2022 (2) TMI 1024 - AT - Income Tax

Addition u/s 68 - assessee could not substantiate the identity and creditworthiness of the Investor Companies and the genuineness of the transaction and the reason for charging huge premium - HELD THAT - It is the settled proposition of law that for allowing a cash credit, the onus is always on the assessee to substantiate with evidence to the satisfaction of the A.O. regarding the identity and creditworthiness of the Investor/Share applicants and the genuineness of the transaction. In the instant case, despite numerous opportunities granted by the A.O, the assessee failed to substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the share applicants and the genuineness of the transaction. It is also not understood as to how the assessee company was able to get share premium of ₹ 49,990/- per share for a ₹ 10/- per share when it is not doing any worthwhile business. Even before the Ld. CIT(A), despite number of opportunities granted, the assessee never bothered to appear before her and was seeking adjournment under one pretext or the other just to derail the appeal process Assessee failed to substantiate the identity and creditworthiness of the share applicants/ investors and the genuineness of the transaction and the reason for charging huge premium of ₹ 49,990/- per share of ₹ 10/-, we do not find any infirmity in the order of the Ld. CIT(A) in upholding the addition made by the A.O. - Decided against assessee.

Summary

Issues: Non-compliance by the assessee leading to ex-parte order, addition of share application money under section 68 of the Income Tax Act, 1961, confirmation of additions by the Ld. CIT(A), grounds of appeal raised by the assessee, and final decision by the Tribunal.

Non-Compliance and Ex-Parte Order:
The appeal was filed against the order of the Ld. CIT(A) relating to A.Y. 2012-13. Despite multiple adjournments granted to the assessee, there was no appearance on behalf of the assessee during the hearing. The A.O. noted lack of compliance by the assessee in providing necessary details and documents, leading to an ex-parte decision. The Ld. CIT(A) observed that the assessee showed disinterest in pursuing the appeal, failing to justify the share capital introduction of ?10 crores.

Addition of Share Application Money:
The A.O. added ?10 crores to the total income of the assessee under section 68 of the Income Tax Act, 1961, as the assessee failed to substantiate the identity, creditworthiness of Investor Companies, and the genuineness of the transaction. The share subscribers did not provide confirmations, and the share value was questioned due to a high premium of ?49,990 per share of ?10. The Ld. CIT(A) upheld the A.O.'s decision, citing the deliberate non-compliance of the assessee.

Grounds of Appeal and Tribunal's Decision:
The assessee raised grounds challenging the ex-parte order, the confirmation of the A.O.'s decision, and the addition of share application money. The Tribunal reviewed the A.O. and Ld. CIT(A) orders, finding no fault in upholding the addition. The Tribunal emphasized the onus on the assessee to substantiate cash credits, which the assessee failed to do despite opportunities. The Tribunal dismissed the grounds raised by the assessee, upholding the Ld. CIT(A)'s decision to confirm the addition made by the A.O.

This detailed analysis covers the non-compliance issue leading to an ex-parte order, the addition of share application money under section 68, the grounds of appeal raised by the assessee, and the final decision by the Tribunal, providing a comprehensive understanding of the legal judgment.