2018 (10) TMI 1171 - AT - Income Tax

Appeal allowed on share application money treated as unexplained cash credit

The Tribunal allowed the appeal of the assessee regarding the treatment of share application money as unexplained cash credit under section 68 of the ... Addition u/s 68 - Share application money as unexplained cash credit - discharge of primary onus to prove the identity, capacity and genuineness of transactions - Held that:- We find from the facts of the case that the assessee has furnished the Name, Address, PAN no and Share Application Form to prove that the shares were allotted to the applicants. The assessee has also furnished its bank statement to show that the money was received through banking channels and there were no immediate withdrawals from the banks which shows that the share application amounts have not been returned back to these parties in cash. Thus, the assessee has discharged the primary onus cast upon it to prove the identity, capacity and genuineness of transactions. CIT(A) provided opportunity to assessee to cross examine Shri Mukesh Choksi by sending the matter to AO for remand report. During remand proceeding, the AO provided opportunity to assessee to cross examine Shri Mukesh Choksi and who in turn during cross examination admitted having invested in assessee company by these two concerns namely Buniyad Chemicals Ltd. & Talent Infoway Ltd. in assessee as share application and premium amounting to ₹ 35 lacs. During cross examination the AO could not further examine Shri Mukesh Choksi that why he is now admitting that why these two concerns admitted in the assessee company as share application money and share premium. The AO could not controvert the same. CIT(A) also could not give any finding on this aspect. We have gone through the statement of Shri Mukesh Choksi i.e. cross examination by the assessee on 30.10.2013, wherein, he vide question admitted investing by Buniyad Chemicals Ltd. & Talent Infoway Ltd. in assessee as share application and premium. As relying on THE COMMISSIONER OF INCOME TAX VERSUS M/S. ORCHID INDUSTRIES PVT. LTD. [2017 (7) TMI 613 - BOMBAY HIGH COURT] we delete the addition made by AO and confirmed by CIT(A) on account of share application money and share premium and allow the appeal of the assessee on this issue. - Decided in favour of assessee. Issues Involved:1. Reopening of the assessment under section 147 of the Income Tax Act, 1961.2. Treatment of share application money as unexplained cash credit under section 68 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Reopening of the assessment under section 147 of the Income Tax Act, 1961:The appellant initially raised the issue of reopening the assessment under section 147, claiming it was 'bad in law' due to the absence of new tangible material indicating any income had escaped assessment. The appellant argued that the reopening was based on the same set of facts as the original assessment, amounting to a change of opinion. Additionally, it was contended that the notice under section 148 was issued without recording proper and valid reasons. However, the appellant's counsel stated they were not interested in prosecuting this issue and sought to withdraw it. The departmental representative did not object, leading to the dismissal of this issue as withdrawn.2. Treatment of share application money as unexplained cash credit under section 68 of the Income Tax Act, 1961:The primary issue on merits was the treatment of Rs. 35,00,000/- received as share application money, which the Assessing Officer (AO) treated as unexplained cash credit under section 68. The appellant argued that they had provided sufficient evidence to prove the identity, capacity, and genuineness of the transactions, including the names, addresses, PAN numbers, and share application forms of the investors, as well as bank statements showing that the money was received through banking channels without immediate withdrawals.The AO's stance was based on the involvement of Buniyad Chemicals Ltd. and Talent Infoway Ltd., both run by Shri Mukesh Choksi, who admitted that these entities were used to provide bogus share application money. The AO concluded that the appellant routed its undisclosed income through these entities, adding the receipts as cash credit under section 68. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, citing the admission of Shri Mukesh Choksi and the lack of proper transactions.However, during the remand proceedings, the appellant was allowed to cross-examine Shri Mukesh Choksi, who confirmed that Buniyad Chemicals Ltd. and Talent Infoway Ltd. had indeed invested in the appellant company. The appellant furnished all necessary documents to prove the legitimacy of the transactions, and the AO failed to provide further evidence to counter this during the cross-examination.The Tribunal considered the facts and circumstances, noting that the appellant had discharged the primary onus to prove the identity, capacity, and genuineness of the transactions. The Tribunal also referenced the Bombay High Court's judgment in the case of CIT vs. Orchid Industries Pvt. Ltd., which held that the production of documentary evidence such as PAN, bank statements, share application forms, and allotment letters suffices to establish the genuineness of the transactions, even if the parties did not appear before the AO.Conclusion:The Tribunal found that the appellant had provided sufficient evidence to prove the genuineness of the share application money and that the AO and CIT(A) had not adequately countered this evidence. Consequently, the Tribunal deleted the addition made by the AO and confirmed by the CIT(A), allowing the appeal in favor of the appellant.Order:The appeal of the assessee was allowed, and the order was pronounced in the open court on 12-10-2018.