2017 (2) TMI 389 - HC - Income Tax

Unexplained cash credit - credit worthiness of 56 shareholders have not been proved - proof of identity, genuineness and credit worthiness of the subscribers - Held that - We find that the Appellate Authority found that along with the affidavit the shareholders had produced the share application form, the share certificate and other supporting documents to show purchase of the share by them in the assessee s Company and the aforesaid was corroborated by the evidence. AO did not call for the account book, balance sheet and other documents from the Assessee Company and only because the shareholders were not produced, disbelieve their contention. The Tribunal has discussed the affidavit of each of the 60 persons and has given reason as to why there are material in the affidavit to show that these were creditworthy shareholders who had invested in amount of ₹ 2,55,60,000/- and by placing reliance on various judgments has recorded a finding to say that if the Assessing Officer had any apprehension with regard to the creditworthiness of the shareholders a proper enquiry should have been conducted by the Assessing Officer and the Assessing Officer having not done so, it is seen that the Commissioner, Appeals and the Tribunal conducted the exercise, examine the genuineness of the affidavit and by recording reason in para 25 has decided the issue. The finding recorded by the Tribunal is a finding of fact based on due assessment of the material that came and we find no substantial question of law warranting reconsideration.

Summary

Issues:
Challenge to orders passed by the Income Tax Appellate Tribunal regarding the creditworthiness of shareholders in an income tax case.

Analysis:
The case involved an appeal by the Revenue challenging the orders passed by the Income Tax Appellate Tribunal regarding the creditworthiness of shareholders in an income tax matter. The respondent assessee initially filed a return of income showing 'Nil' income, which was later revised. A refund was issued, but during scrutiny, it was found that the appellant had raised capital through shares from 66 subscribers. The Assessing Officer accepted the creditworthiness of 10 persons who appeared before him but rejected the same for the remaining 56 shareholders whose affidavits were filed. The Assessing Officer made an addition to the income by holding that the creditworthiness of these 56 shareholders was not proven. The Appellate Authority and the Tribunal intervened in the matter, leading to the Revenue's appeal challenging the orders.

The argument was made that the Assessing Officer rightfully disbelieved the claim of the assessee regarding the creditworthiness of the shareholders who were not produced for giving evidence. However, the Appellate Authority found that the shareholders had provided supporting documents, such as share application forms and certificates, to prove their investment in the company. The Tribunal extensively discussed the affidavits of the shareholders and reasons for their creditworthiness, citing judgments from various High Courts. It was emphasized that suspicion cannot replace evidence or proof, and since the Assessing Officer did not conduct a proper enquiry, the Tribunal's findings based on a thorough assessment of the material presented were considered valid. The Tribunal's decision was upheld, stating that no substantial question of law warranted reconsideration, as the Tribunal had adequately examined the facts and evidence.

In conclusion, the appeal was dismissed, affirming the Tribunal's decision regarding the creditworthiness of the shareholders. The judgment emphasized the importance of a proper enquiry by the Assessing Officer and the Tribunal's role in assessing the genuineness of the affidavits and evidence presented. The decision was based on a factual analysis, supported by legal precedents, and no error was found to warrant interference in the Tribunal's findings.