2023 (11) TMI 589 - AT - Income Tax

Unexplained cash credit u/s. 68 - addition towards bogus Share Capital including premium - only contention raised by revenue is that the director of the subscriber company did not appear in response to the summons issued u/s 131 - HELD THAT - The assessee having furnished all the details and documents before the AO and the AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed 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. In view of this, even applying the ratio laid down in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd. 2019 (3) TMI 323 - SUPREME COURT impugned additions are not warranted in this case wherein held once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same In the case of Commissioner of Income-tax vs. Manish Build Well (P.) Ltd. 2011 (11) TMI 35 - DELHI HIGH COURT has held that the CIT(A) is statutory first appellate authority and has independent power of calling for information and examination of evidences and possesses co-terminus power of assessment apart from appellate powers. However, a perusal of the impugned order of the CIT(A) shows that the 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 upheld the order of the AO in mechanical manner. The order of the ld. CIT(A) is a non-speaking order. The same is not sustainable as per law. Decided in favour of assessee.

Summary

Issues:
The appeal involves the addition of Rs. 2,06,00,000 towards Share Capital including premium as unexplained cash credit under section 68 of the Income Tax Act, 1961.

Details of Judgment:

Issue 1: Addition of Share Capital and Premium as Unexplained Cash Credit
The assessee contested the addition of Rs. 2,06,00,000 made by the Assessing Officer, arguing that it was the opening balance of the year and not pertaining to the year under consideration. The assessee provided detailed documentation regarding the share capital and premium received, including identity and creditworthiness of the creditor, genuineness of the transaction, and source of funds. The share subscriber, M/s Primerose Traders Pvt. Ltd., had undergone assessment and paid due taxes, which the Assessing Officer failed to consider. The Tribunal noted that the AO did not conduct any independent inquiry to verify the genuineness of the transactions, shifting the burden of proof back to the AO as per legal precedents.

Issue 2: Failure to Consider Director's Response
The lower authorities contended that the director of the subscriber company did not appear in response to the summons issued. However, the assessee argued that the director had responded and provided required details, and it was not under the assessee's control to compel personal presence. Legal precedents were cited to support the contention that once documentary evidence is produced to establish the existence of subscriber companies, the burden shifts to the revenue to prove otherwise.

Conclusion:
The Tribunal found that the lower authorities failed to justify the additions made, ordering them to be deleted. It was observed that the Assessing Officer did not conduct a proper inquiry, and the CIT(A) upheld the order in a mechanical manner without discussing material facts. The appeal of the assessee was allowed, and the impugned additions were ordered to be deleted.