2012 (11) TMI 752 - AT - Income Tax

Tribunal upholds decision to delete Rs. 21,00,000 addition under Sec. 68 of I.T. Act

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 21,00,000 under Section 68 of the I.T. Act, 1961, dismissing the Revenue's appeal. ... Addition on account of share capital u/s 68 of the I.T. Act - credit worthiness and identity of creditors and genuineness of the transactions – Held that:- After the assessee filed the requisite details of the share applicant companies as far as the onus upon the assessee is concerned it stood discharged - initially in proceedings considering the issue u/s 68 the initial burden of proof lies upon the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN numbers or Income tax assessment number and shows the genuineness of the transaction by showing money in his books either by account payee cheque or by draft or by any other mode then the onus of proof would shift to the Revenue. AO of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the AO should enquire from the AO of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the AO of the creditor but instead of adopting such course, the AO himself could not enter into the return of the creditor and brand the same as unworthy of credence – in favor of assessee Issues Involved:1. Deletion of addition of Rs. 21,00,000/- on account of share capital under Section 68 of the I.T. Act, 1961.2. Ignoring findings under Section 68 by the AO regarding the creditworthiness, identity of creditors, and genuineness of transactions.Detailed Analysis:1. Deletion of Addition of Rs. 21,00,000/- on Account of Share Capital under Section 68 of the I.T. Act, 1961:The Revenue appealed against the CIT(A)'s order, which deleted the addition of Rs. 21,00,000/- made by the AO under Section 68 of the I.T. Act, 1961. The AO had required the assessee to provide details of the capital funds introduced, amounting to Rs. 1.40 crores, including transactions with Tashi Contractors P. Ltd. (Rs. 20,00,000) and Madan Electronics P. Ltd. (Rs. 1,00,000). The AO concluded that these entities were 'accommodation entry operators' based on statements from Mukesh Gupta, who admitted that their activities were limited to providing accommodation entries. The AO argued that the share capital raised was unexplained cash credit under Section 68.2. Ignoring Findings Under Section 68 by the AO Regarding the Creditworthiness, Identity of Creditors, and Genuineness of Transactions:The CIT(A) deleted the addition after considering the assessee's submissions, which included confirmation letters, bank accounts, PAN details, ROC filings, and reliance on judgments such as CIT vs. Lovely Exports P. Ltd. The CIT(A) concluded that the assessee had discharged the initial burden of proving the identity and genuineness of the transactions. The Revenue argued that the CIT(A) ignored the fact that cash deposits were made before issuing cheques and that the assessee did not discharge the onus of proving the creditworthiness of the parties.Tribunal's Observations and Conclusion:The Tribunal evaluated the submissions and evidence, including confirmation letters, bank statements, PAN details, and ROC filings. The Tribunal agreed with the CIT(A) that the assessee had discharged the initial burden of proof. The Tribunal noted that the AO did not confront the assessee with the statements of Mukesh Gupta and Mahesh Garg, which was a procedural lapse. The Tribunal emphasized that the onus of proof is not static and shifts to the Revenue once the assessee provides sufficient evidence of identity and genuineness. The Tribunal cited judgments supporting this view, including CIT vs. Dwarkadhish Investment Ltd., Lovely Exports P. Ltd., and CIT vs. Value Capital Services P. Ltd.The Tribunal rejected the Revenue's request to restore the issue for further verification, stating that the AO should have inquired with the AO of the creditor companies instead of questioning the assessee. The Tribunal concluded that the CIT(A) correctly deleted the addition and dismissed the Revenue's appeal.Final Judgment:The appeal of the department was dismissed, upholding the CIT(A)'s decision to delete the addition of Rs. 21,00,000/- under Section 68 of the I.T. Act, 1961.