2019 (2) TMI 1910 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on Income Tax Act Section 68 challenge.

ITO-4 (3) (1), Mumbai Versus M/s. Nityanand Industries Pvt. Ltd.

ITO-4 (3) (1), Mumbai Versus M/s. Nityanand Industries Pvt. Ltd. - TMI Issues Involved:1. Deletion of addition of Rs. 1,00,00,000/- under Section 68 of the Income Tax Act towards unexplained share application money.2. Identity, genuineness, and creditworthiness of the lenders.Detailed Analysis:Issue 1: Deletion of Addition of Rs. 1,00,00,000/- under Section 68The Revenue challenged the deletion of an addition of Rs. 1,00,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The AO had added this amount as unexplained share application money on the grounds that the identity, genuineness, and creditworthiness of the lenders were not proven. The case was reopened under Section 147 read with Section 148 following information from the DGIT, Investigation, Mumbai, which indicated that the assessee had received accommodation entries from 12 parties linked to the Pravin Kumar Jain group, known for providing bogus unsecured loans and share application money.During the assessment proceedings, the assessee submitted various documents, including IT returns, audit reports, balance sheets, and confirmations from shareholders. Despite this, the AO concluded that the loans were accommodation entries and made the addition under Section 68.Issue 2: Identity, Genuineness, and Creditworthiness of the LendersIn the appellate proceedings, the CIT(A) allowed the appeal, stating that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the transactions. The CIT(A) noted that the AO had not conducted further inquiries or provided the assessee with an opportunity to rebut the information. The CIT(A) concluded that the AO's reliance on inadequate evidence and failure to recognize the satisfactory nature of the explanations provided by the assessee rendered the addition unsustainable.The Revenue's representative argued that the CIT(A)'s order was flawed, emphasizing that the search and seizure operations revealed the Pravin Kumar Jain group was involved in providing accommodation entries without any genuine business activities. The Revenue contended that the mere filing of documents did not automatically prove the genuineness of the transactions.The assessee's representative defended the CIT(A)'s order, arguing that all necessary documents were submitted to prove the transactions' genuineness. The representative highlighted that the AO did not conduct any verification or investigation beyond relying on the statements of the directors of the Pravin Kumar Jain group companies.The Tribunal noted that the assessee had raised money from 12 parties, all linked to the Pravin Kumar Jain group, which was known for providing accommodation entries. However, the assessee's name was not mentioned as a beneficiary during the search. The Tribunal observed that the assessee had submitted comprehensive evidence, including share application forms, confirmation letters, PAN numbers, IT returns, balance sheets, and bank statements, to prove the transactions' genuineness. The Tribunal also noted that similar cases involving some of the same parties had been decided in favor of the assessee by other judicial forums, including the ITAT Hyderabad and the Bombay High Court.Based on the detailed analysis and the judicial precedents cited, the Tribunal upheld the CIT(A)'s order, concluding that the assessee had satisfactorily explained the identity, creditworthiness, and genuineness of the share application money. Consequently, the Tribunal dismissed the Revenue's appeal.Conclusion:The Tribunal dismissed the Revenue's appeals for both assessment years, upholding the CIT(A)'s decision to delete the addition of Rs. 1,00,00,000/- under Section 68. The Tribunal found that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the lenders, and the AO had failed to conduct further inquiries or provide the assessee with an opportunity to rebut the information.