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2020 (2) TMI 71 - AT - Income TaxAddition u/s 68 - Unexplained cash credit - onus to prove - HELD THAT - There is nothing contrary on record to show that the assessee has complied with the requirements of the learned Assessing Officer in the exercise of forming satisfaction as to the identity and the creditworthiness of the share applicants or the genuineness of the transaction. Mere paperwork by the assessee does not take the authorities anyway, when the authorities suspected the existence of the entities that applied and paid for share application and share premium and insisted that a higher degree of proof is required in that respect. In view of the decisions of the Hon ble jurisdictional High Court and Hon ble Supreme Court in the case of NDR Promotors Pvt. Ltd. 2019 (1) TMI 1089 - DELHI HIGH COURT and NRA Iron and Steel (P) Ltd 2019 (3) TMI 323 - SUPREME COURT we are of the considered opinion that the action of the learned Assessing Officer was illegal and non-compliance with the same had rightly led to the inference that the assessee had rooted their own money in the books of accounts through the fictitious and bogus companies. On this premise we sustain the addition made by the learned Assessing Officer under section 68 of the Act. We further find that the Ld. CIT(A) had followed the procedure established under law for enhancing the additions and such additions are justified by record. Consequently, we dismiss the grounds of appeals.
Issues Involved:
1. Legitimacy of Share Capital and Share Premium. 2. Compliance with Section 68 of the Income Tax Act. 3. Validity of Assessing Officer's Actions and Findings. 4. Enhancement of Additions by CIT(A). 5. Non-appearance and Non-compliance by the Assessee. Detailed Analysis: 1. Legitimacy of Share Capital and Share Premium: The core issue revolves around the legitimacy of the share capital and share premium received by the assessee from various companies. The Assessing Officer (AO) conducted field inquiries and found that the addresses provided for the investor companies were either non-existent or residential, indicating that these companies were mere paper entities used for accommodation entries. The AO's findings were based on the fact that these companies had no legitimate income to justify their investments in the assessee company. 2. Compliance with Section 68 of the Income Tax Act: The AO required the assessee to substantiate the identity, creditworthiness, and genuineness of the transactions as per Section 68 of the Income Tax Act. The assessee provided PAN details and addresses but failed to produce the controlling persons of the investor companies for examination. The AO noted that mere paperwork was insufficient to prove the genuineness of the transactions, especially when field inquiries suggested that the investor companies were non-existent. 3. Validity of Assessing Officer's Actions and Findings: The AO's actions were validated by the findings that the investor companies were not operational at the given addresses and were used to route unaccounted income back into the assessee's books. The AO's reliance on the decisions in CIT vs. NR Portfolio Private Limited, Onassis Axles Private Limited vs. CIT, and CIT vs. Odian Builders Private Limited was deemed appropriate. The AO concluded that the share capital credited in the assessee's books was unexplained and added it to the income under Section 68. 4. Enhancement of Additions by CIT(A): The CIT(A) issued a notice for enhancement under Section 251(2) of the Act and confirmed the AO's findings. The CIT(A) noted that the assessee failed to provide a satisfactory explanation for the share premium and did not produce the investors for examination. The CIT(A) further enhanced the additions for the assessment years 2010-11, 2011-12, and 2012-13, based on the unsubstantiated claims relating to certain investor companies. 5. Non-appearance and Non-compliance by the Assessee: The assessee did not appear for the hearing and refused to receive the notice sent by the Tribunal. The Tribunal proceeded with the matter based on the available records and upheld the AO's and CIT(A)'s findings. The Tribunal emphasized that mere filing of documents does not absolve the assessee from proving the identity, creditworthiness, and genuineness of the transactions. Conclusion: The Tribunal dismissed the appeals of the assessee, sustaining the additions made by the AO under Section 68 of the Act. The Tribunal found that the AO's and CIT(A)'s actions were justified and in compliance with the law, given the non-existence of the investor companies and the failure of the assessee to provide substantial evidence. The Tribunal also noted that the decisions of the Hon'ble jurisdictional High Court and Supreme Court in similar cases supported the AO's conclusions.
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