2014 (10) TMI 427 - AT - Income Tax

Tribunal Upheld CIT(A)'s Decision on Share Applicants' Identity

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. The Tribunal found the assessee had adequately proven the identity, ... Addition of cash credit u/s 68 – Genuineness of the transactions, identity of the cash creditor and creditworthiness of the cash creditors - AO was of the view that the assessee had increased share capital to the tune of ₹ 3 crores - Held that:- During the course of search, relevant to AY 2009-10, no incriminating documents were found in Kamdhenu group cases - appellant filed confirmation of PAN No. addresses of the subscribers & company master detail of ROC - The share capital was received through proper banking channels - The AO collected information u/s 133(6) of the Act, which was served on all the subscribers - therefore, these are the sufficient proof of identity, genuineness and creditworthiness of the subscribers - AO heavily relied upon the Inspector's report, which was against the natural justice as the copy was provided on 06/6/2011 to the appellant whereas assessment order was completed by the AO - Jawahar market is evident from the copy of bank account of subscriber, on which this address had been mentioned as well as on master detail of ROC - The share capital was subscribed in FY 2005-06 and inquiries were made in FY 2010-11 - There is a time gap of near about 5 years, the share applicant might have changed their addresses, which could be verified from the ROC by the AO to substantiate his findings, which has not been done by him - CIT(A) has called for remand report from the AO on furnishing of copy of bank account of M/s Megatronics Systems Pvt. Ltd. at the time of appellate proceedings – revenue has not controverted the findings given by the CIT(A) – Decided against revenue. Issues Involved:1. Deletion of addition of Rs. 2,00,00,000/- made by the A.O. under Section 68 of the IT Act on account of share application money and premium received.2. Whether the identity, genuineness, and creditworthiness of the share applicants were established.3. Reliance on the addresses given in bank statements and ROC details.4. Compliance with judicial pronouncements, particularly the case of CIT Vs. Oasis Hospitalities Pvt. Ltd.Issue-wise Detailed Analysis:1. Deletion of Addition under Section 68:The appeal was filed by the Revenue against the order of the CIT(A), Central, Jaipur, which deleted the addition of Rs. 2,00,00,000/- made by the Assessing Officer (A.O.) under Section 68 of the Income Tax Act, 1961. The A.O. had made this addition on account of share application money and premium received from various companies, questioning their identity, genuineness, and creditworthiness.2. Identity, Genuineness, and Creditworthiness:The A.O. observed that the assessee had increased its share capital by Rs. 3 crores during the year under consideration. The A.O. provided an opportunity to the assessee to prove the genuineness, identity, and creditworthiness of the cash creditors. The assessee submitted various details, including ledger accounts and confirmations. However, the A.O.'s Inspector reported that the shareholders did not exist at the given addresses. The A.O. concluded that mere confirmations, without verifiable signatures and the presence of directors, were insufficient, and thus, added Rs. 2 crores as undisclosed income under Section 68.3. Reliance on Addresses in Bank Statements and ROC Details:The CIT(A) allowed the appeal, noting that the appellant had filed names, addresses, PAN numbers, and current confirmations for the eight private limited companies that subscribed to the share capital. The CIT(A) observed that the addresses provided were consistent with the bank statements and ROC details. The CIT(A) found the Inspector's report unreliable, as it did not consider the existence of 'Jawahar Market' and other address details verified from bank statements and ROC. The CIT(A) noted that the A.O. did not find any adverse facts related to the subscription of the share application money from these companies.4. Compliance with Judicial Pronouncements:The CIT(A) referred to the legal position established by various courts, including the Hon'ble Delhi High Court in CIT Vs. Sophia Finance Ltd., which held that capital receipts in the names of genuine taxpayers introduced in the books of account of the assessee should be assessed in the hands of such an assessee. The CIT(A) also considered the decision in the case of CIT Vs. Kamdhenu Steel, where the Hon'ble Delhi High Court held that the assessee had discharged its initial onus by providing registration details, confirmations, and bank account details of the share applicants.Conclusion:The Tribunal upheld the order of the CIT(A), dismissing the Revenue's appeal. It was noted that the assessee had provided sufficient proof of identity, genuineness, and creditworthiness of the share applicants through PAN numbers, ROC details, and banking channels. The Tribunal found that the A.O. relied heavily on the Inspector's report without verifying the addresses from the ROC and did not provide the report to the assessee in a timely manner. The Tribunal concluded that the CIT(A) rightly deleted the addition made by the A.O., as the assessee had discharged its onus of proof. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 28.8.2014.