2017 (7) TMI 210 - AT - Income Tax

Addition u/s 68 - paper identify of the share applicants - Held that - If before the Ld. CIT (Appeals) the assessee has pointed out that the ITI was not sent on the correct address or there has been some change of address later on, then it was incumbent upon the Ld. CIT (Appeals) to himself got the enquiry done through the Assessing Officer or should have asked the Assessing Officer for the remand report to examine the veracity of the claim of the assessee made before the Ld. CIT (Appeals) or should have asked the assessee to produce creditors. None of such exercise has been done by Ld. CIT (A) Even the confirmations letters which have been given along with the other details have not been examined properly by the Ld. CIT (Appeals) or even as a matter of fact by the Assessing Officer, especially when during the year the assessee has only received the share application money and none of the share applicants were allotted shares in this year and it has also not been properly scrutinized as to how much money has been refunded back in the subsequent years and to whom shares have been allotted and when. All these facts needs to thoroughly scrutinized and examined by both the authorities. Revenue s appeal is treated as allowed for statistical purposes.

Summary

Issues:
- Addition of share application money under section 68 of the Income Tax Act, 1961.

Analysis:
1. The Revenue filed an appeal against the order passed by the ld. CIT (Appeals)-VI, New Delhi regarding the addition of ?5,52,65,000 under section 68 of the Income Tax Act for the A.Y. 2007-08. The Revenue contended that physical identity of share applicants needed to be established for accepting the genuineness of funds under section 68.

2. The Assessing Officer called for information under section 133(6) from the companies providing share application money. Despite submissions by the assessee, the Assessing Officer added the entire amount under section 68 as the genuineness of the transaction was not proven. The Assessing Officer also deputed ITI to make inquiries, which revealed discrepancies in company existence.

3. The assessee submitted confirmation letters, bank statements, PAN details, and income return acknowledgments of the share applicants. The ld. CIT(A) accepted the assessee's submissions, noting that the initial onus was discharged by providing requisite details. The ld. CIT(A) held that the Assessing Officer was unjustified in making the addition under section 68.

4. The Revenue argued that the onus was on the assessee to prove the genuineness of the transaction, citing a High Court judgment. The assessee maintained that all necessary documents were provided, and the Assessing Officer failed to conduct further investigations despite correct addresses being provided later.

5. The Tribunal observed that while the assessee provided prima facie evidence of the transaction's genuineness, discrepancies found by the Assessing Officer shifted the onus back to the assessee. The Tribunal emphasized the need for the assessee to prove the transactions were not with shell companies and criticized the lack of thorough examination by the authorities.

6. The Tribunal set aside the ld. CIT(A)'s order, remanding the issue back to the Assessing Officer for a fresh decision. The Tribunal directed the Assessing Officer to examine all evidence, conduct proper inquiries, and cooperate with the assessee. The Revenue's appeal was treated as allowed for statistical purposes.