2019 (11) TMI 589 - HC - Income Tax

Tribunal upholds deletion of cash credit addition under Income Tax Act for 2008-09

The Tribunal upheld the Commissioner of Income Tax (Appeals) [CIT(A)] decision to delete the addition of Rs. 19.40 Crores as cash credit under Section 68 ... Cash credit under Section 68 - identity, capacity and genuineness of shareholders - concurrent findings of fact - perversity - substantial question of lawCash credit under Section 68 - identity, capacity and genuineness of shareholders - concurrent findings of fact - perversity - Whether the Tribunal was justified in confirming deletion of the addition made under Section 68 for share application money and share premium. - HELD THAT: - The Assessing Officer had treated share application money and premium as cash credits and made an addition; on appeal the CIT(A) called for a remand report and, after examining confirmations, bank statements, audited financials, Forms filed with Registrar of Companies and an affidavit of a subscribing director, concluded that identity, capacity and genuineness of the shareholders and transactions were established and deleted the addition. The Tribunal affirmed those factual findings and recorded that Revenue offered no material to show error other than contending that the AO's order should be restored. Although some notices were returned as not served, the remand report and records show that the subscribing companies appeared through representatives and gave explanations and that change of address/incorrect service issues were noted. The High Court found that these concurrent factual findings by the CIT(A) and the Tribunal are not shown to be perverse by the Revenue and therefore do not raise a substantial question of law. Accordingly the Tribunal's confirmation of deletion under Section 68 was upheld. [Paras 5, 7, 8, 9]Tribunal's order confirming deletion of the addition under Section 68 upheld; Revenue's appeal dismissed for lack of any substantial question of law.Final Conclusion: Concurrent findings that the identity, capacity and genuineness of the shareholders and transactions were established were not shown to be perverse; the Revenue failed to raise a substantial question of law and the appeal is dismissed. Issues: Challenge to order under Section 260-A of the Income Tax Act, 1961 regarding addition of share application money and share premium under Section 68 of the Act for Assessment Year 2008-09.Analysis:1. The Respondent, engaged in construction business, filed a return of income declaring 'Nil' income for Assessment Year 2008-09. The Assessing Officer added share application money and share premium of Rs. 19.40 Crores as cash credit under Section 68 of the Act, increasing the income to Rs. 19.40 Crores.2. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition of Rs. 19.40 Crores after verifying documents submitted by shareholders, confirming their identity, capacity, and genuineness of transactions. The CIT(A) found Rs. 4.90 Crores to be from promoters and an earlier year, not part of the current assessment.3. The Revenue appealed to the Tribunal challenging the CIT(A)'s decision. The Tribunal upheld the order, stating that the identity, capacity, and genuineness of transactions were established. The Revenue failed to provide evidence to challenge the CIT(A)'s findings.4. The Revenue contended that letters sent to investing companies were returned undelivered, suggesting non-existence of such companies. However, the CIT(A) and Tribunal noted that companies later appeared through representatives, providing necessary documentation. One company director even submitted an affidavit confirming the investment details.5. The concurrent findings of fact by the CIT(A) and Tribunal supported the legitimacy of share subscriptions, negating the Revenue's claim under Section 68 of the Act. The absence of evidence proving perversity in the lower authorities' decisions led to the dismissal of the appeal under Section 260-A of the Income Tax Act, 1961.6. The Court held that the Revenue failed to establish any substantial question of law warranting interference with the lower authorities' decisions. Therefore, the appeal was dismissed, affirming the deletion of the Rs. 19.40 Crores addition from the Respondent's income for Assessment Year 2008-09.