2021 (4) TMI 1009 - AT - Income Tax

Unexplained cash credit under section 68 - HELD THAT - As assessee during the assessment proceedings has furnished the necessary details of the fixed assets, along with the name of the suppliers and the breakup of the assets. But the AO has not pointed out any infirmity in such details furnished by the assessee. In fact the assessee has duly discharged its onus by furnishing the requisite details and therefore the onus was shifted upon the AO to reject the contention of the assessee based on the cogent materials. As such the assessee cannot be penalised for non-response of the suppliers, particularly in a situation, where the notices to the suppliers were issued by the AO at the fag end of the assessment. The entire thrust of the learned DR was based on the documents/informations collected in the course of search proceedings under section 132 of the Act which was conducted on 2 May 2013. As per the learned DR the information gathered during the search proceedings should also be considered while adjudicating the issue on hand. The learned DR further submitted that the matter of the assessee for the year under consideration against the search proceedings is pending before the learned CIT (A). Accordingly the learned DR contended that the matter on hand can also be restored to the file of the learned CIT (A) for fresh adjudication along with the search proceedings. However, we are not convinced with the argument of the learned DR for the reason that both the proceedings are separate and independent to each other. The assessments in the search proceedings are special assessments to be carried out under the provisions of section 153A of the Act which begins with non-obstante clause. As a result of search, the proceedings under section 153A of the Act have already begun which are based on the search materials. Furthermore, the issue before us is arising against the assessment order framed under section 143(3) of the Act and we are not adjudicating the appeal/matter arising against the assessment framed under section 153A of the Act. It might be quite possible that search material has a bearing on the income to be determined for the year under consideration but for that purpose the proceedings have already been initiated and the same will be taken care by the revenue authorities in the respective proceedings. Accordingly, we are not convinced with the argument of the learned DR. The cash credit received by the assessee during the year remains no longer unexplained as provided under section 68 of the Act for the reasons as discussed above - Decided against revenue.

Issues Involved:
1. Deletion of addition made by the AO for ?37,02,25,000/- on account of unexplained cash credit under section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 of the Act:

The primary issue raised by the Revenue was the deletion of the addition of ?37,02,25,000/- made by the AO on account of unexplained cash credit under section 68 of the Act. The assessee, a private limited company engaged in the business of Iron and steel marketing, issued 40,00,000 equity shares at a face value of ?10 and a premium of ?90 per share, aggregating to ?40 crores. Additionally, the assessee received share application money pending allotment amounting to ?25,23,27,371/-. The AO doubted the genuineness of the share capital, share premium, and share application money, leading to the addition under section 68.

Assessee's Defense:

The assessee argued that it had discharged its onus under section 68 by establishing the identity, genuineness, and creditworthiness of the investors. The assessee provided details such as name, address, PAN, CIN, company master data, MOA, AOA, balance sheet, bank statements, and share certificates of the investors. The assessee contended that the AO's duty was to bring cogent material to overturn the documentary evidence provided, which the AO failed to do.

CIT (A)'s Observations:

The CIT (A) held that the assessee had discharged its primary onus by furnishing the identity of the investors, genuineness of the transactions, and creditworthiness of the investors. The CIT (A) noted that the investor companies were regularly filing returns of income, and the transactions were carried out through banking channels without any cash deposits. The CIT (A) also observed that the AO had not brought any material suggesting that the subscribers were engaged in providing accommodation entries or that the transactions were bogus.

Tribunal's Analysis:

The Tribunal analyzed the details of each investor and found that the assessee had sufficiently discharged its onus under section 68. The Tribunal noted that the investor companies had substantial funds and had made investments in various other companies. The Tribunal also observed that the AO had accepted part of the share application money as genuine while doubting the rest, which was inconsistent.

Comparison with NRA Iron & Steel Case:

The Tribunal distinguished the present case from the NRA Iron & Steel case, where the assessee failed to discharge the onus under section 68. In the present case, the assessee had provided sufficient details, and the transactions were carried out through banking channels. The Tribunal also noted that the decision in NRA Iron & Steel was based on facts and would be binding only on cases with similar facts and circumstances.

Conclusion:

The Tribunal concluded that the assessee had discharged its onus under section 68 by providing sufficient details of the investors and the transactions. The Tribunal upheld the CIT (A)'s order deleting the addition made by the AO, and the appeal of the Revenue was dismissed.

Order Pronounced:

The appeal of the Revenue was dismissed, and the order was pronounced in the Court on 19/04/2021.

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