2012 (3) TMI 523 - AT - Income Tax

Tribunal upholds deletion of additions under section 68, invalidates reassessment. Assessee's evidence deemed genuine.

The Tribunal dismissed the departmental appeals and Cross Objections, upholding the CIT (A)'s deletion of additions under section 68 of the Income Tax Act ... - Issues Involved:1. Deletion of additions made u/s 68 of the IT Act.2. Validity of reassessment proceedings initiated by the Assessing Officer.Summary:Issue 1: Deletion of Additions Made u/s 68 of the IT ActThe revenue contested the deletion of additions made by the Assessing Officer (A.O) u/s 68 of the IT Act for Assessment Years 2002-03, 2003-04, and 2004-05. The CIT (A) had deleted the additions on the grounds that the share application money received by the assessee from its associate concern was genuine and duly reflected in the balance sheets of both parties. The CIT (A) found that the assessee had provided sufficient evidence, including confirmation letters, bank statements, and income tax returns, to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal upheld the CIT (A)'s decision, noting that no additional evidence was considered and that the A.O had not pointed out any discrepancies in the provided documents. Consequently, the Tribunal dismissed the departmental appeals, affirming that the amounts could not be treated as unexplained cash credits u/s 68.Issue 2: Validity of Reassessment ProceedingsThe assessee challenged the validity of the reassessment proceedings initiated by the A.O based on an audit objection. The CIT (A) upheld the reassessment proceedings, but the Tribunal found that the reassessment was based on the incorrect application of Section 2 (22)(e) of the IT Act. The Tribunal noted that the assessee was not a registered shareholder of the payer company, and thus, Section 2 (22)(e) was not applicable, referencing the Special Bench decision in ACIT vs. Bhaumik Colours Pvt. Ltd. and the Delhi High Court decision in CIT vs. Ankitech (P) Ltd. The Tribunal concluded that the income could not be said to have escaped assessment on this basis, and thus, the reassessment proceedings were invalid. As a result, the Cross Objections filed by the assessee became infructuous and were dismissed.Conclusion:The Tribunal dismissed both the departmental appeals and the Cross Objections, affirming the CIT (A)'s deletion of additions u/s 68 and invalidating the reassessment proceedings.The order was pronounced in the open court on 07.03.2012.