2018 (4) TMI 403 - HC - Income Tax

Addition u/s 68 - assessee could not produce satisfactory material to establish the identity of the share applicants or the genuineness of the transaction as well as their creditworthiness - ITAT confirmed CIT s order deleting the addition - Held that - When the assessee has brought on record all the documents necessary to establish the creditworthiness of the creditors and genuineness of the transaction and the AO has not preferred to file any comment, we find no scope to interfere into the findings returned by ld. CIT(A). Moreover, perusal of the assessment order also goes to prove that the AO has not even preferred to summon the parties to make compete enquiry so as to establish the creditworthiness of the creditors and genuineness of the transactions. - Decided in favour of assessee.

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 challenging addition under Section 68 - Justification of addition of amount - Failure to establish identity, genuineness, and creditworthiness of share applicants.

Detailed Analysis:

1. Appeal under Section 260A:
The Revenue's appeal under Section 260A of the Income Tax Act questioned the ITAT's order regarding the addition of a specific amount under Section 68 of the Act. The amounts were brought to tax under Section 68 due to the inability of the assessee to provide satisfactory material establishing the identity of share applicants, genuineness of the transaction, and their creditworthiness.

2. Assessment Proceedings:
During the assessment proceedings, the assessee submitted relevant details such as PAN numbers, Tax Returns of creditors, and copies of their bank account statements to establish the creditworthiness of the creditors and the genuineness of the transaction. The Appellate Commissioner sought a remand report, but the Assessing Officer (AO) did not respond to these documents despite being given an opportunity.

3. Decision of CIT(A) and ITAT:
The CIT(A) allowed the appeal as the AO failed to displace the onus that lay upon the Revenue, and the ITAT concurred with this view. The ITAT noted that the assessee had provided all necessary documents, and the AO did not make any comments or summon the parties for a complete inquiry to establish creditworthiness and genuineness of the transactions.

4. Judicial Findings:
The High Court considered the grounds of appeal, which primarily involved questions of facts and evidence appreciation. The failure of the AO to comment on the materials produced before the CIT(A) resulted in the discharge of the initial burden on the assessee, justifying the deletion of the amounts brought to tax under Section 68. Consequently, the Court found no question of law arising and dismissed the appeal.

In conclusion, the judgment highlights the importance of providing necessary documentation to establish the legitimacy of transactions and the creditworthiness of parties involved. The decision emphasizes the burden on the Revenue to substantiate additions under Section 68 and the significance of thorough assessment procedures by the Assessing Officer.