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2021 (11) TMI 318 - AT - Income TaxAddition u/s 68 - unexplained share application money - undisclosed income - As per AO assessee failed to prove the identity of the alleged lenders, the credit worthiness of the lenders and the genuineness of the transactions - HELD THAT - In the course of assessment proceedings, confirmation letters were filed, affidavit of directors are also filed. The full addresses of the companies were also given - bank accounts of the creditors were also furnished. In the said bank accounts, there are also no cash deposits by the creditors before issuing cheque to the assessee. No cogent material or any other incriminating material was found which showed that it is the assessee s money which has gone to the aforesaid share applicants in cash and then it came back to the assessee in the form of share capital - there are no findings of the A.O. that the creditors bank accounts are the benami bank accounts of the assessee. There are also no evidences which show the various credits in the bank accounts of the creditors are the undisclosed income of the assessee deposited in those bank accounts and, therefore, the receipt of share application from the aforesaid share applicants could not be assessed as a deemed income of the assessee u/s.68 - We find that all transactions are from the regular banking channel verifiable from the bank account of the assessee as well as the bank accounts of the share applicants It is not a case that the assessee had filed merely a confirmatory letters of share applicants but it is a case that the assessee had filed affidavit of the director, certification of incorporation of the share applicants, full particulars of directors of the share applicant companies, bank account of the share applicants, PAN of share applicants, tax returns of the share applicants, audited final accounts i.e. balance sheet profit loss account of the share applicants. All these documents proved the identity of the share applicants, creditworthiness of the share applicants and genuineness of the transactions - We also find that the assessee s case is on strong footing as by the Finance Act, 2012, the provision for source of source was inserted w.e.f. 1.4.2013 but the present matter pertains to the assessment year 2012-13. Hence, the insertion of that provision is also not applicable in the present matter. Thus assessee in these circumstances had duly discharged its burden lay upon it u/s.68. The case-laws referred by the Revenue Authorities are distinguishable on facts and they are not applicable on the facts of the assessee s case. Therefore, the addition made u/s.68 in assessment year 2012-13 is bad in law and unjustified and, therefore, we delete the addition. Decided in favour of assessee.
Issues Involved:
1. Deletion of addition made by the Assessing Officer on account of unexplained share application money under Section 68 of the Income Tax Act, 1961. 2. Recording of satisfaction before initiating proceedings under Section 153C of the Income Tax Act, 1961. 3. Consideration of corroborative and cogent evidence found during the course of search. 4. Jurisdiction and validity of proceedings initiated under Section 153C of the Income Tax Act, 1961. 5. Consideration of evidence and documents furnished by the assessee in support of the claim of share capital received. Issue-wise Detailed Analysis: 1. Deletion of Addition Made by the Assessing Officer on Account of Unexplained Share Application Money Under Section 68: The Revenue contended that the addition of ?2,03,50,000/- made by the Assessing Officer was based on incriminating loose papers seized during the search. However, the CIT(A) quashed the assessment on legal grounds, noting that no satisfaction was recorded by the AO of the searched person before transferring the records/material to the AO of the assessee. The Tribunal upheld this decision, citing the absence of any incriminating material suggesting that the share application money represented unaccounted income of the assessee. 2. Recording of Satisfaction Before Initiating Proceedings Under Section 153C: The Tribunal found that no satisfaction as contemplated under Section 153C was recorded by the AO of the searched person. The CIT(A) and the Tribunal both noted that the AO's remand report admitted that the satisfaction note was not traceable from the record, thus failing to meet the sine qua non for assuming jurisdiction under Section 153C. The Tribunal confirmed the order of the CIT(A) on this issue, referencing the Supreme Court's decision in the case of Supermall Private Limited vs. PCIT. 3. Consideration of Corroborative and Cogent Evidence Found During the Course of Search: The CIT(A) observed that no incriminating material was found during the search that suggested the share application money was unaccounted income. The Tribunal agreed, noting that the assessment could not be reopened in the absence of incriminating material, as established in several judicial pronouncements, including the Delhi High Court's decision in CIT vs. Kabul Chawla. 4. Jurisdiction and Validity of Proceedings Initiated Under Section 153C: The Tribunal reiterated that the initiation of proceedings under Section 153C was without jurisdiction due to the lack of recorded satisfaction by the AO of the searched person. The Tribunal cited various case laws, including the Supreme Court's decision in CIT vs. Calcutta Knitwear, to support the conclusion that the proceedings were bad in law and the assessments were quashed. 5. Consideration of Evidence and Documents Furnished by the Assessee in Support of the Claim of Share Capital Received: For the assessment year 2012-13, the Tribunal noted that the assessee provided comprehensive documentation, including confirmations, affidavits of directors, bank statements, PAN cards, and balance sheets of the share applicant companies. Despite this, the AO made an addition of ?2,41,25,000/- under Section 68. The Tribunal found that the assessee had discharged its burden of proof under Section 68 by providing sufficient evidence of the identity, creditworthiness, and genuineness of the transactions. The Tribunal cited several judicial precedents, including the Supreme Court's decision in CIT vs. Lovely Exports Pvt. Ltd., to conclude that the addition was unjustified and deleted the addition. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, confirming the CIT(A)'s decision to quash the assessments due to the lack of recorded satisfaction under Section 153C and the absence of incriminating material. The Tribunal also deleted the addition made under Section 68 for the assessment year 2012-13, finding that the assessee had provided sufficient evidence to substantiate the share application money received.
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