2013 (7) TMI 162 - AT - Income Tax

Tribunal upholds CIT decision on Income-tax Act Section 68 addition, emphasizes burden of proof shift

The Tribunal upheld the CIT (Appeals) decision to delete the addition of Rs. 1,10,00,000 made under Section 68 of the Income-tax Act, 1961, as the ... Unaccounted cash credit - Addition u/s 68 - CIT(A) deleted the addition - Held that:- The assessee has received share application and furnished full particulars of the same before the AO. The identity of the subscriber is proved beyond doubt. The details of income-tax returns were also field before the AO. Confirmations were also filed before Assessing Officer either directly by investor or by assessee. The copy of the share application form was also furnished. The payments have been made by the account payee cheques through banking channels. In such a situation, the genuineness of the transaction is also established. Once the assessee has furnished the income-tax particulars of the concerned subscribers then the Assessing Officer is duty bound to investigate the creditworthiness of the subscribers. All these facts show that the assessee was able to discharge the onus lay on it in terms of section 68. Thus no fault in the order of CIT (A) to delete the addition - in favour of assessee. Issues Involved:1. Deletion of addition under Section 68 of the Income-tax Act, 1961.2. Assessment of the genuineness, identity, and creditworthiness of share applicants.3. Burden of proof and onus on the assessee and the revenue.4. Reliance on judicial precedents.Issue-wise Detailed Analysis:1. Deletion of Addition under Section 68 of the Income-tax Act, 1961:The revenue appealed against the CIT (Appeals) decision to delete the addition of Rs. 1,10,00,000 made by the Assessing Officer (AO) under Section 68. The AO had added this amount as unexplained cash credits. The CIT (A) deleted the addition, stating that the assessee had discharged the onus by providing all necessary information and documents, such as names, addresses, application forms, number of shares allotted, amount invested, mode of payment, cheque/DD numbers, confirmations from investors, and their income tax returns.2. Assessment of the Genuineness, Identity, and Creditworthiness of Share Applicants:The AO argued that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. The AO noted that some share applicants had cash deposits before issuing cheques and that the assessee failed to produce these applicants for verification. The CIT (A) countered that the assessee provided sufficient evidence, including confirmations and income tax returns of the investors, and that the AO's addition was based on assumptions and conjectures. The Tribunal agreed with the CIT (A), noting that the assessee had provided all relevant details and that the AO should have conducted further investigations if there were doubts about the genuineness of the transactions.3. Burden of Proof and Onus on the Assessee and the Revenue:The Tribunal emphasized that the assessee had discharged its initial onus under Section 68 by providing sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions. Once this onus was discharged, the burden shifted to the revenue to disprove the assessee's claims. The Tribunal noted that the AO had not taken any steps to verify the creditworthiness of the investors or to pursue further investigations, thus failing to discharge the burden that had shifted to the revenue.4. Reliance on Judicial Precedents:The Tribunal cited several judicial precedents to support its decision, including:- Rohini Builders vs. DCIT (192 CTR 373) and Orissa Corporation Pvt. Ltd. (159 ITR 88), which held that once the assessee provides sufficient evidence, the burden shifts to the revenue to disprove the same.- CIT vs. Lovely Exports Pvt. Ltd. (216 CTR 195), where the Supreme Court held that if the assessee provides the names and addresses of the investors, the onus shifts to the revenue to prove that the investments are not genuine.- CIT vs. Value Capital Services Pvt. Ltd. (307 ITR 344), which reiterated that the assessee's burden is to provide prima facie evidence of identity, creditworthiness, and genuineness, after which the onus shifts to the revenue.Conclusion:The Tribunal concluded that the assessee had discharged its onus under Section 68 by providing all necessary details and evidence. The AO failed to conduct further investigations to disprove the assessee's claims. Therefore, the Tribunal upheld the CIT (A)'s decision to delete the addition of Rs. 1,10,00,000 and dismissed the revenue's appeal. The judgment was pronounced in open court on April 30, 2013.