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2021 (1) TMI 221 - AT - Income TaxAddition u/s 68 - unexplained cash credit - credit worthiness of shareholders/investors to invest such huge amount - Genuineness of transactions - HELD THAT - Admittedly, in the case on hand, the assessee has discharged its onus by furnishing the necessary details such as copy of PAN, driving license, ITR, confirmation of the parties etc. in support of identity of the parties. There is also no dispute to the fact that all the transactions were carried out through the banking channel. What is the inference that flows from a cumulative consideration of all the aforesaid contending factsis that the assessee has discharged its onus imposed under Section 68 of the Act. The details filed by the assessee was not cross verified by the Revenue from the respective parties despite having the necessary details in its possession. Thus, we are of the view, Revenue cannot go to hold the addition under Section 68 of the Act in the given facts and circumstances. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of ?70 lakh under Section 68 of the Income Tax Act, 1961. 2. Verification of identity, creditworthiness, and genuineness of transactions related to share capital received by the assessee. Detailed Analysis: Disallowance under Section 68: The core issue in this case revolves around the disallowance of ?70 lakh by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. The AO found discrepancies in the creditworthiness of the investors who had declared low incomes but invested significant amounts in shares. Specifically, the AO disallowed ?40 lakh due to the lack of creditworthiness and ?30 lakh due to the failure of the assessee to provide documents proving the identity, genuineness, and creditworthiness of certain shareholders. The AO concluded that these transactions were not genuine and added the disallowed amount to the total income of the assessee. Assessee's Appeal and Submission: The assessee, a public limited company engaged in manufacturing Iron and Steel Roll, argued that it had submitted all necessary documents, including share application forms, bank details, and confirmations from the parties during the assessment proceedings. The assessee contended that it is not liable to prove the "source of source" of the investors' funds and that transactions carried out through banking channels should be considered genuine. The assessee cited the judgment of the Hon'ble Gauhati High Court in Nemi Chand Kothari vs. CIT to support its stance. CIT(A)'s Confirmation: The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the assessee failed to prove the creditworthiness and genuineness of the transactions. The CIT(A) emphasized that the initial burden of proof lies with the assessee to establish the identity, source, and creditworthiness of the investors. The CIT(A) also referenced the Delhi High Court's judgment in CIT v/s Nova Promoters Fin Lease Private Limited, which held that mere receipt of money through banking channels does not satisfy the burden of proof under Section 68. Tribunal's Findings: Upon appeal, the Tribunal examined the evidence and rival contentions. The Tribunal noted that the assessee had provided necessary details such as PAN, driving license, ITR, and confirmations, which were not cross-verified by the Revenue. The Tribunal held that the assessee had discharged its onus under Section 68 by providing prima facie evidence of the identity, creditworthiness, and genuineness of the transactions. The Tribunal referred to the Gujarat High Court's judgment in CIT Vs. Chanakya Developers, which stated that once the assessee provides sufficient evidence, the onus shifts to the AO to disprove it. The Tribunal also cited the Supreme Court's decision in CIT v. Orissa Corp. (P.) Ltd., which held that the Revenue must pursue further inquiries if the assessee provides the names and addresses of creditors. Additionally, the Tribunal referenced the Gujarat High Court's ruling in Deputy CIT v. Rohini Builders, which emphasized that the assessee is not required to prove the source of the source. Conclusion: The Tribunal concluded that the authorities below had not conducted proper verification of the documents provided by the assessee. The Tribunal held that the assessee cannot be penalized for the inaction of the Revenue and directed the AO to delete the addition of ?70 lakh. The Tribunal also noted that the CIT(A) possesses coterminous power with the AO and should have conducted further inquiries or called for a remand report. The Tribunal's decision was influenced by its own previous ruling in the assessee's case for the Assessment Year 2011-12, where similar facts and circumstances led to a decision in favor of the assessee. Final Judgment: The appeal filed by the assessee was partly allowed, with the Tribunal directing the AO to delete the addition made under Section 68. The second issue raised by the assessee was dismissed as infructuous. Order pronounced in the Court on 26th October, 2020 at Ahmedabad.
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