2021 (9) TMI 354 - AT - Income Tax

Addition u/s 68 - onus tp prove - identity, creditworthiness of the lenders / investors to advance such monies and genuineness of the transactions not proved - HELD THAT - As seen that the assessee has duly discharged the primary onus of establishing the identity of the investor entities, proving their respective creditworthiness and to establish the genuineness of the transactions. The same stem from the fact that the assessee had furnished name, addresses, PAN, relevant bank statements, financial statements, Income Tax return copies of the share applicants, their respective confirmations, copy of Form No.2 filed with ROC towards allotment of shares etc. It is the findings of Ld. CIT(A) that the investments were sourced from transfer entries and there was no immediate cash deposit in the account of the investor entities. Onus was on revenue to rebut these evidences by bringing on record cogent material to dislodge assessee s evidences. However, except for relying upon the investigation findings, no independent enquiries or verifications have been done by Ld. AO. The sole basis of addition is the third party statements given by the directors of these entities. These were merely third party statements which, on standalone basis, could not form the basis of making additions in the hands of the assessee - allegations are not supported by any corroborative evidences. Once the initial onus was discharged by the assessee, it was incumbent upon revenue to carry out further investigation to support the allegation that the credits were unexplained - nothing of that sort has been shown to have been carried out. It is trite law that no additions could be based merely on doubts, conjectures or surmises - additions as made by Ld. AO are not sustainable in the eyes of law. - Decided in favour of assessee.

Summary

Issues:
Confirmation of addition under section 68 for ?67 Lacs in AY 2009-10.

Analysis:

Issue 1: Reopening of Assessment and Addition under Section 68
The original return filed by the assessee was processed under section 143(1). However, during a survey under section 133A, it was found that the assessee issued shares at a high premium without justification. The case was reopened, and during assessment proceedings, it was alleged that the share application money of ?67 Lacs received from certain entities was not genuine. The Assessing Officer added these amounts to the income of the assessee as unexplained cash credit under section 68. The assessee, during appellate proceedings, submitted various documents to prove the genuineness of the transactions. However, the CIT(A) confirmed the addition. The Tribunal noted that the assessee had discharged the onus to prove the genuineness of the transactions, and the revenue failed to provide sufficient evidence to dislodge the assessee's claim. Therefore, the additions made by the Assessing Officer were deemed unsustainable in the eyes of the law.

Issue 2: Legal Position and Precedents
The Tribunal discussed the legal position under section 68 of the Income Tax Act, 1961, which requires the assessee to prove the identity, creditworthiness of lenders/investors, and genuineness of transactions to avoid additions. It cited the decision of the Hon'ble Supreme Court in Lovely Exports P. Ltd., emphasizing that if share application money is received from alleged bogus shareholders, the Department can proceed to reopen their individual assessments. The Tribunal also referred to various judicial pronouncements, including decisions by the Hon'ble Bombay High Court and Hon'ble Delhi High Court, which supported the assessee's position. It reiterated that no additions could be made based on doubts, conjectures, or surmises, and the revenue must substantiate allegations with corroborative evidence to sustain additions under section 68.

Conclusion
The Tribunal found that the assessee had fulfilled the primary onus by providing substantial evidence to establish the genuineness of the transactions. It noted that the revenue failed to conduct independent inquiries or verifications to disprove the assessee's evidence. The additions made by the Assessing Officer lacked corroborative evidence and were solely based on third-party statements. As per legal principles, the Tribunal concluded that the additions were not sustainable in the eyes of the law. Therefore, the impugned additions were deleted, and the appeal was partly allowed in favor of the assessee.

The Tribunal's detailed analysis considered the legal provisions, precedents, and the burden of proof on the assessee and the revenue, ultimately leading to the decision to delete the additions under section 68.