2015 (12) TMI 764 - AT - Income Tax

Addition under section 68 - CIT(A) deleted the addition - Held that - The assessee by producing the address of the companies, PAN, confirmation from the share subscribers, ROC details that shares have been allotted to these companies, assessment order u/s 143(3) of one lender company for AY 2007-08 in which the AO has accepted the transaction, the bank details, bank statements, cheque number, etc., the assessee has discharged the preliminary onus on it to prove the identity, creditworthiness and genuineness of the transaction in question, the AO merely on suspicion and surmises cannot make addition u/s 68 of the Act, therefore, the ld. CIT (A) has rightly deleted the addition made u/s 68 of the Act - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of Rs. 20 lakhs made by the Assessing Officer (AO) under Section 68 of the Income-tax Act, 1961.

Detailed Analysis:

1. Deletion of Addition of Rs. 20 Lakhs under Section 68:

Facts of the Case:
The assessee, engaged in the business of trading cloths including velvet, received a sum of Rs. 20 lakhs (Rs. 4 lakhs for share capital and Rs. 16 lakhs as share premium) from four companies. The AO questioned the creditworthiness and genuineness of these transactions, noting that cash deposits in the bank accounts of these companies occurred either on the same date or immediately prior to the cheque debits. Summons issued to the directors of these companies were not attended, leading the AO to conclude that these companies were merely name lenders. Consequently, the AO treated the receipt of Rs. 20 lakhs as income under Section 68 of the Act.

First Appellate Authority's Decision:
The CIT (A) deleted the addition by observing that the assessee had provided sufficient documents, such as confirmation letters, bank statements, and other details, to prove the existence and identity of the companies. The CIT (A) referred to various judicial pronouncements, including the judgment of the Delhi High Court in CIT vs. Oasis Hospitalities Pvt. Ltd., which established that once the assessee provides documents like PAN and bank account details, the onus shifts to the AO to verify the shareholders. The CIT (A) concluded that the assessee had satisfactorily discharged its burden of proof regarding the identity, creditworthiness, and genuineness of the transactions.

Revenue's Argument:
The Revenue argued that the CIT (A) did not properly appreciate the facts on which the AO based his decision. They maintained that the identity, creditworthiness, and genuineness of the transactions were not satisfactorily proved, and thus the addition under Section 68 should be restored.

Assessee's Argument:
The assessee contended that it had submitted all necessary documents, including PAN, income tax returns, audited balance sheets, bank statements, and confirmations from the investing companies. The transactions were conducted through proper banking channels, and the net worth of the companies was sufficient to make the investments. The assessee argued that the AO's adverse inference based on common addresses and auditors was baseless.

Tribunal's Decision:
The Tribunal upheld the CIT (A)'s decision, finding that the assessee had provided ample evidence to discharge its burden of proof. The Tribunal noted that the AO's conclusions were based on suspicion and surmises rather than concrete evidence. The Tribunal referred to the judgment in CIT vs. Oasis Hospitalities Pvt. Ltd., which emphasized that once the assessee provides PAN and bank details, the onus shifts to the AO to verify the shareholders. The Tribunal also cited the judgment in CIT vs. Value Capital Services (P) Ltd., which stated that the additional burden is on the department to show that the investment emanated from the assessee. The Tribunal concluded that the AO's addition under Section 68 was rightly deleted by the CIT (A).

Conclusion:
The appeal of the Revenue was dismissed, and the deletion of the addition of Rs. 20 lakhs under Section 68 of the Income-tax Act, 1961, was upheld. The Tribunal emphasized that the assessee had satisfactorily discharged its burden of proof regarding the identity, creditworthiness, and genuineness of the transactions, and the AO's conclusions were based on mere suspicion without substantial evidence.