2016 (4) TMI 585 - AT - Income Tax

Additions made u/s 68 - Held that - The assessing officer has not disproved the documents furnished by the assessee to discharge the initial burden placed upon it u/s 68 of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Additions under Section 68 of the Income Tax Act:

The revenue challenged the orders of the CIT(A) for assessment years 2007-08 and 2008-09, which deleted the additions made by the AO under Section 68 of the Income Tax Act. The AO had added the amounts received as preference share capital and share application money to the assessee's income, alleging it was unexplained cash credit.

The assessee, a public limited company engaged in securities investments, provided details of the share application money and preference share capital during the assessment proceedings. The AO based the additions on statements from directors of companies that invested in the assessee, who claimed they were providing accommodation entries. However, the CIT(A) deleted the additions by relying on previous Tribunal decisions in the assessee's own case and related cases.

The Tribunal reviewed the CIT(A)'s order, noting that the AO had not conducted independent inquiries during the assessment but relied on an investigation report from Kolkata. The AO had also failed to produce the directors for cross-examination, violating the principles of natural justice. The Tribunal emphasized that the statements used by the AO were not corroborated by evidence and contradicted the documentary evidence provided by the assessee, such as account payee cheques and bank statements.

The Tribunal cited several legal precedents, including the Delhi High Court's decision in Oasis Hospitalities Pvt. Ltd., which outlined that the initial burden to prove the nature and source of share application money lies with the assessee. Once the assessee provides adequate documentation, the burden shifts to the AO to disprove these documents. The Tribunal noted that the AO did not provide any evidence to show that the money received by the investing companies was routed back to the assessee.

The Tribunal concluded that the AO's reliance on uncorroborated statements was misplaced. It upheld the CIT(A)'s deletion of the additions, stating that the share application money could not be treated as the assessee's income without concrete proof that the assessee's own money was routed back through the share applicants.

The Tribunal dismissed the revenue's appeals, affirming that the assessee had discharged its burden under Section 68 by providing sufficient evidence of the identity, genuineness, and creditworthiness of the share applicants. The AO's failure to provide contrary evidence or conduct proper inquiries rendered the additions unsustainable.

Conclusion:

The Tribunal upheld the CIT(A)'s orders, deleting the additions made by the AO under Section 68, and dismissed the revenue's appeals. The judgment emphasized the importance of proper inquiry and evidence in sustaining additions under Section 68, reinforcing that uncorroborated statements and procedural lapses cannot justify such additions.