2019 (4) TMI 1116 - AT - Income Tax

Tribunal Upholds Unexplained Cash Credit Addition Under Income-tax Act

The Tribunal upheld the addition of Rs. 1,15,00,000/- as unexplained cash credit under section 68 of the Income-tax Act, dismissing the appeal of the ... Addition u/s 68 - unsecured cash credit - HELD THAT:- Principal officers of the share applicant company, were not produced by the assessee is undisputed. In case of the 2 share applicant companies, the summon issued also returned unserved. The one company, in which case though the summon was served, but no one attended before the AO in compliance of the summon. The share applicant companies have filed certain documents, including balance sheet and profit and loss account, bank statements etc. in form of paper trail. The companies have shown small amount of income in their hand, which is not sufficient to discharge their creditworthiness. The assessee has also not justified the high amount of the share premium taken. In view of these peculiar facts seen cumulatively in the light of various decisions relied upon by the learned DR including the decision of PCIT Vs NRA Iron and Steels Private Limited [2019 (3) TMI 323 - SUPREME COURT] , we uphold the finding of the CIT(A) on the issue in dispute. - Decided against assessee. Issues Involved:1. Validity of the assessment order assessing the income at Rs. 1,23,82,730/-.2. Alleged violation of principles of natural justice by AO and CIT(A).3. Addition of Rs. 1,15,00,000/- on account of share application money.4. Burden of proof regarding identity, creditworthiness, and genuineness of transactions.5. Legality and factual correctness of observations made by AO and CIT(A).6. Justification of additions made by AO and CIT(A).7. Consideration and interpretation of evidence provided by the assessee.Issue-wise Detailed Analysis:1. Validity of Assessment Order:The assessee challenged the assessment order that assessed the income at Rs. 1,23,82,730/-. The additions made by the AO and upheld by the CIT(A) were contested as illegal, unjust, and bad in law. The Tribunal reviewed the assessment and upheld the addition, stating that the assessee failed to discharge its onus under section 68 of the Income-tax Act, 1961.2. Violation of Principles of Natural Justice:The assessee argued that the AO and CIT(A) passed the orders without giving a sufficient and proper opportunity to be heard, violating the principles of natural justice. The Tribunal noted that repeated adjournments were sought by the assessee, and despite multiple opportunities, the assessee failed to produce the necessary evidence or appear for arguments, leading to the rejection of the appeal.3. Addition of Rs. 1,15,00,000/- on Account of Share Application Money:The AO observed that the assessee received share application money along with share premium totaling Rs. 1,15,00,000/- from three companies. The assessee failed to produce the principal officers of these companies. Summons issued under section 131 of the Act returned unserved for two companies, and no one attended for the third company. The AO concluded that the assessee failed to discharge its onus under section 68, leading to the addition of Rs. 1,15,00,000/-.4. Burden of Proof:The CIT(A) emphasized that the assessee did not prove the identity, creditworthiness, and genuineness of the transactions. The assessee failed to provide bank account details or evidence of sufficient funds in the accounts of the share applicants. The Tribunal upheld this view, citing several case laws that supported the AO's and CIT(A)'s decisions.5. Legality and Factual Correctness of Observations:The Tribunal reviewed the observations made by the AO and CIT(A) and found them factually correct and legally sound. The assessee's failure to produce credible evidence and the unserved summons were significant factors in upholding the addition.6. Justification of Additions:The Tribunal justified the additions made by the AO and CIT(A) based on the lack of evidence provided by the assessee. The creditworthiness of the share applicants was not established, and the genuineness of the transactions remained unproven. The Tribunal cited various judgments, including the Supreme Court's decision in PCIT Vs. NRA Iron & Steel Pvt. Ltd., to support its decision.7. Consideration and Interpretation of Evidence:The Tribunal noted that the assessee did not properly consider and judicially interpret the evidence provided. The paper trail submitted by the share applicant companies showed small amounts of income, insufficient to justify the high share premium. The Tribunal concluded that the assessee failed to prove the genuineness of the transactions and upheld the addition under section 68.Conclusion:The Tribunal dismissed the appeal of the assessee, upholding the addition of Rs. 1,15,00,000/- as unexplained cash credit under section 68 of the Income-tax Act. The Tribunal found that the assessee failed to discharge its burden of proof regarding the identity, creditworthiness, and genuineness of the transactions, and the orders passed by the AO and CIT(A) were legally and factually justified. The appeal was dismissed in its entirety.