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2025 (2) TMI 536 - AT - Income TaxAddition u/s 68 - treating the share capital / share premium as unexplained cash credit on the ground that summons issued u/s 131 were not complied with besides making other additions - HELD THAT - The case of the assessee is squarely covered by the decisions of Crystal Networks Pvt. Ltd. 2010 (7) TMI 841 - KOLKATA HIGH COURT wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions the fact that summon issued were returned un-served or no body complied with them is of little significance to prove the genuineness of the transactions and identity and creditworthiness of the creditors. As relied on Orchid Industries (P) Ltd. 2017 (7) TMI 613 - BOMBAY HIGH COURT by holding that provisions of section 68 cannot be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN financial and bank statements showing share application money. The facts of the assessee are squarely covered by the above decisions wherein it has been held that addition u/s 68 cannot be made merely on the ground of non-compliance to summon issued u/s 131 of the Act when the assessee and subscribers have filed all the evidences. Pertinent to mention that the AO has not submitted the remand report before the ld. CIT(A) despite repeated reminders. Appeal of the Revenue is dismissed.
ISSUES PRESENTED and CONSIDERED
The core issue in this case was whether the deletion of the addition of 15,81,84,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act was justified. This addition was initially made on the grounds that the share capital/share premium raised by the assessee was treated as unexplained cash credit due to non-compliance with summons issued under Section 131 of the Act. ISSUE-WISE DETAILED ANALYSIS 1. Legal Framework and Precedents The legal framework revolves around Section 68 of the Income Tax Act, which deals with unexplained cash credits. The section requires the assessee to prove the identity, creditworthiness of the creditors, and the genuineness of the transaction. The precedents cited in this case include decisions from the Supreme Court and various High Courts, which have established that mere non-compliance with summons does not automatically justify an addition under Section 68 if the assessee has provided sufficient evidence to prove the transaction's genuineness. 2. Court's Interpretation and Reasoning The Tribunal interpreted that the mere non-appearance of directors in response to summons under Section 131 does not invalidate the evidences provided by the assessee. The Tribunal emphasized that the assessee had submitted comprehensive evidence, including names, addresses, PANs, audited accounts, and bank statements, to establish the identity and creditworthiness of the subscribers, as well as the genuineness of the transactions. 3. Key Evidence and Findings The assessee provided substantial documentation to prove the identity and creditworthiness of the subscribers, including responses to notices issued under Section 133(6) of the Act. The Tribunal noted that the AO failed to conduct meaningful investigations beyond issuing summons and did not respond to the remand report requests from the CIT(A). 4. Application of Law to Facts The Tribunal applied the principles from precedents such as CIT Vs. Orissa Corporation Pvt. Ltd., which held that the burden of proof on the assessee is discharged upon providing necessary details of the creditors. The Tribunal found that the assessee had indeed discharged this burden by providing all requisite information and documentation. 5. Treatment of Competing Arguments The Tribunal considered the arguments from both the assessee and the Revenue. The Revenue argued that the non-compliance with summons indicated a lack of creditworthiness. However, the Tribunal found this argument insufficient, given the extensive evidence provided by the assessee. The Tribunal also noted the CIT(A)'s detailed findings and the lack of response from the AO to the remand report requests. 6. Conclusions The Tribunal concluded that the CIT(A) was correct in deleting the addition made by the AO. The decision was based on the assessee's fulfillment of the requirements under Section 68, as well as the AO's failure to conduct further investigations or respond to remand reports. SIGNIFICANT HOLDINGS The Tribunal upheld the CIT(A)'s decision to delete the addition under Section 68, emphasizing that:
Verbatim quotes from the judgment include references to the CIT(A)'s findings and the Tribunal's reliance on precedents, such as: "The mere non-appearance/production of directors of the assessee company before the ld. AO cannot be a ground for making the addition u/s 68 of the Act." The Tribunal's final determination was to dismiss the Revenue's appeal, thereby upholding the CIT(A)'s order in favor of the assessee.
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