2012 (11) TMI 7 - AT - Income Tax

Tribunal upholds Rs.80,00,000 addition under Income Tax Act Section 68.

INCOME TAX OFFICER Versus M/s ONASSIS AXIES PVT LTD

INCOME TAX OFFICER Versus M/s ONASSIS AXIES PVT LTD - TMI Issues Involved:1. Deletion of addition of Rs.80,00,000/- made under Section 68 of the Income Tax Act on account of income from undisclosed sources.2. Evaluation of the genuineness, identity, and creditworthiness of the share application money received from three parties.3. Validity of the Assessing Officer's (AO) investigation and the findings regarding discrepancies in bank statements.4. Applicability of the decision in the case of Lovely Exports Pvt. Ltd. by the CIT(A).Issue-wise Detailed Analysis:1. Deletion of Addition under Section 68:The primary issue in this appeal was whether the CIT(A) was correct in deleting the addition of Rs.80,00,000/- made by the AO under Section 68 of the Income Tax Act. The AO had added this amount as income from undisclosed sources, questioning the share application money received from three entities: M/s. Hub Services P. Ltd., M/s. R.S. Associates P. Ltd., and M/s. Transaction India P. Ltd.2. Genuineness, Identity, and Creditworthiness:The AO required the assessee to provide details to establish the genuineness of the transactions, identity, and creditworthiness of the parties from whom the share application money was received. The assessee submitted various documents, including share applications, confirmations, affidavits, resolutions, Memorandum & Articles of Association, PAN cards, and income tax returns. However, the AO found discrepancies in the bank statements of these companies, which raised doubts about the genuineness of the transactions.3. Investigation and Findings by AO:The AO issued summons under Section 131 to the three companies, which were returned unserved with remarks 'No such person.' The AO also obtained bank statements from Mahamedha Urban Cooperative Bank Ltd., Noida, revealing that the accounts of M/s. Hub Services P. Ltd. and M/s. R.S. Associates P. Ltd. were opened after the dates on which the pay orders were issued. In the case of M/s. Transaction India P. Ltd., the pay order was issued after depositing cash into the account, further questioning the genuineness of the transaction. The AO concluded that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions.4. Applicability of Lovely Exports Pvt. Ltd. Decision:The CIT(A) deleted the addition relying on the Supreme Court decision in Lovely Exports Pvt. Ltd., which held that if the identity of shareholders is established, no addition can be made in the hands of the company. The CIT(A) argued that the AO did not bring any material evidence to disprove the assessee's claim and that the identity of the shareholders was established through PAN numbers and income tax returns.Tribunal's Findings:The Tribunal noted that the assessee failed to produce the directors of the share applicant companies or provide their latest addresses. The Tribunal found significant discrepancies in the bank statements and the issuance of pay orders, which could not be explained satisfactorily by the assessee. The Tribunal observed that the CIT(A) ignored these discrepancies and the AO's findings. The Tribunal also highlighted that the decision in Lovely Exports Pvt. Ltd. did not apply as the assessee failed to prove the creditworthiness and genuineness of the transactions.Conclusion:The Tribunal concluded that the AO was justified in making the addition under Section 68 of the Act, as the assessee failed to discharge the onus of proving the identity, creditworthiness, and genuineness of the share application money. The Tribunal set aside the order of the CIT(A) and restored the AO's order, allowing the Revenue's appeal.Result:The appeal filed by the Revenue was allowed, and the decision was pronounced in the Open Court on 18.5.2012.