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2016 (7) TMI 998 - AT - Income TaxAddition u/s 68 - genuineness of transaction and the creditworthiness and identity of the subscribers not proved - information received from the Investigation Wing of the department - Held that - In the present case, the AO while making the impugned addition had relied upon the information received from the Investigation Wing of the department that the aforesaid two companies were controlled by one Sh. Tarun Goyal who disclosed in his statement that the said companies were engaged in providing accommodation entries, however, the assessee was not confronted with that statement, if any. It was also claimed by the assessee that on inspection of the assessment record no such statement was found. In our opinion, the said observation of the AO is not sufficient to presume that the said companies were engaged in providing the accommodation entries. It is well settled that the companies are juristic person and separate from the individual, therefore, on this basis that even if Sh. Tarun Goyal was engaged in providing accommodation entry, it was not sufficient to hold that M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. were also engaged in providing accommodation entries, particularly when no evidence was brought on record in support of the said presumption. In the present case, as we have already noted that the assessee discharged the onus cast upon it to prove the identity of the share applicants, their creditworthiness and genuineness of the transaction. Therefore, the addition made by the AO u/s 68 of the Act was rightly deleted by the ld. CIT(A). In that view of the matter we do not see any merit in this appeal of the department. - Decided in favour of assessee
Issues Involved:
1. Deletion of addition made by the AO under Section 68 of the Income Tax Act, 1961 for unexplained cash credits. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68: The department appealed against the order dated 24.03.2011 of the CIT(A)-XVI, New Delhi, which deleted the addition of ?1,00,000 made by the AO under Section 68 of the Income Tax Act, 1961. The AO had added this amount as unexplained cash credits, stating that the assessee failed to discharge the onus of proving the genuineness of the transaction, creditworthiness, and identity of the subscribers. Facts of the Case: The assessee e-filed the return of income on 11.09.2008 declaring nil income after adjusting brought forward losses of ?51,57,563. The case was selected for scrutiny, and during the assessment proceedings, the AO observed that the assessee received share application money from three entities: Bhavani Portfolio Pvt. Ltd., Thar Steels Pvt. Ltd., and Vidhyut Marketing & Foods (I) Ltd. The AO received information from the Investigation Wing that Bhavani Portfolio Pvt. Ltd. and Thar Steels Pvt. Ltd. were managed by an entry operator, Sh. Tarun Goyal, who provided accommodation entries. The AO added ?1,00,00,000 to the income of the assessee under Section 68, treating it as unexplained cash credit. CIT(A)'s Findings: The assessee contended that the share application money was received through account payee cheques and provided various documents to support the genuineness of the transactions, including audited balance sheets, confirmation letters, bank statements, and income tax returns of the investor companies. The CIT(A) noted that the AO conducted an inquiry under Section 133(6) and received confirmations from the investor companies. The AO's inspector also verified the documents from the Central Circle-IV, which confirmed the investments made by the companies in the assessee. The CIT(A) referred to several judicial pronouncements, including CIT vs. Sophia Finance Ltd., CIT vs. Lovely Exports Pvt. Ltd., and others, which established that once the identity of the share subscribers and the genuineness of the transactions were proved, no addition under Section 68 could be made. The CIT(A) observed that the AO did not bring any material to disprove the documents provided by the assessee and relied solely on the information from the Investigation Wing without confronting the assessee with any adverse material. Tribunal's Decision: The Tribunal upheld the CIT(A)'s order, noting that the assessee provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal observed that the AO did not rebut the findings of the CIT(A) and failed to provide any concrete evidence to support the addition made under Section 68. The Tribunal dismissed the department's appeal, concluding that the addition made by the AO was rightly deleted by the CIT(A). Conclusion: The appeal of the department was dismissed as the assessee successfully discharged the onus of proving the identity, creditworthiness, and genuineness of the share application money received, and the AO failed to provide any substantial evidence to justify the addition under Section 68.
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