2015 (12) TMI 1418 - AT - Income Tax

Addition u/s 68 - CIT(A) deleted the addition - Held that - Assessing Officer had received information from the Director of Income Tax (Investigation), New Delhi that those five share applicants have provided accommodation entry to the assessee. The persons who provide money to the taxpayers through cheques against receipt of cash are called as accommodation entry providers. However, we have also noted that the Assessing Officer did not carry out any independent inquiry in respect of the alleged accommodation entry provider, nor brought on record the statement or confession of alleged entry providers given before the officers of the Investigation Wing of Income Tax Department. The Assessing Officer has merely described theoretical information in respect of the informations collected by the Investigation Wing. He did not bring on record any documentary evidence leading to conclusion that those five share applicants were accommodation entry providers, whereas the assessee has submitted confirmation letter certificate of incorporation of share application money, a copy of PAN certificate, copy of acknowledgment of income tax return filed, copy of balance sheet and profit and loss account of share applicants. In the case of Gangeshwari Metal (P.) Ltd (2013 (1) TMI 624 - DELHI HIGH COURT ), the Hon ble High Court has held that when there was a clear lack of inquiry on the part of the Assessing Officer, once the assessee had furnished all the material, then in such eventuality, no addition could be made under Section 68 of the Act - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition of Rs. 10,55,000/- under Section 68 of the Income Tax Act, 1961.
2. Onus on the assessee to establish the identity, creditworthiness, and genuineness of the transaction.
3. Applicability of CBDT Circular regarding tax effect threshold for filing appeals.

Detailed Analysis:

Issue 1: Deletion of Addition of Rs. 10,55,000/- under Section 68 of the Income Tax Act, 1961
The Revenue's appeal contends that the learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 10,55,000/- under Section 68 of the Act. The Assessing Officer had received information from the Director of Income Tax (Investigation) that the assessee was a beneficiary of accommodation entries in the form of share application money. The Assessing Officer concluded that the amount was unexplained credit and added it to the income of the assessee.

In the assessment proceedings, the assessee provided confirmation letters, balance sheets, and other documents to establish the identity and genuineness of the transactions. However, the Assessing Officer did not conduct any independent inquiry or bring on record any documentary evidence to substantiate the claim that the share applicants were accommodation entry providers. The Commissioner of Income Tax (Appeals) found that the assessee had furnished sufficient evidence to substantiate the identity, genuineness, and creditworthiness of the share applicants and deleted the addition.

Issue 2: Onus on the Assessee to Establish the Identity, Creditworthiness, and Genuineness of the Transaction
The Revenue argued that the onus was on the assessee to prove the identity, creditworthiness, and genuineness of the transactions, which the assessee failed to do. However, the Commissioner of Income Tax (Appeals) noted that the assessee had provided adequate documentation, including PAN cards, income tax returns, registration certificates, and bank statements, to support the transactions. The Commissioner of Income Tax (Appeals) relied on the judgment of the Hon'ble Delhi High Court in the case of Commissioner of Income Tax Vs. Gangeshwari Metal (P.) Ltd., where it was held that no addition could be made under Section 68 if the assessee had furnished all material evidence and the Assessing Officer failed to conduct further inquiry.

Issue 3: Applicability of CBDT Circular Regarding Tax Effect Threshold for Filing Appeals
The Revenue's appeal was initially challenged on the grounds of the tax effect being below Rs. 4 lacs, as per the CBDT Circular. However, the learned Departmental Representative argued that the circular was prospective and not applicable to appeals filed before its issuance. The Tribunal agreed with this view and proceeded to hear the appeal on its merits.

Conclusion:
The Tribunal observed that the Assessing Officer had not conducted any independent inquiry or brought on record any evidence to substantiate the claim that the share applicants were accommodation entry providers. The assessee had furnished sufficient evidence to establish the identity, genuineness, and creditworthiness of the transactions. Citing the judgment in the case of Gangeshwari Metal (P.) Ltd., the Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal. The appeal filed by the Revenue was dismissed, and the decision was pronounced in the open court on 18th December 2015.