2016 (3) TMI 1348 - AT - Income Tax

Tribunal upholds deletion of Rs. 49 lacs addition under Income Tax Act

The Tribunal dismissed the revenue's appeal and affirmed the Commissioner of Income-tax (Appeals)'s decision to delete the addition of Rs. 49 lacs under ... Addition u/s 68 - as alleged credit worthiness of the share applicant was not proved - HELD THAT:- Addition has been made merely on the basis of assumption that as money is deposited in cash transaction is not genuine. We do not find any distinction between the transactions entered into by the assessee through banking channel or in cash unless prohibited by the law. Therefore for the purposes of applicability of section 68 of the Act both are looked at in similar manner. As possible that in transaction in cash further enquiries may be made in absence of trail which is generally available in transactions through banking channel. Assessee has adequately explained the identity, creditworthiness and genuineness of the transaction of share application money of ₹ 4851000/- deposit in cash in name of M/s. Anshu Tradex Pvt. Ltd with the assessee. Hence we confirm the order CIT (Appeals) deleting the addition u/s 68. - Decided in favour of assessee. Issues:Appeal against deletion of addition under section 68 of the Income Tax Act based on lack of creditworthiness proof and cash transactions.Analysis:1. The appeal was filed by the revenue against the deletion of an addition of Rs. 49 lacs made by the Assessing Officer (AO) under section 68 of the Income Tax Act, which was subsequently deleted by the Commissioner of Income-tax (Appeals).2. The primary issue revolved around whether the Commissioner of Income-tax (Appeals) erred in deleting the addition of Rs. 49,00,000/- under section 68 of the IT Act, 1961, despite the lack of proof regarding the creditworthiness of the share applicant.3. The second issue questioned whether the deletion of the addition was justified, considering the entire transaction was conducted in cash, raising doubts about the share applicant company's capacity to make such a payment.4. The third issue focused on the genuineness of the transaction, especially since the cash received did not reflect in the books of accounts, leading to a dispute over the legitimacy of the transaction.5. During the assessment proceedings, the assessee provided various details regarding the company from which the share capital was received, including confirmation of accounts, financial results, and affidavits. However, the AO made the addition under section 68 due to the cash nature of the transaction and unresponsive notices under section 133(6) of the Act.6. The Commissioner of Income-tax (Appeals) deleted the addition based on the complete trail of the money provided by the assessee, demonstrating the flow of funds from one entity to another, thereby establishing the identity, creditworthiness, and genuineness of the transaction.7. The revenue contested the deletion, arguing that the creditworthiness and genuineness of the transaction were not adequately proven. The revenue relied on legal precedents and emphasized the need for banking channel transactions in such cases.8. The assessee, on the other hand, presented a detailed money trail, showing the source of funds and the flow of transactions between related parties. The assessee maintained that the identity, creditworthiness, and genuineness of the transaction were sufficiently established.9. The Tribunal examined the evidence presented, including cash books, bank statements, and confirmations, to conclude that the assessee had adequately explained the transaction's legitimacy. The Tribunal emphasized that transactions in cash should not be viewed with suspicion unless there is evidence of introducing the assessee's own money.10. The Tribunal dismissed the revenue's appeal, confirming the Commissioner of Income-tax (Appeals)'s decision to delete the addition under section 68 of the Act, as the genuineness and legitimacy of the transaction were satisfactorily demonstrated by the assessee.11. The Tribunal also addressed the legal cases cited by the revenue, clarifying that the facts of those cases were not analogous to the present case, thereby reinforcing the decision to uphold the deletion of the addition.12. Ultimately, the Tribunal dismissed the revenue's appeal, affirming the order of the Commissioner of Income-tax (Appeals) to delete the addition under section 68 of the Income Tax Act.