2021 (2) TMI 1110 - HC - Income Tax

Addition u/s 68 - Onus to prove - whether evidence against the assessee lies and the assessee failed to discharge his initial burden on this account - Tribunal shifting the responsibility of proving genuineness of share application money to the Assessing Officer - whether mere furnishing list of person who have claimed to have advanced towards share capital thus constitute sufficient compliance on the part of the assessee? - HELD THAT - Assessee has not discharged the legal obligation cast upon them to prove the genuineness of the transaction, the identity of the creditors and creditworthiness of the investors, who should have the financial capacity to make the investment in question to the satisfaction of the Assessing Officer so as to discharge the primary onus - Since the assessee did not discharge the primary onus cast upon them, the question of the Assessing Officer to investigate the creditworthiness of the creditors/subscribers would not arise in the case on hand. We have no hesitation to conclude that the Tribunal erred in confirming the order passed by the CIT(A) by observing that merely because the share applicants are from Andhra Pradesh that cannot be a reason to disallow the claim of the assessee. The factual position being, the Assessing Officer did not do so, but disallowed the same on the ground that the assessee has not furnished any details, viz., the names and addresses of the persons, who paid the share capital advances, the cheque numbers, the name of the bank, PAN numbers etc. Thus, the order passed by the Tribunal calls for interference. Decided in favour of the Revenue

Summary

Issues:
1. Shifting the responsibility of proving genuineness of share application money to the Assessing Officer.
2. Compliance with furnishing list of persons contributing towards share capital.
3. Giving relief to the assessee despite defaulting in filing return of income in time.

Analysis:
1. The appeal raised concerns about shifting the burden of proving the genuineness of share application money to the Assessing Officer despite prima facie evidence against the assessee. The High Court referred to Section 68 of the Income Tax Act, emphasizing that if the assessee fails to explain the nature and source of credited amounts, they may be charged as income. The Court highlighted the onus on the assessee to establish the identity, creditworthiness, and genuineness of share capital contributors. Mere submission of a list of contributors was deemed insufficient by the Court.

2. The Court examined the compliance with furnishing a list of persons contributing towards share capital. The assessee failed to provide details such as names, addresses, PAN numbers, and proof of creditworthiness of the contributors. The Court cited a Supreme Court judgment emphasizing the assessee's obligation to prove the genuineness of transactions and the financial capacity of investors. The Court noted that the assessee did not discharge the primary onus, leading to a decision in favor of the Revenue.

3. Regarding relief granted to the assessee despite delays in filing income tax returns, the Court referred to a Calcutta High Court decision where inadequate explanations and unestablished identities of share applicants led to upholding the Assessing Officer's order. The Court emphasized that the burden of proof lies with the assessee, and failure to discharge this burden may result in adverse consequences. The Court overturned the Tribunal's decision, ruling in favor of the Revenue and setting aside the earlier order.

This detailed analysis of the judgment addresses the issues raised in the appeal, providing a comprehensive understanding of the Court's decision based on legal principles and precedents cited during the proceedings.