2022 (2) TMI 377 - AT - Income Tax

Addition u/s 68 - addition on account of share application money - whether assessee has discharged the onus to prove the identity and creditworthiness of the share applicants/creditors and the genuineness of the transactions in accordance with section 68 ? - HELD THAT - AO deputed inspectors to physically visit Kolkata and collect information directly from the share applicants who gave share application money to the assessee during the year under consideration. It is also an uncontroverted fact that notices under section 133(6) of the Act were issued to the said share applicants which were duly complied with. Assessing Officer himself accepted that inspectors met Shri Ashok Kumar Surekha who represented as the Chairman in these companies. The share applicant companies also provided their acknowledgement of return, copy of account of the assessee in their books of accounts, copy of share certificate and copy of their bank statement directly to the Ld Assessing Officer which were never disproved by the Ld Assessing Officer We find that with the help of supporting/corroborative documentary evidences, the existence of the share applicant companies was proved beyond doubt by the assessee. The assessee during the course of re-assessment proceedings and first appellate proceedings filed requisite documentary evidences which included share application form, extract of minutes of the meeting of the companies, Master data and signatory details, Certificate of incorporation, MOA, AOA, audited financial statements etc. so as to justify the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them. It is also an uncontroverted fact that the said documents were never disproved by the Ld AO and Ld CIT(A). The identity of the above share applicants was also independently verified by the inspectors during the course of re-assessment proceedings. Notices u/s 133(6) of the Act were issued to the above share applicants which were duly replied to by the share applicants. So far as the share application money received from remaining companies is concerned, we find that the assessee filed ample documentary evidences which discharged the primary onus cast upon it u/s 68 There was no justification for doubting the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them in the light of the aforesaid discussion and judicial pronouncements (supra). Under the given facts and circumstances of the case, we are of considered view that the assessee company properly discharged the primary onus cast upon it u/s 68 of the Act to justify the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them and accordingly, addition of made by the Ld AO on account of share application money was not justified - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings initiated under section 147 of the Income Tax Act, 1961.
2. Addition of ?2,60,00,000 under section 68 of the Income Tax Act, 1961 on account of share application money.
3. Deletion of ?1,80,00,000 by CIT(A) out of the total addition of ?2,60,00,000.
4. Sustaining the addition of ?80,00,000 by CIT(A).

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:
The assessee challenged the validity of the reassessment proceedings initiated under section 147 of the Income Tax Act, 1961, on the grounds that there was no tangible material in possession of the assessing officer to prove the live link of concealment of income. The reassessment was claimed to be initiated merely for making roving and fishing inquiries, which is not permissible in law. Additionally, the assessee argued that the proper sanction from the competent authority under section 151 of the Income Tax Act, 1961, was not obtained.

2. Addition of ?2,60,00,000 under Section 68:
The Assessing Officer (AO) added ?2,60,00,000 to the total income of the assessee on account of share application money received from various companies, invoking section 68 of the Income Tax Act, 1961. The AO initially added ?3,17,50,000 but later reduced it to ?2,60,00,000 after accepting the assessee's rectification application, which clarified that ?57,50,000 pertained to the Financial Year 2003-04.

3. Deletion of ?1,80,00,000 by CIT(A):
The CIT(A) deleted ?1,80,00,000 out of the total addition of ?2,60,00,000 made by the AO. The CIT(A) accepted the assessee's explanation regarding the identity and creditworthiness of the share applicants and the genuineness of the transactions. The CIT(A) relied on the documentary evidence provided by the assessee, including share application forms, board resolutions, financial statements, and income tax returns of the share applicants.

4. Sustaining the Addition of ?80,00,000 by CIT(A):
The CIT(A) sustained the addition of ?80,00,000, finding that the assessee failed to satisfactorily explain the identity and creditworthiness of certain share applicants and the genuineness of the transactions. The CIT(A) relied on the AO's findings and the lack of sufficient evidence provided by the assessee for these specific transactions.

Tribunal's Findings:

On the Validity of Reassessment Proceedings:
The Tribunal did not specifically adjudicate the legal grounds regarding the validity of the reassessment proceedings, as the issue was rendered academic due to the decision on the merits of the case.

On the Addition of ?2,60,00,000 under Section 68:
The Tribunal found that the assessee had provided ample documentary evidence to substantiate the identity and creditworthiness of the share applicants and the genuineness of the transactions. The evidence included share application forms, board resolutions, financial statements, and income tax returns of the share applicants, which were never disproved by the AO or CIT(A).

On the Deletion of ?1,80,00,000 by CIT(A):
The Tribunal upheld the CIT(A)'s decision to delete ?1,80,00,000, finding that the assessee had satisfactorily discharged the onus cast upon it under section 68 of the Income Tax Act, 1961. The Tribunal noted that the AO had accepted the identity of the share applicants and the genuineness of the transactions during the reassessment proceedings.

On the Sustaining of ?80,00,000 by CIT(A):
The Tribunal disagreed with the CIT(A)'s decision to sustain the addition of ?80,00,000, finding that the assessee had provided sufficient evidence to prove the identity and creditworthiness of the share applicants and the genuineness of the transactions. The Tribunal relied on various judicial precedents, including the decisions of the Hon'ble Apex Court and High Courts, which supported the assessee's contentions.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue and partly allowed the appeal filed by the assessee. The Tribunal confirmed the deletion of ?1,80,00,000 by the CIT(A) and also set aside the addition of ?80,00,000 sustained by the CIT(A). The Tribunal concluded that the assessee had properly discharged the primary onus cast upon it under section 68 of the Income Tax Act, 1961, to justify the identity and creditworthiness of the share applicants and the genuineness of the transactions.

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