2020 (1) TMI 158 - AT - Income Tax

Addition u/ 68 and 69 - no satisfaction as to the identity and creditworthiness of the share applicants and the genuineness of the transaction - HELD THAT - No clarification to the doubts in the mind of the learned Assessing Officer as to the genuineness of the identity and creditworthiness of the share applicants or genuineness of the transaction. Unless and until satisfactory answers are obtained to these questions, it would be difficult to reach a positive conclusion as to the identity and creditworthiness of the share applicants and the genuineness of the transaction. Merely because the assessee was successful in completing the paperwork very meticulously or bringing into existence certain documents, the statutory obligation of the authorities does not get absolved merely because the assessee produced certain documents. It is incumbent on the authorities to verify the genuineness of such documents also in the light of the attending circumstances. Having regard to the facts and circumstances of the case we are not satisfied in this case that the Ld. CIT(A) appreciated the facts and circumstances in their proper perspective before reaching the impugned conclusions basing on the document as produced by the assessee. We accordingly find it difficult to sustain the findings of the Ld. CIT(A). Consequently, the impugned order is set aside and the order of the learned Assessing Officer is restored. - Decided in favour of revenue

Summary

Issues:
Challenging deletion of ?4.6 crores under section 68 and ?8,05,000 under section 69 of the Income Tax Act, 1961.

Analysis:

1. Issue of Deletion of Amounts under Sections 68 and 69:
The case involved the deletion of ?4.6 crores under section 68 and ?8,05,000 under section 69 of the Income Tax Act. The Assessing Officer had added these amounts based on the investigation report indicating that the assessee had taken accommodation entries. The Appellate Tribunal noted that the assessee had provided detailed information, including share application forms, bank statements of share applicants, and other relevant documents, to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal found that the assessee had fulfilled its burden under section 68, and the additions made by the Assessing Officer were deleted by the CIT(A).

2. Assessment Proceedings and Lack of Cooperation:
During the assessment proceedings, the assessee had cooperated by submitting necessary documents. However, the Revenue argued that despite the paperwork, doubts still clouded the transactions, and the assessee's cooperation was insufficient. The Revenue cited legal precedents emphasizing the need to look beyond paperwork to ascertain the identity, creditworthiness of share applicants, and the genuineness of transactions. The Revenue contended that the Tribunal should dismiss the appeal.

3. Verification of Identity and Creditworthiness:
The Tribunal observed that while the CIT(A) had relied on documents provided by the assessee to establish identity and creditworthiness, further investigation was necessary. The Tribunal highlighted the importance of verifying various aspects such as the relationship between parties, mode of transaction, financial capacity of investors, and the purpose of investments. It noted that unanswered questions regarding the genuineness of transactions raised doubts. The Tribunal emphasized that statutory obligations required authorities to scrutinize documents meticulously in light of surrounding circumstances.

4. Decision and Conclusion:
After considering the submissions and the record, the Tribunal found that the CIT(A) had not fully appreciated the facts and circumstances before reaching conclusions based solely on documents produced by the assessee. As a result, the Tribunal set aside the CIT(A)'s findings and restored the Assessing Officer's order. Ultimately, the appeal of the Revenue was allowed, and the order was pronounced on 31st December 2019.

In summary, the judgment addressed the challenges to the deletion of amounts under sections 68 and 69 of the Income Tax Act, emphasizing the need for thorough verification of identity and creditworthiness beyond paperwork. The Tribunal highlighted the importance of investigating various factors to establish the genuineness of transactions and statutory obligations to scrutinize documents meticulously.