2018 (8) TMI 2079 - AT - Income Tax

Tribunal rules in favor of assessee in income tax appeal

ITO 12 (2) (3), Mumbai Versus M/s. GGF Industries Pvt. Ltd.

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision to delete the addition of Rs. 2,25,00,000 made by the Assessing Officer under ... Addition u/s 68 - unexplained cash credit - whether CIT(A) has wrongly deleted the addition specifically in the circumstances when the identity and genuineness and creditworthiness of the transaction of the said three companies have not been proved on record? - HELD THAT:- CIT(A) was of the view that the assessee as well as the three companies whose shares have been purchased by the assessee have proved the identity, genuineness and creditworthiness of transaction. Assessee has produced the PAN number, Bank Account, Balance-Sheet, Copy of return & Statement of bank account of all parties confirmation letter etc. Whether these documents are false and fabricated are not on record. A further enquiry is required to be done to falsify the claim of assessee in connection with the said three parties which the AO has not done. It is not necessary to going into the transaction of the source of the parties who sold their share to the assessee. CIT(A) has relied upon the law discussed above to allow the claim of the assessee which is not required to repeat the same. Nothing came into noticed that the CIT(A) has wrongly allowed the claim of the assessee. The facts are not distinguishable at this stage also. Therefore, taking into account of all the facts and circumstances mentioned above, we are of the view that the finding of the CIT(A) is quite correct which is not liable to be disturbed at this appellate stage. Accordingly, we affirmed the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue. Issues Involved:1. Addition of Rs. 2,25,00,000 under Section 68 of the Income Tax Act, 1961.Detailed Analysis:ISSUE NO. 1: Addition of Rs. 2,25,00,000 under Section 68 of the Income Tax Act, 1961Background:The revenue challenged the deletion of an addition of Rs. 2,25,00,000 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, which was subsequently deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO had added this amount to the income of the assessee, claiming that the identity, genuineness, and creditworthiness of the transactions from three companies were not satisfactorily explained.CIT(A)'s Findings:The CIT(A) found that the assessee had provided adequate documentation to establish the identity, genuineness, and creditworthiness of the transactions. These documents included:- Confirmation letters- Copies of Income Tax Returns (ITR)- Bank statements- Audited financial statements- PAN detailsThe CIT(A) relied on the Supreme Court's decision in CIT Vs. Lovely Exports (P) Ltd., which clarified that the onus on the assessee under Section 68 is to prove the identity of the investor, their creditworthiness, and the genuineness of the transaction. The CIT(A) noted that the AO had not conducted a thorough investigation and had based the addition on mere suspicion and conjecture.Tribunal's Analysis:The Tribunal affirmed the CIT(A)'s findings and noted the following key points:- The assessee had provided all necessary documents to prove the identity, creditworthiness, and genuineness of the transactions.- The AO had failed to conduct further inquiries or provide any material evidence to discredit the documents submitted by the assessee.- The transactions were conducted through banking channels, and there was no evidence of cash deposits that could indicate the transactions were not genuine.- The AO's addition was based on doubts and suspicions rather than concrete evidence.The Tribunal referenced several legal precedents, including:- CIT Vs. Lovely Exports (P) Ltd.- Oasis Hospitalities P Ltd.- CIT v. Creative World Telefilms Ltd.- CIT v. P. Mohanakala- CIT vs Stellar Investment Ltd.These cases collectively established that once the assessee provides sufficient documentation to prove the identity, genuineness, and creditworthiness of the transactions, the burden shifts to the AO to disprove these claims with substantial evidence.Conclusion:The Tribunal concluded that the CIT(A) had correctly deleted the addition of Rs. 2,25,00,000 made by the AO under Section 68. The assessee had discharged its initial burden of proof, and the AO had not provided any substantial evidence to counter the claims. Consequently, the Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s order.Order:The appeal filed by the revenue was dismissed, and the order was pronounced in the open court on 03.08.2018.