2022 (2) TMI 649 - HC - Income Tax

Addition u/s 68 - No satisfactory genuineness of transaction, credit worthiness of the company, nature and source of such sum so credited to the assessee s account - CIT- A deleted the addition as confirmed by ITAT - HELD THAT - We find from the order passed by the tribunal that the assessing officer has complied with the direction issued by the CIT(A) and has given effect to the order and no adverse finding has been recorded by the assessing officer and accordingly the addition was deleted. Therefore, the tribunal would have been well justified in rejecting the revenue s appeal which was filed against the order passed by the CIT(A). Nevertheless the tribunal took upon itself the exercise to examine the factual position probably realising that they are the last fact finding authority in the hierarchy of authorities provided under the Act. After making an elaborate factual exercise the tribunal examined the credit worthiness of the investors and found that three share applicants were income tax assessees; they were filing return of income; share application form and allotment letter were available on record; the share application money was paid by the account payee cheques; details of bank account belonging to the share applicants and their bank statements were available; the assessing officer did not find any amount to be deposited in cash; the share applicants have substantial credit worthiness; the share applicants have common directors; all the directors are income tax assessees and all the three share applicants are sister concern. Thus, the tribunal was satisfied that the credit worthiness and the genuinity of the investments have been sufficiently established by the assessee not only before the CIT(A), but also before the assessing officer on the matter being sent back to the assessing officer pursuant to the order passed by the CIT(A). - No substantial question of law.

Summary

Issues:
1. Whether the explanation offered by the assessee regarding share capital/share application money and premium was satisfactory as per Section 68 of the Income Tax Act?
2. Whether the Tribunal erred in confirming the order of the CIT(A) without remanding the issue to verify the credentials of the persons involved?

Analysis:

Issue 1:
The appeal filed by the revenue under Section 260A of the Income Tax Act challenged the order passed by the Income Tax Appellate Tribunal regarding the assessment year 2012-13. The assessing officer had added the entire amount received during the year, including share capital and premium, as unexplained credit under Section 68 of the Act. The CIT(A) reversed this order, which was further affirmed by the tribunal. The assessing officer concluded that the share subscriptions were part of a pre-meditated plan involving the assessee company. The CIT(A) found that the assessment order should have been passed only under Section 143(3) of the Act, not both under Section 144 and 143(3). Additionally, the CIT(A) directed the assessing officer to verify the claim that investments were made by the assessee's sister concern and group companies. The tribunal, after examining the credit worthiness of the investors, found that the genuineness of the investments was sufficiently established by the assessee.

Issue 2:
The Tribunal examined whether the assessee had established the identity and credit worthiness of the share-holders. The tribunal found that the share applicants were income tax assessees, filed returns of income, and made payments through account payee cheques. Their bank account details and statements were available, and they had substantial credit worthiness. The tribunal concluded that the credit worthiness and genuinity of the investments were adequately proven by the assessee before both the CIT(A) and the assessing officer. The tribunal, being the final fact-finding authority, dismissed the revenue's appeal as no substantial question of law arose for consideration.

In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose for consideration. The detailed analysis of the issues highlighted the satisfactory explanation provided by the assessee regarding share capital and premium, as well as the verification of the credentials of the share-holders, leading to the dismissal of the appeal.