2022 (10) TMI 562 - AT - Income Tax

Addition u/s 68 - Bogus share capital including share premium - HELD THAT - AO in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before the AO and AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the AO to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. A perusal of the impugned order of the ld. CIT(A) shows that the ld. CIT(A) has not discussed anything about the material facts of the case. He has not pointed out any defect and discrepancy in the evidences and details furnished by the assessee but simply cited certain case laws even without pointing out as to how these case laws were applicable to the facts and circumstances of this case. The order of the CIT(A) is a non-speaking order. By simply reproducing the contents of the case laws without discussing about their application on the facts of the case, in our view, would not make the order of the ld. CIT(A) justifiable speaking order and hence, the same is not sustainable as per law. No justification on the part of the lower authorities in making the impugned additions and the same are accordingly ordered to be deleted. - Appeal of assessee allowed.

Summary

Issues Involved:
1. Addition of Rs. 2,15,00,000/- as unexplained income under Section 68 of the Income Tax Act.
2. Addition of Rs. 72,224/- under Section 14A read with Rule 8D.

Detailed Analysis:

Issue 1: Addition of Rs. 2,15,00,000/- as Unexplained Income under Section 68
Facts of the Case:
The assessee received share capital including share premium of Rs. 2.15 crores from seven different private limited companies. The Assessing Officer (AO) issued summons under Section 131 to the directors of these companies to verify the identity, creditworthiness, and genuineness of the transaction. The summons were not complied with, leading the AO to add the amount as unexplained income under Section 68. The CIT(A) confirmed this addition.

Assessee's Submissions:
1. Complete details of the identity and creditworthiness of the shareholders and genuineness of the transactions were filed before the AO.
2. Notices under Section 133(6) were issued to all share applicants, and they complied by submitting financials, bank statements, source of funds, ITRs, etc.
3. The shareholders had substantial net worth, and some were assessed under Section 143(3) on a substantive basis.
4. The assessee argued that the non-appearance of directors cannot be a ground for addition if all documentary evidence is provided.

Tribunal's Observations:
1. The AO acknowledged receipt of relevant documents but insisted on the personal appearance of the directors without pointing out discrepancies in the documents.
2. The AO did not mention the names of the share subscriber companies or specify which transactions were not genuine.
3. The Tribunal noted that adverse inference could not be taken solely based on the non-appearance of directors.
4. The Tribunal relied on the decision of the Bombay High Court in the case of "PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd." and the jurisdictional Calcutta High Court in "Crystal networks (P) Ltd. vs CIT".

Conclusion:
The Tribunal found that the assessee had discharged the initial burden of proving the identity and creditworthiness of the share subscribers and the genuineness of the transaction. The AO did not conduct an independent enquiry nor pointed out any discrepancies. The Tribunal held that the addition made by the lower authorities was unjustified and ordered its deletion.

Issue 2: Addition of Rs. 72,224/- under Section 14A read with Rule 8D
Facts of the Case:
The CIT(A) confirmed the addition of Rs. 72,224/- under Section 14A read with Rule 8D.

Assessee's Submissions:
The assessee did not specifically address this issue in the detailed submissions provided.

Tribunal's Observations:
The Tribunal did not provide a detailed analysis of this issue, focusing primarily on the major issue of the addition under Section 68.

Conclusion:
Given the lack of specific arguments and detailed analysis on this point, the Tribunal's decision on this issue remains implicit in the overall judgment, which was in favor of the assessee.

Final Order:
The appeal of the assessee was allowed, and the additions made by the lower authorities were deleted. The Tribunal emphasized the importance of the AO conducting an independent enquiry and pointed out that the CIT(A)'s order was non-speaking and not sustainable as per law.