2015 (5) TMI 923 - AT - Income Tax

Tribunal remands unexplained credits issue to Assessing Officer for fresh adjudication under Section 68.

The Tribunal allowed the Revenue's appeal, remanding the issue of unexplained credits under Section 68 back to the Assessing Officer for fresh ... Unexplained credits in the books of account u/s 68 - CIT(A) deleted the addition - Held that:- AO denied opportunity of being heard for the assessee and the CIT(A) wrongly shifted onus on the revenue authorities and misunderstood the meaning of onus with regard to section 68 of the Act. Hence, we are of the considered opinion that the issue of share application money was not adjudicated by the lower authorities as per provisions of section 68 of the Act and as per ratio and proposition laid down in the case of CIT vs MAF Academy P. Ltd. (2013 (12) TMI 13 - DELHI HIGH COURT) wherein it was held that the onus to prove genuineness, creditworthiness and identity of the transaction is on the assessee and mere production of incorporation details, PAN or income tax returns may not be sufficient when surrounding and attending facts predicate a cover up. Therefore, restore the issue to the file of AO for de novo adjudication only on the issue of alleged share application money after affording due opportunity of hearing for the assessee - Decided in favour of revenue for statistical purposes. Issues Involved:1. Deletion of addition made by the AO on account of unexplained credits under Section 68 of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Deletion of Addition Made by the AO on Account of Unexplained Credits Under Section 68 of the Income Tax Act, 1961The primary issue in this case revolves around the deletion of an addition of Rs. 25,00,000 made by the Assessing Officer (AO) on account of unexplained credits under Section 68 of the Income Tax Act, 1961. The Revenue contended that the CIT(A) erred in deleting the addition, arguing that the assessee failed to discharge its onus to prove the identity, genuineness, and creditworthiness of the persons providing the share application money.Arguments by the Revenue:The Revenue emphasized that the assessee did not produce the individuals who provided the share application money during the assessment year. The AO, relying on various decisions including CIT vs MAF Academy P. Ltd., argued that failure to produce evidence or avoid appearance before the AO should lead to an adverse inference against the assessee. The Revenue further contended that merely providing PAN or assessment particulars does not establish the identity of the persons. The AO concluded that the transactions were not genuine and the assessee failed to prove the creditworthiness and genuineness of the share application money providers.Arguments by the Assessee:The assessee argued that the AO made the additions with a predetermined mindset, disregarding the evidence and explanations provided. The assessee highlighted that it had requested additional time to submit further information, which was denied by the AO. The assessee submitted copies of confirmations, bank statements, and income tax returns of the share application money providers, arguing that these documents were sufficient to discharge the onus under Section 68. The assessee relied on the Supreme Court's decision in CIT vs Lovely Exports (P) Ltd., which held that if the share application money is received from alleged bogus shareholders whose names are provided to the AO, the department is free to proceed against the individual shareholders but cannot treat the amount as undisclosed income of the company.Tribunal's Findings:The Tribunal noted that the assessee had indeed furnished evidence such as confirmations, bank statements, and income tax returns of the share application money providers. However, the AO denied the assessee's request for an additional day to submit further information due to the impending time-barred status of the assessment. The CIT(A) granted relief to the assessee, holding that the AO failed to discharge his onus to prove that the credits were mere accommodation entries.The Tribunal referred to the Delhi High Court's decision in CIT vs MAF Academy P. Ltd., which emphasized that the onus to prove the genuineness, creditworthiness, and identity of the transactions lies on the assessee. Mere production of incorporation details, PAN, or income tax returns may not suffice if surrounding facts indicate a cover-up. The Tribunal found that the CIT(A) misunderstood the onus under Section 68 and wrongly shifted the burden onto the Revenue.Conclusion:The Tribunal concluded that the issue of share application money was not adjudicated by the lower authorities in accordance with the provisions of Section 68 and the relevant judicial precedents. Therefore, the Tribunal restored the issue to the file of the AO for de novo adjudication, directing the AO to consider the matter afresh in light of the Delhi High Court's judgment in CIT vs MAF Academy P. Ltd. The appeal of the Revenue was allowed for statistical purposes.Order:The appeal of the Revenue was allowed, and the issue was remanded back to the AO for fresh adjudication. The order was pronounced in the open court on 08.05.2015.