2023 (3) TMI 464 - AT - Income Tax

Addition u/s 68 - share capital introduced during the previous year unexplained - identity creditworthiness and genuineness not proved - assessee has failed to substantiate the genuineness of transaction and creditworthiness of the share holding company - HELD THAT - AO has not properly applied his mind to the facts details and evidence filed on record rather the assessment was framed in a hurried manner as the time limit for framing of the assessment was expiring. However the ld. CIT(A) has duly taken note of the facts details and evidence on the file and noted that the share application money was received from one party which was a group company of the assessee company who was substantially interested in the business and development of the assessee company and further the assessee had duly proved the identity creditworthiness and genuineness of the transactions. The ld. D/R has failed to controvert the factual findings of the ld. CIT(A). Appeal of the revenue stands dismissed.

Summary

Issues: Appeal against deletion of addition made under section 68 of the Income Tax Act for failure to substantiate transaction genuineness and creditworthiness.

Analysis:
1. Issue 1 - Deletion of Addition under Section 68:
- The Assessing Officer added Rs.3,53,32,000 as unexplained income due to non-compliance by the assessee in verifying share capital received from a group company.
- The assessee contended before the CIT(A) that all required details were furnished, including identity proofs, financial statements, and documents establishing the genuineness of the transaction.
- The CIT(A) accepted the contentions, noting that the share subscriber was a group company with common directors, and all necessary documents were provided to establish identity and creditworthiness.
- The CIT(A) observed that the AO did not consider documents submitted by the group company, which included bank statements, audited accounts, and sources of funds for investment.
- The CIT(A) found that the AO's assertion of non-compliance by the assessee was incorrect, and the onus under section 68 was discharged satisfactorily.
- The CIT(A) concluded that the share capital and premium could not be added as income, especially when received from a group company with no discrepancies in the evidence.

2. Issue 2 - Lack of Proper Assessment by AO:
- The note by the AO at the end of the assessment order indicated a hurried assessment due to time constraints, raising doubts on the thoroughness of the assessment process.
- The CIT(A) noted that the AO did not properly apply his mind to the evidence and details on record, leading to a rushed assessment.
- The CIT(A) emphasized that the share application money was from a group company interested in the assessee's business, and the identity, creditworthiness, and genuineness of the transactions were adequately proven.
- The Dispute Resolution failed to challenge the factual findings of the CIT(A), indicating a lack of substantial grounds for the appeal.
- The Tribunal dismissed the revenue's appeal, highlighting the importance of a thorough assessment process and proper consideration of evidence.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition under section 68, emphasizing the importance of substantiating the genuineness of transactions and creditworthiness. The judgment underscored the need for meticulous assessment procedures and thorough consideration of evidence to ensure fair and accurate tax assessments.