2022 (5) TMI 1095 - AT - Income Tax

Addition u/s 68 - onus to prove - addition made on Non discharge of identity of the creditors, genuineness of the transactions and creditworthiness of the creditors - HELD THAT - In the present case, the assessee has discharged a burden by proving identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Therefore, the Ld. CIT(A) by considering all the facts and circumstances of the case, the addition is deleted. Recently, the Hon ble Bombay High Court in Income Tax Appeal in the case of PCIT vs. Ami Industries (India) P. Ltd. 2020 (2) TMI 269 - BOMBAY HIGH COURT has considered the decision of the Hon ble Supreme Court in the case of PCIT v. NRA Iron Steel (P) Ltd. 2019 (3) TMI 323 - SUPREME COURT , and observed that the first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit worthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower authorities, we confirmed the order of the Tribunal. In present case, the relevant assessment year is 2012-13, which is pre-amendment period to the first proviso to section 68 of the Act introduced by Finance Act, 2012 w.e.f. 01.04.2013 as well as the assessee has placed on record the name, address, PAN, confirmations and genuineness of the transaction through banking channel, thereby, the ld. CIT(A) has deleted the addition made under section - Decided in favour of assessee.

Issues Involved:
1. Delay in filing the appeal.
2. Treatment of investments as unexplained cash credit under Section 68 of the Income Tax Act.
3. Admissibility of additional evidence under Rule 46A.
4. Compliance with principles of natural justice.
5. Applicability of amendments to Section 68 and related judicial precedents.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal by the Revenue was delayed by 116 days due to the COVID-19 pandemic. The Tribunal condoned the delay and admitted the appeal for adjudication.

2. Treatment of Investments as Unexplained Cash Credit under Section 68:
The assessee, engaged in trading and manufacturing of tiles, filed its return for the assessment year 2012-13. The Assessing Officer (AO) treated investments from two companies, Sanguine Media Ltd. and IRIS Media Works Ltd., amounting to ?3,80,00,000 as unexplained cash credits under Section 68 of the Income Tax Act, 1961, due to the absence of confirmation letters during the assessment.

3. Admissibility of Additional Evidence under Rule 46A:
The assessee presented confirmation letters from the two companies during the appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) forwarded these to the AO for a remand report, but the AO did not respond. The CIT(A) decided the appeal on merits, considering the additional evidence. The Tribunal cited the case of ACIT vs. Modi Revlon Pvt Ltd., where it was held that Rule 46A is not violated if the AO fails to respond to requests for a remand report.

4. Compliance with Principles of Natural Justice:
The CIT(A) emphasized that Rule 46A cannot override the principles of natural justice. The Supreme Court in Jute Corporation of India Ltd. v. CIT observed that appellate authorities have plenary powers similar to the original authority unless restricted by statutory provisions. The CIT(A) admitted the additional evidence, considering it vital and relevant to the case.

5. Applicability of Amendments to Section 68 and Related Judicial Precedents:
The CIT(A) noted that the amendments to Section 68, introduced by the Finance Act 2012, effective from 01.04.2013, were not applicable to the assessment year 2012-13. Prior to the amendment, proving the identity, genuineness, and creditworthiness of the entities was sufficient compliance. The CIT(A) relied on the Bombay High Court's decision in CIT-1 v. M/s Gagandeep Infrastructure Pvt. Ltd., which held that the amendment to Section 68 is prospective. The CIT(A) also referenced the Supreme Court's decision in Lovely Exports Ltd., which stated that if share application money is received from identifiable subscribers, the revenue can reopen their individual assessments if the subscribers are found bogus.

Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal found no violation of Rule 46A and agreed with the CIT(A) that the addition under Section 68 was unjustified. The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A) rightly deleted the addition.

Conclusion:
The appeal filed by the Revenue was dismissed, and the Tribunal confirmed the CIT(A)'s order, which deleted the addition of ?3,80,00,000 made under Section 68 of the Income Tax Act, 1961.

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