2011 (6) TMI 755 - AT - Income Tax

Appellate Tribunal rules in favor of assessee in unexplained cash credit case

Income Tax Officer, Ward 18 (1), Versus M/s Ultra Modern Exports Pvt. Ltd.,

The Appellate Tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals), ruling in favor of the assessee. The Tribunal found that the ... - Issues involved: The issue raised is the deletion of an addition of Rs. 4,34,00,000/- on account of unexplained credits in the form of share application money.Details of the Judgment:Issue 1: Unexplained credits in the form of share application moneyThe Assessing Officer found that the assessee received Rs. 4,34,00,000/- as unexplained credits in the form of share application money. Notices u/s. 133(6) sent to investors were returned as underserved. The Assessing Officer noted discrepancies in the income declared by investors and observed large transfers before issuing cheques. Consequently, the Assessing Officer treated the share capital amount as unexplained cash credits and added it to the assessee's income.Issue 2: Appeal by the assesseeUpon the assessee's appeal, the Ld. Commissioner of Income Tax (Appeals) noted that the assessee provided necessary documents like confirmation certificate, bank statements, income tax returns, audited balance sheet, and additional information as required under the Companies Act. The Ld. Commissioner observed that the Assessing Officer did not doubt the identity of the share applicants, a crucial parameter to be fulfilled by the assessee. Referring to a decision of the Hon'ble Jurisdictional High Court, the Ld. Commissioner held that once the identity of creditors/share applicants is proven, the onus shifts to the Revenue. The Ld. Commissioner concluded that the addition was misconceived and should be deleted.Issue 3: Decision of the Appellate TribunalThe Appellate Tribunal upheld the Ld. Commissioner's order, stating that the assessee had established the identity of share applicants and provided necessary documentation. Citing a relevant Supreme Court decision, the Tribunal emphasized that if share application money is received from alleged bogus shareholders, the Department can proceed to reopen individual assessments but cannot treat it as undisclosed income of the assessee.In conclusion, the appeal filed by the Revenue was dismissed, and the order of the Ld. Commissioner of Income Tax (Appeals) was upheld.