2018 (2) TMI 1464 - HC - Income Tax

Court rules in favor of taxpayer in Income Tax Act Section 68 dispute, burden of proof on Revenue

Principal Commissioner of Income Tax (Central) -1 Versus M/s. Adamine Construction Pvt. Ltd.

The Court upheld the deletion of amounts added under Section 68 of the Income Tax Act for A.Y. 2008-09. The Assessing Officer failed to prove the ... Addition u/s 68 - genuineness of the transaction and the creditworthiness of the parties - reassessment proceedings - Held that:- The material on record in the form of the orders of the lower appellate authorities disclosed that both the assessee and later the share applicants (upon receiving notice under Section 131 of the Act) had produced documentary proof. These included the assessments and income-tax returns filed by the share applicants as well as confirmation and acknowledgment documents. If the AO wished to pursue the matter, there were sufficient clues for him to have proceeded – for instance, it could have issued notices and obtained statements from the bankers of the share applicants or even the balance sheets which existed in the income-tax records of their Assessing Officers. He did not choose to pursue both but instead rested his conclusions entirely on the basis of remarks received from the Commissioner. These remarks can at best be considered opinion but not primary evidence to displace the inferences that had to be drawn with respect to the genuineness of the transaction and the creditworthiness of the parties. - Decided in favour of assessee. Issues:1. Whether the addition of Rs. 4.65 crores under Section 68 of the Income Tax Act, 1961, made during re-assessment proceedings for A.Y. 2008-09, was rightly directed to be deleted.Analysis:1. The re-assessment proceedings were initiated based on the suspicion of certain receipts in the original return processed under Section 143(1) of the Act. The Assessing Officer (AO) added Rs. 4.65 crores under Section 68 of the Act, along with Rs. 50 lakhs received as application money. The CIT(A) found the identity and credibility of the investors established, shifting the burden of proving the transactions were not genuine to the Revenue. Citing relevant judgments, the CIT(A) directed the deletion of the amounts added under Section 68, a decision upheld by the ITAT.2. The Revenue contended that the lower authorities erred in not giving due weight to the report obtained during proceedings, indicating the non-existence of entities shown as share applicants and dubious financial transactions. However, both the assessee and share applicants provided documentary evidence, including assessments, income-tax returns, and confirmations. The AO had opportunities to gather more evidence, such as statements from bankers or balance sheets, but relied solely on the Commissioner's remarks, which were considered opinions and not primary evidence.3. The High Court held that in the absence of any legal question, the appeal was dismissed. The court emphasized that the AO had sufficient avenues to gather more concrete evidence to support the addition under Section 68 but failed to do so, leading to the dismissal of the appeal.This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the court's reasoning behind the decision to dismiss the appeal.