2016 (4) TMI 85 - AT - Income Tax

Addition u/s 68 - creditor from the foreign country - Held that - In the light of documentary evidence on record, the burden was on the Assessing Officer to establish that share capital is represented by undisclosed income of the company. As already clarified, Sh. Suveer Arora has been regularly visiting Delhi and which has never been disputed. A copy of the passport was also filed which contains the particulars of his visit to India. Further, verification of remittances in his NRE accounts under FEMA are relevant in his personal assessment as NRE account is part of record and as such these technical observations have no relevance or bearing to the issue of share capital. In fact, the Assessing Officer has made only general observation and not disputed or commented on the document including the assessment order and bank statement placed on record. Further, if any query is required in respect to his NRE account, the issue is relevant in his personal assessment as his identity and assessment particulars are not in dispute. From the above, the assessee has already established the identity, source and genuineness of share capital in the light of documents produced and settled legal principles clarified above. Even the Assessing Officer has also not disputed the identity, source and genuineness of share capital. We are also of the view that it is unnecessary burden upon the assessee by pressuring it to bring the creditor from the foreign country which is contrary to the facts of the case as well as evidence produced by the assessee. Thus the assessee has fully proved its burden and discharged the onus upon the Department, however, no contrary evidence was shown by the AO which will prove that the transactions were not genuine, therefore, the addition made by the AO and confirmed by the Ld. CIT(A) is totally unwarranted and the same needs to be deleted. - Decided in favour of assessee Addition as unexplained credit balance - addition on account of difference between confirmations received from the party and balance appearing in the books of the assessee - Held that - The reconciliation statement was filed during the assessment proceeding vide letter dated 05.02.2013 in which the difference was duly explained and as such the observation of Assessing Officer seems to be factually incorrect and addition made by the AO and confirmed by the Ld. CIT(A) needs to be deleted. - Decided in favour of assessee

Summary

Issues Involved:
1. Addition of ?3,10,00,000/- as unexplained share capital investment.
2. Addition of ?23,280/- as unexplained credit balance relating to M/s Orient Fashion Export (India) Pvt. Ltd.

Issue-wise Detailed Analysis:

1. Addition of ?3,10,00,000/- as unexplained share capital investment:

The primary issue was whether the addition of ?3,10,00,000/- as unexplained share capital investment by the Assessing Officer (AO) was justified. The assessee argued that the share capital was received from an NRI, Mr. Suveer Arora, who is a regular income tax assessee in Delhi. The assessee provided various documents to substantiate the claim, including confirmation from Mr. Suveer Arora, his PAN card, bank statement, Form No.2 regarding allotment of shares, passport, income tax return, and assessment order passed u/s 143(3) for AY 2010-11, a letter dated 14.02.2013, and an affidavit from Mr. Suveer Arora.

The Tribunal noted that the AO did not dispute the correctness of these documents or make any adverse comments. There was no adverse information from the Investigation Wing or any other agency. The Tribunal found that the identity, source, and genuineness of the share capital were established by the assessee. The Tribunal relied on various case laws, including CIT vs. Rhombus International Pvt. Ltd., CIT vs. Gangeshwari Metal (P) Ltd., and CIT vs. Kamdhenu Steel & Alloys Ltd., which supported the assessee's position that once the initial burden of proof is discharged by the assessee, the onus shifts to the Revenue to disprove the claim.

The Tribunal also distinguished the case relied upon by the Department (CIT vs. Empire Builtech Pvt. Ltd.) as the facts were different. In the present case, the assessee provided all necessary documents, which were not disputed by the AO. Therefore, the Tribunal concluded that the addition made by the AO and confirmed by the CIT(A) was unwarranted and needed to be deleted.

2. Addition of ?23,280/- as unexplained credit balance relating to M/s Orient Fashion Export (India) Pvt. Ltd.:

The second issue was the addition of ?23,280/- as an unexplained credit balance. The AO made this addition based on the difference between the confirmations received from the party and the balance appearing in the assessee's books. The assessee provided a reconciliation statement during the assessment proceedings, explaining the difference. The Tribunal found that the AO's observation was factually incorrect, as the reconciliation statement duly explained the difference.

The Tribunal concluded that the addition of ?23,280/- made by the AO and confirmed by the CIT(A) was not justified and needed to be deleted.

Conclusion:

In conclusion, the Tribunal allowed the appeal filed by the assessee, deleting both the additions of ?3,10,00,000/- and ?23,280/-. The Tribunal emphasized that the assessee had provided sufficient documentary evidence to substantiate its claims, and the AO did not provide any contrary evidence to disprove the genuineness of the transactions. The order was pronounced in the Open Court on 21/3/2016.