2022 (10) TMI 1029 - AT - Income Tax

Addition u/s. 68 - unexplained cash credits of share capital and security premium received during the year - HELD THAT - Assessee failed to produce the alleged 8 parties who had subscribed to the equity shares of the assessee company. The assessee was asked to explain the cash credits received by it during the year. The assessee failed to file necessary details to explain the source of alleged cash credit and also unable to prove identity, creditworthiness of the cash creditors as well as genuineness of the transaction. The assessee company has miserably failed to explain the source of alleged cash credit. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details at any stage. Consistently escaping from appearing/producing the alleged parties before the ld. AO and the appellate authority(ld.CIT-A) indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium and, therefore, the provisions of section 68 of the Act have rightly been invoked by ld. AO and alleged sum is the unaccounted income of assessee, which has been routed in the books through bogus/accommodation entry in the form of share capital and security premium. No infirmity in the finding of the ld. CIT(A) confirming the addition made u/s. 68 of the Act. Thus, all the grounds of appeal raised by the assessee are dismissed.

Summary

Issues:
Challenge to the addition made under section 68 of the Income-tax Act for unexplained cash credits of share capital and security premium received during the assessment year 2012-13.

Analysis:
The appeal was directed against the order passed by the Commissioner of Income-tax, Appeals regarding the assessment year 2012-13. The appellant did not appear, leading to an ex parte adjudication based on available material and the assistance of the Departmental Representative. The grounds of appeal raised by the assessee included challenges to the order of the Commissioner, alleging errors in sending notices to the wrong address and in confirming the Income Tax Officer's view on the company's business. The primary issue revolved around the addition of Rs. 32,51,00,000 as unexplained cash credit under section 68 without proper opportunities for examining records.

The assessee, a private limited company engaged in shares and securities, filed returns showing income of Rs. 1890, later revised to the same amount. The Assessing Officer (AO) found discrepancies in the share capital and security premium received by the company, leading to notices under section 133(6) remaining uncomplied with. The AO, unsatisfied with the genuineness of the capital and premium, made additions under section 68 for unexplained credits, along with other disallowances.

The assessee, challenging only the addition under section 68, appealed to the Commissioner, who passed an ex parte order due to the assessee's absence during hearings. The Tribunal noted the substantial share capital and premium raised by the company, raising doubts about the transactions' genuineness. The failure to produce parties involved in the transactions, explain the source of cash credits, and prove the transactions' authenticity led to the invocation of section 68 by the AO. The Tribunal upheld the Commissioner's decision, dismissing all grounds of appeal raised by the assessee.

The Tribunal found no infirmity in the Commissioner's decision to confirm the addition under section 68, considering the lack of plausible explanations and evidence provided by the assessee. The appeal was ultimately dismissed, affirming the addition of Rs. 32,51,00,000 as unexplained cash credits.