2021 (5) TMI 29 - AT - Income Tax

Addition under section 68 being share capital received and addition under section 69C on account of commission - some of Directors did not appear in the case of assessee - HELD THAT - Assessee produced documentary evidences before the A.O. to establish that assessee has received genuine share capital/premium from the Investor Company. The documentary evidences have not been doubted by the authorities below. The Investor Company has declared income of ₹ 173.55 Lacs in assessment year under appeal and has sufficient funds to make investment in assessee-company. It is a Public Limited Company and listed with BSE. Therefore, the assessee-company has been able to prove the identity of the Investor, its creditworthiness and genuineness of the transaction in the matter. Therefore, there were no justification for the authorities below to make or confirm the addition against the assessee under section 68. The Hon ble Delhi High Court in the case of Divine Leasing Finance Ltd. 2006 (11) TMI 121 - DELHI HIGH COURT held that no adverse inference to be drawn if the shareholders failed to respond to the notice issued by the A.O. - Therefore, merely because the same Directors did not appear in the case of assessee would not be a ground to have an adverse inference against the assessee. Considering the totality of the facts and circumstances of the case in the light of above decisions, we do not find any justification to sustain the addition under section 68 and addition under section 69C - Decided in favour of assessee. Reopening of assessment u/s 147 - HELD THAT - As in the light of this decision, the Order of the Tribunal in the case of ASN Polymers Pvt. Ltd., 2020 (12) TMI 1199 - ITAT DELHI cannot be considered favourable in favour of the assessee. We, therefore, following the Order of the Tribunal in the case of INS Finance Investment P. ltd., (supra) confirm the reopening of the assessment in the matter. This ground of appeal of Assessee is dismissed.

Summary

Issues Involved:
1. Reopening of the assessment under section 147/148 of the I.T. Act, 1961.
2. Addition of ?45 lakhs under section 68 of the I.T. Act, 1961 for share capital received from M/s. Prraneta Industries Ltd.
3. Addition of ?90,000/- under section 69C of the I.T. Act, 1961 on account of commission.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment under Section 147/148 of the I.T. Act, 1961:
The assessee challenged the reopening of the assessment, arguing that the reasons for reopening were based on "borrowed satisfaction" without the A.O.'s independent application of mind. The A.O. received information from the Investigation Wing about the assessee receiving ?45 lakhs from M/s. Prraneta Industries Ltd., alleged to be a conduit company controlled by Shri Shirish C. Shah for providing accommodation entries. The A.O. issued statutory notices and sought explanations from the assessee, who contended that all relevant documents were not provided, thereby curtailing their right to file proper objections. The Tribunal, following the decision in the case of INS Finance & Investment P. Ltd., confirmed the reopening of the assessment, thus dismissing the assessee's ground on this issue.

2. Addition of ?45 lakhs under Section 68 of the I.T. Act, 1961:
The A.O. made an addition of ?45 lakhs under section 68, doubting the genuineness of the share capital received from M/s. Prraneta Industries Ltd. The assessee provided various documents, including the Investor Company's ITR, audited balance sheet, and proof of listing on the BSE, to establish the identity, creditworthiness, and genuineness of the transaction. The A.O. rejected the explanation, citing statements from individuals recorded during a search operation, which were not provided to the assessee. The Tribunal noted that the statements were not subjected to cross-examination and thus could not be used as evidence against the assessee. The Tribunal also referenced previous decisions, including those of the Indore Bench and the Hon’ble Madhya Pradesh High Court, which found M/s. Prraneta Industries Ltd. to be a genuine entity. Consequently, the Tribunal deleted the addition of ?45 lakhs.

3. Addition of ?90,000/- under Section 69C of the I.T. Act, 1961 on Account of Commission:
The A.O. also made an addition of ?90,000/- under section 69C, alleging it as commission for obtaining accommodation entries. The Tribunal, considering the deletion of the main addition of ?45 lakhs and the lack of evidence supporting the commission payment, also deleted this addition.

Conclusion:
The Tribunal upheld the reopening of the assessment under section 147/148 but deleted the additions of ?45 lakhs under section 68 and ?90,000/- under section 69C, finding no justification for these additions based on the evidence provided by the assessee and the lack of cross-examination of key statements used by the A.O.