2015 (12) TMI 1862 - AT - Income Tax

Tribunal upholds deletion of unexplained share application money, emphasizing burden of proof

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 4,79,00,000 as unexplained share application money, citing the assessee's ... Unexplained share application money - Information u/s 133(6) as received from the following parties - Proof of identity of the share applicants, their creditworthiness and genuineness of the transaction - HELD THAT:- In the present case the assessing officer himself has not doubted the identity in respect of all the share holders of the assessee company. Hence, the following the decision of the Hon’ble Co-ordinate bench in the case of M/s Agrawal Coal Corporation[2011 (10) TMI 496 - ITAT INDORE]the amount of share application money as received by the assessee requires to be accepted as genuine. As regard share premium of ₹ 990/- Per share is concern, the assessee company is a big player in the Media segment and engaged in the Print and Boarding business. The assessee company was incorporated on 05-04-1989 and therefore having more than 20 years experience of this line of business. The assessee company declared total income in its books of account prior to depreciation was of ₹ 9995881/- as on 31.03.2008 and the same was increased to ₹ 12489838/- as on 31.03.2009. That considering the long standing in the business and huge profit the amount of share premium is duly justifiable. That in case of private limited company the amount of share premium is mutually decided between the Management of the company and share applicant. Hence, the issue in dispute should not be the amount of share premium but the identity of the share holders who has applied in the share application money of the assessee company. Once the assessee has established the identity of the share holder in that case the amount of share premium is not an issue. If the assessing officer has not satisfied with the explanation of the share applicant, necessary addition is to be made in the hand of the share applicant but not in the case of the assessee. That as regard the blank transfer deed duly signed by the share applicant as found during the course of survey. The assessing officer himself after being satisfied not taking any cognizance for the same. Since, by the time of assessment proceeding these transfer deed was not used by the assessee and therefore after the date of Annual General Meeting , old date transfer deed has no legal value. Additional evidence filed before the Ld CIT[A] - department in this ground of appeal has challenged the Rule 46A of the Income Tax Rules - HELD THAT:- During the course of hearing, we find that the assessee has submitted all the documentary evidence before the Assessing Officer and the ld. DR has not disputed this fact, therefore, we are of the view that this departmental ground deserves to be dismissed. We dismiss the same. Issues Involved:1. Addition of Rs. 4,79,00,000/- as unexplained share application money.2. Admission of additional evidence violating Rule 46A of the I.T. Rules.Detailed Analysis:1. Addition of Rs. 4,79,00,000/- as Unexplained Share Application Money:Facts and Arguments:- The Revenue challenged the deletion of the addition of Rs. 4,79,00,000/- made by the Assessing Officer (AO) on account of unexplained share application money.- The AO noted that the assessee issued 47,900 equity shares at a premium of Rs. 990 each, aggregating to Rs. 1,000 per share, resulting in a total share capital and share premium of Rs. 4,79,00,000/-.- During a survey, the Managing Director of the assessee company disclosed the entire share capital and share premium received as undisclosed income but later retracted this statement.- The AO issued notices under Section 133(6) to verify the genuineness of the share application money but received no response from several companies and returned notices from others.- The AO also relied on statements from directors of certain companies recorded by the Investigation Wing, which suggested that the share application money was merely accommodation entries.CIT(A)'s Findings:- The CIT(A) deleted the addition, noting that the assessee had provided sufficient documents to establish the identity, genuineness, and creditworthiness of the share applicants.- The CIT(A) observed that the AO did not conduct proper inquiries and relied heavily on the retracted statement made during the survey.- The CIT(A) cited judicial precedents, including the Supreme Court's decision in Lovely Exports Pvt. Ltd., which held that if the identity of the shareholders is established, the burden shifts to the Revenue to prove that the transactions are not genuine.Tribunal's Decision:- The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to provide concrete evidence to discredit the documents submitted by the assessee.- The Tribunal noted that the AO did not conduct proper verification and relied on presumptions and statements recorded without offering the assessee an opportunity for cross-examination.- The Tribunal referenced multiple judicial decisions supporting the principle that the identity of the share applicants and the genuineness of the transactions were adequately demonstrated by the assessee.2. Admission of Additional Evidence Violating Rule 46A:Facts and Arguments:- The Revenue contended that the CIT(A) admitted additional evidence in violation of Rule 46A of the I.T. Rules, which restricts the admission of additional evidence at the appellate stage without providing the AO an opportunity to examine it.CIT(A)'s Findings:- The CIT(A) considered the documents submitted by the assessee during the appellate proceedings, which were claimed to have been submitted during the assessment proceedings as well.Tribunal's Decision:- The Tribunal dismissed this ground, noting that the Revenue failed to demonstrate that the documents admitted by the CIT(A) were indeed new and not previously submitted to the AO.- The Tribunal emphasized that the CIT(A) had the discretion to admit additional evidence if it was found necessary for a just decision, especially when such evidence was already part of the assessment record.Conclusion:The Tribunal upheld the CIT(A)'s order, confirming the deletion of the addition of Rs. 4,79,00,000/- as unexplained share application money and dismissing the Revenue's contention regarding the violation of Rule 46A. The Tribunal emphasized the importance of proper verification and the need for the Revenue to provide concrete evidence when challenging the genuineness of transactions.