2021 (2) TMI 229 - AT - Income Tax

Addition u/s 68 - assessee has received share premium and share capital during the year from 18 parties - HELD THAT - As far as the additions in the case of Sh. Sanjeevji, Sh. Ajay Singh, Sh. Hanumat Prasad Nautiyal, Sunil Shastri, Sh. Virender Arya, Sh. Sulekh Arya, Sh. Suresh Arya, Sh. Narendra Arya and Mahendra Arya are concerned, CIT(A) has inter alia noted that in all the aforesaid case, the amounts was received in cash and the other documents like the contention of income being from agricultural activities was not supportive of their contentions. As noted that the documents furnished did not prove the creditworthiness and genuineness of transactions which has not been found to be incorrect/ false, we find no reason to interfere with the order of CIT(A) to that extent. Addition of the amoun from Sh. Suman Arya we find that CIT(A) has given a finding that the amount was paid by cheque/ bank transfer, she was employed as a teacher and had total income of ₹ 3,26,334/-. In such a situation we find there was no justification for holding only ₹ 1 lakh to be explained and balance ₹ 2 lakh to be unexplained. We therefore, hold that the addition of ₹ 2 lakh was not warranted in this case. We therefore direct its deletion. As far as addition of amount received from Sh. Jasbir Singh is concerned, we find that CIT(A) has given a finding that his confirmation, bank statement evidencing bank transfer is on record but since he had not given source of the money, the conditions stipulated u/s 68 have not been complied. We do not agree with the reasoning of CIT(A). When the fact of confirmation, bank transfer and bank statement of the lender of the money has not been found to be incorrect, it cannot be concluded the genuineness of transaction to have not been established. In such a situation we are of the view that no addition was called for in his case

Summary

Issues Involved:
1. Legality of the CIT(A)'s order.
2. Addition of ?62,82,500 under Section 68 of the Income Tax Act.
3. Evidence provided by the assessee to prove identity, creditworthiness, and genuineness of the share applicants.
4. Confirmation of transactions by shareholders.
5. Partial relief granted by CIT(A).

Detailed Analysis:

1. Legality of the CIT(A)'s Order:
The assessee contended that the CIT(A)'s order was erroneous both in law and on facts. The CIT(A) had partially upheld the Assessing Officer's (AO) addition of ?62,82,500 under Section 68 of the Income Tax Act, while granting partial relief.

2. Addition of ?62,82,500 under Section 68 of the Income Tax Act:
The AO added ?93,52,000 to the assessee's income as unexplained share capital and share premium. The CIT(A) provided partial relief by reducing the addition to ?62,82,500. The AO's addition was based on the absence of confirmations from all parties who had invested in the share capital.

3. Evidence Provided by the Assessee:
The assessee argued that sufficient evidence had been provided to prove the identity, creditworthiness, and genuineness of the share applicants. However, the CIT(A) found that in many cases, the evidence was insufficient or unverifiable. For instance, the CIT(A) noted that:
- Sh. Sanjeevji paid ?4,34,400 in cash without substantial evidence of the source.
- Smt. Suman Arya's investment of ?3,00,000 was only partially explained.
- Sh. Jasbir Singh's bank transfer lacked details of the source.
- Several other applicants, such as Sh. Ajay Singh, Sh. Hanumat Prasad Nautiyal, and Sh. Virender Arya, provided inadequate evidence of their agricultural income or other sources.

4. Confirmation of Transactions by Shareholders:
Despite some shareholders confirming their transactions, the CIT(A) upheld the addition for those who failed to provide satisfactory evidence. For example:
- Smt. Suman Arya's confirmation was partially accepted, resulting in a partial addition.
- Sh. Jasbir Singh's confirmation and bank transfer were on record, but the source of funds was not explained.

5. Partial Relief Granted by CIT(A):
The CIT(A) granted relief for certain amounts where the identity and creditworthiness were satisfactorily proven. For example:
- Relief of ?30,52,450 was granted for amounts received from Sh. Sushil Kumar Garg, Madhulika, and others.
- The addition of ?2,00,000 from Smt. Suman Arya was found unjustified and deleted.
- The addition of ?5,00,000 from Sh. Jasbir Singh was deleted as the confirmation and bank transfer were found to be genuine.

Conclusion:
The ITAT upheld the CIT(A)'s order to the extent that the evidence provided by the assessee was insufficient to prove the identity, creditworthiness, and genuineness of certain transactions. However, it granted relief for the amounts where the CIT(A) had erred in upholding the addition despite satisfactory evidence. The appeal was partly allowed, providing relief to the extent of ?7,00,000 (?2,00,000 from Smt. Suman Arya and ?5,00,000 from Sh. Jasbir Singh). The order was pronounced on 05.02.2021.