is restored to the file of the AO for proper of adjudication after affording due opportunity of hearing for the assessee - Decided in favour of revenue for statistical purposes

Summary

Issues:
- Addition of unexplained credits u/s 68 of the Income Tax Act
- Applicability of the judgment of Lovely Exports Pvt. Ltd. to the present case

Analysis:
1. Addition of unexplained credits u/s 68 of the Income Tax Act:
The case involved an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the addition of Rs. 20,02,2000 on account of unexplained credits under section 68 of the Income Tax Act. The Revenue contended that all companies providing share application money to the assessee were accommodation entry providers, depositing cash in their bank accounts before issuing cheques to the assessee. The Revenue argued that the CIT(A) erred in deleting the addition, as the entry providers had given statements confirming their role as accommodation entry providers. The Departmental Representative emphasized that the facts of this case were distinct from the judgment in the Lovely Exports case, and the CIT(A) failed to appreciate this distinction. The Revenue sought to set aside the CIT(A) order and restore that of the Assessing Officer.

2. Applicability of Lovely Exports Pvt. Ltd. judgment:
The assessee, on the other hand, argued that the assessment was initiated based on false information from the Investigation Wing. The assessee contended that the share application money was received from specific companies, not from the entities mentioned by the AO. The assessee highlighted its inability to provide certain current IT particulars and present directors or officers of the alleged entities in person. The assessee's counsel asserted that the CIT(A) rectified the AO's mistakes and properly considered the relevant evidence, demonstrating the genuineness of the transactions. The counsel supported the CIT(A)'s decision to follow the Supreme Court's judgment in Lovely Exports Pvt. Ltd. The CIT(A) had noted that the assessee had fulfilled its onus by providing various details and documents regarding the share capital transactions.

3. Judgment and Decision:
The ITAT Delhi, after considering the submissions and evidence, observed that there were discrepancies in the information provided by the assessee and the findings of the AO. The ITAT noted that while the AO doubted the genuineness of the transactions based on statements from entry providers, the CIT(A) found the assessee had submitted relevant details to establish the genuineness, creditworthiness, and identity of the subscribers to the share capital. The ITAT concluded that the issue required further examination and verification by the AO to determine whether the assessee had discharged its onus as per the provisions of the Act. The ITAT directed the issue to be restored to the AO for proper adjudication, following the principles laid down in the judgments of the Supreme Court and the Delhi High Court. Consequently, the appeal of the Revenue was deemed to be allowed for statistical purposes.

In conclusion, the ITAT's decision highlighted the importance of establishing the genuineness and creditworthiness of transactions under section 68 of the Income Tax Act, emphasizing the need for thorough examination and adherence to legal precedents in such cases.