2013 (2) TMI 892 - AT - Income Tax

Tribunal dismisses Revenue's appeal, emphasizing need for thorough inquiry before income additions.

The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal. The addition to share capital made by the Assessing Officer was deleted, as the ... - Issues Involved:1. Deletion of addition to share capital by CIT(A).2. Verification of evidence and documents submitted by the assessee.3. Applicability of legal precedents and judgments.Summary:Issue 1: Deletion of Addition to Share Capital by CIT(A)The Revenue appealed against the CIT(A)'s order which deleted the addition of Rs. 50,00,000/- made by the Assessing Officer (AO) on account of share capital from seven companies. The AO had added this amount u/s 68 of the Income Tax Act, 1961, citing that the assessee failed to provide a satisfactory explanation for the addition to the share capital.Issue 2: Verification of Evidence and Documents Submitted by the AssesseeThe AO issued notices u/s 133(6) to the seven companies, but four notices were returned unserved, and the remaining three companies did not respond. Despite this, the assessee submitted confirmations from all seven companies. The AO, however, did not verify these confirmations and other documents submitted by the assessee, including PAN numbers and bank statements, and proceeded to add Rs. 50 lakh to the income of the assessee.Issue 3: Applicability of Legal Precedents and JudgmentsThe CIT(A) found that the AO did not provide any basis for his observation regarding accommodation entries and relied on the judgments in CIT vs. Stellar Investment Ltd. 251 ITR 263 (SC) and CIT vs. Value Capital Services Pvt. Ltd 307 ITR 334 (Delhi). The Tribunal observed that the AO failed to conduct any meaningful inquiry or verification of the evidence submitted by the assessee, thus falling into the category where the AO 'sits back with folded hands' as described in the judgment of Gangeshwari Metal Pvt. Ltd. The Tribunal also noted that the share application money was routed through banking channels and that the AO's action was not sustainable in light of the recent judgment in Commissioner of Income Tax vs Gangeshwari Metal Pvt. Ltd.Conclusion:The Tribunal upheld the CIT(A)'s order, stating that the assessee had discharged its burden to prove the genuineness of the transaction, and the AO had not brought any material on record to show that the share capital was represented by undisclosed income of the assessee. The appeal of the Revenue was dismissed.Order:The appeal of the Revenue is dismissed. Order pronounced in the open court on 22.2.2013.