2019 (10) TMI 982 - AT - Income Tax

Addition u/s 68 on account of unexplained cash credits - HELD THAT - Regarding identity of AVPL The AVPL address is 35B, Brajadulal Street, Joraban, Kolkata, West Bengal-700006. This company assessed to tax over the years with PAN No.AAGCA2061E. The same is assessed to tax in ITO, Ward-1(3), Kolkata. The copy of the written submissions are placed in the Paper Book of the Revenue at page 15 onwards. Therefore, Shri Nemichand Jain is the director of the company. S. Sadhu Associates are the statutory auditors bearing the Membership No.061636. This company has the share capital of ₹ 32,96,000/- and it has reserves and ₹ 6,07,05,000/- as on 31.03.2010. It is a recorded transaction that Ashva Multi Trade Pvt. Ltd. received ₹ 6.55 crores as seen from the Schedule 3 of the Balance Sheet page 25 of the Paper Book. The said creditor AVPL is filing the returns with the active company in the records of Ministry of Commerce and is not struck for any default or reason. Considering the same, the above allegation that the identity of the creditor is unsustainable within the meaning of section 68 of the Act. Accordingly, the Revenue fails on this issue. Considering the huge reserves and surpluses available with the said AVPL, the creditworthiness of the AVPL also cannot be doubted. AO has not brought except stating that the company has meagre income as shown in the returns. The Assessing Officer has not brought any incriminating material to show that the creditor has not creditworthiness. As stated this company has 10 crores as reserves and surplus at the end of the March, 2010 at the relevant point of time. Regarding the genuineness of the transactions, we find that the Assessing Officer objection is that the AVPL being Kolkata Based company and its transaction with the assessee has to be suspected. In our view, such objection is unsustainable for the reason that the company with adequate reserves is assessed to tax regularly and the same is active company in the records of the Ministry of Commerce. No addition is made by the Assessing Officer for the amount of ₹ 2.5 crores in the assessment year 2009-10. Therefore, this kind of transaction with the creditor can be partly suspectable or partly unsuspectable and partly existing or partly not existing and partly genuine or partly non-genuine etc. Regarding the allegation of Kolkata based company, therefore fictitious company are accommodation entries provider etc. we find that the AVPL with so much of background as narrated above i.e. existence, identity, size reserves, punctual filing the document etc., the said company cannot be just accommodation entries provider. Shri Nemichand Jain is the director of the AVPL appeared before the authorities filing various documents clearly demonstrated the existence, genuineness, creditworthiness of the AVPL. As the huge amount of documentation was filed by the assessee. Per contra, the Assessing Officer did not gather any iota of direct evidence or indirect evidence to demonstrate that the AVPL is bogus concern or sham concern or accommodation entries provider. - Decided against revenue

Issues Involved:
1. Addition u/s 68 of the Income Tax Act on account of unexplained cash credits.
2. Credibility, genuineness, and identity of the share application money received.
3. The Assessing Officer's decision to treat the transactions as bogus.
4. The CIT(A)'s decision to delete the additions made by the Assessing Officer.

Detailed Analysis:

1. Addition u/s 68 of the Income Tax Act on account of unexplained cash credits:
The Revenue filed three appeals challenging the deletion of additions made by the Assessing Officer under Section 68 of the Income Tax Act for unexplained cash credits. The Assessing Officer scrutinized the share application money received by the assessee from three Kolkata-based companies and treated a portion of it as bogus, leading to additions in the assessee's income.

2. Credibility, genuineness, and identity of the share application money received:
The assessee provided substantial documentation to establish the identity, creditworthiness, and genuineness of the transactions with the three companies, including PAN details, CIN details, Income Tax Returns, and ROC returns. Despite this, the Assessing Officer questioned the credibility of the transactions based on negative reports from the ITO (Inv.), Kolkata, and treated the share application money as bogus.

3. The Assessing Officer's decision to treat the transactions as bogus:
The Assessing Officer's decision was based on the fact that the companies were Kolkata-based, and the initial summons were returned un-served. Despite subsequent compliance and submission of documents by the assessee, the Assessing Officer remained unconvinced and invoked Section 68 to add ?3.55 crores to the assessee's income. This decision was challenged on the grounds that the Assessing Officer did not provide sufficient evidence to prove the transactions were bogus.

4. The CIT(A)'s decision to delete the additions made by the Assessing Officer:
The CIT(A) deleted the additions, noting that the assessee had provided all necessary evidence to prove the identity and creditworthiness of the share applicants. The CIT(A) emphasized that mere suspicion could not replace concrete proof and that the Assessing Officer had not provided any material evidence to discredit the transactions. The CIT(A) relied on various judicial precedents to support the decision.

Proceedings Before the Tribunal:
The Tribunal reviewed the arguments from both the Revenue and the assessee. The Tribunal found that the assessee had indeed provided ample documentation to establish the genuineness of the transactions. The Tribunal noted the inconsistency in the Assessing Officer's approach, as the same company was treated as genuine for a portion of the share application money but not for the rest. The Tribunal upheld the CIT(A)'s decision, stating that the Assessing Officer had failed to provide any direct or indirect evidence to prove the transactions were bogus.

Decision of Tribunal:
The Tribunal dismissed all three appeals filed by the Revenue, confirming the CIT(A)'s order to delete the additions made by the Assessing Officer. The Tribunal emphasized that the identity, creditworthiness, and genuineness of the transactions had been sufficiently established by the assessee, and the Assessing Officer's suspicion alone could not justify the additions under Section 68.

Conclusion:
The Tribunal's decision underscores the importance of concrete evidence over mere suspicion in matters of unexplained cash credits under Section 68. The assessee's thorough documentation and compliance played a crucial role in establishing the genuineness of the transactions, leading to the dismissal of the Revenue's appeals.

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