2021 (8) TMI 860 - AT - Income Tax

Addition u/s 68 - un-explained credit - HELD THAT - We direct the AO to first verify from the accounts of the assessee and other details, whether this amount of ₹ 1,53,75,769/- has been received prior to 31.03.2008 or not. In case this amount received prior to 31.03.2008, no addition for this amount will be made. In case, this amount received in this year then the assessee will again explain in entirety with evidence before the AO. For remaining amount the assessee will explain with evidence to meet with the conditions of section 68 of the Act. To this proposition both agreed, the learned DR as well as the learned Counsel for the assessee. In term of the above, the matter is set aside and restore to the file of the Assessing Officer. Appeal of the assessee is allowed for statistical purposes.

Issues:
1. Reopening of assessment - jurisdictional issue.
2. Addition of total share premium by Assessing Officer.
3. Evidence of identity, creditworthiness, and genuineness of transactions.
4. Burden of proof on assessee.
5. Application of Section 68 of the Income-tax Act, 1961.
6. Assessment Year 2009-10.

Reopening of Assessment - Jurisdictional Issue:
The appellant did not press ground No. 1 regarding the reopening of the assessment, which was related to the jurisdictional issue. Consequently, the reopening issue was dismissed as not pressed.

Addition of Total Share Premium by Assessing Officer:
The main issue in this appeal was the addition of total share premium by the Assessing Officer. The CIT(A) confirmed this action, leading to the appellant raising grounds 2 to 5 challenging the decision. The appellant argued that the provisions of Section 68 should only apply to receipts credited during the relevant previous year. The appellant contended that substantial evidence was produced to prove the identity, creditworthiness, and genuineness of the transactions, which the CIT(A) did not accept. The appellant also highlighted that the share premium money was from the same person and along with the same share application.

Evidence of Identity, Creditworthiness, and Genuineness of Transactions:
The appellant presented substantial evidence to establish the genuineness of the transactions, including balance sheet details and Foreign Inward Remittance Certificates showing the money was brought into India through normal banking channels. The appellant also provided information about the Non-Resident Investor, Mr. Gunawan Sulaiman, as an existing shareholder and Director of the company. However, the CIT(A) noted that the appellant failed to prove the genuineness of the transactions or the identity and creditworthiness of the creditors, leading to the confirmation of the addition by the Assessing Officer.

Burden of Proof on Assessee:
The appellant claimed to have fully discharged its onus in establishing the genuineness of the transaction and the identity and creditworthiness of the investor party. However, the CIT(A) found that the appellant did not provide adequate documentary evidence regarding the identity, genuineness, and creditworthiness of the creditor, raising doubts about the transaction's legitimacy.

Application of Section 68 of the Income-tax Act, 1961:
The Assessing Officer made the addition under Section 68 of the Income-tax Act, 1961, as unexplained credit due to the failure to prove the identity of the creditor, genuineness of the transaction, and creditworthiness of the creditor transparently with proper documents. The CIT(A) upheld this decision, emphasizing the lack of evidence provided by the appellant to justify the high share premium.

Assessment Year 2009-10:
After hearing the contentions of both parties, the Tribunal directed the Assessing Officer to verify whether the amount in question was received before or after 31.03.2008. If received before that date, no addition would be made. If received during the relevant year, the appellant would need to provide evidence to meet the conditions of Section 68 for the remaining amount. The matter was set aside and restored to the Assessing Officer's file, ultimately allowing the appeal for statistical purposes.

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