2016 (5) TMI 539 - AT - Income Tax

Tribunal confirms addition of Rs. 18,02,000 as unexplained cash credit under Income Tax Act

The Tribunal upheld the addition of Rs. 18,02,000/- to the assessee's income as unexplained cash credit under section 68 of the Income Tax Act. Despite ... Addition u/s 68 being share capital - Held that:- In this present case, regarding M/s. Ramsay International, any sanctity cannot be attached to the documents filed before the AO as on certified. The said Ramsay International Ltd. neither filed any valid documents before the 1st appellate authority nor before us in support of its contention. Therefore, we are of the view that the view expressed by the AO and CIT(A) about the creditworthiness and genuineness of transaction between assessee and M/s. Ramsay International Ltd. is justified. Thus, we hold that M/s. Ramsay International Ltd. has failed to prove its identity also as discussed above and we confirm the order of CIT(A) about creditworthiness and genuineness of transaction. In pursuance of the Section 68 of the Income Tax Act, It is for the assessee to establish the identity of the subscribers and prove their credit worthiness. In the present case, on the basis of the material available on record the identity of the Saroj Kumar Jhunjhunwala was established and identity of the M/s Ramsay International Ltd was not established. Regarding proving their creditworthiness or the genuineness of the transaction as they were not availed an opportunity given by the ITAT, Kolkata and pursuant to which, the proceedings under Section 131 of the Act. In enquiry by his inspector, AO found that one of the share applicants not existed at the given address. That both the share applicants did not choose to appear before the AO and The details could not be established. The valid details of the two concerns were not produced for examinations - Decided against assessee. Issues Involved:1. Legality of the assessment.2. Addition of Rs. 18,02,000/- being share capital raised during the year.Detailed Analysis:1. Legality of the Assessment:The assessee initially raised the issue of legality of the assessment before the CIT(A), which was dismissed. The Tribunal noted that the assessee did not press this ground during the second appeal. Consequently, the Tribunal dismissed this ground as not pressed.2. Addition of Rs. 18,02,000/- Being Share Capital Raised During the Year:The primary issue revolved around the addition of Rs. 18,02,000/- to the assessee's income as unexplained cash credit under section 68 of the Income Tax Act. The Tribunal's earlier order directed the AO to reconsider the genuineness of the share applicants and provide the assessee an opportunity to produce relevant details and documents.Reconsideration by AO:The AO issued multiple notices under section 142(1) and section 131 to verify the identity, creditworthiness, and genuineness of the transactions related to the share capital raised. Despite several opportunities, the assessee failed to provide certified documents or ensure the personal attendance of the concerned representatives.Findings on Share Applicants:- M/s. Saroj Kumar Jhunjhunwala (HUF): The AO noted discrepancies in the documents submitted, such as uncertified photocopies and unexplained cash transactions. The Karta of the HUF did not appear for personal verification, and the claimed sources of income were not substantiated with valid evidence.- M/s. Ramsay International Ltd.: The AO's inspector found that the given address was a residential area, and no office existed there. The documents submitted were uncertified, and no valid evidence was provided to prove the identity, creditworthiness, or genuineness of the transactions.Tribunal's Conclusion:The Tribunal observed that the assessee did not cooperate with the AO's proceedings and failed to discharge its onus under section 68. The Tribunal upheld the AO's findings that the identity of M/s. Ramsay International Ltd. was not established, and the creditworthiness and genuineness of transactions with both entities were doubtful. Consequently, the Tribunal confirmed the addition of Rs. 18,02,000/- as unexplained cash credit.Final Judgment:The Tribunal dismissed the appeal filed by the assessee, affirming the addition of Rs. 18,02,000/- to the income as unexplained cash credit under section 68 of the Income Tax Act.Order Pronounced:The order was pronounced in the open court on 13th April, 2016.