2021 (6) TMI 607 - AT - Income Tax

Tribunal remands case for verification of evidence on unexplained share capital under Income Tax Act

The Tribunal remanded the case to the Assessing Officer to verify additional evidence, including share certificates, regarding the genuineness of ... Bogus share capital - Addition u/s 68 - identity and creditworthiness of subscribers proved or not? - admission of additional evidence by assessee - HELD THAT:- Once having accepted the fact that identity and creditworthiness of subscribers is not in doubtful, there is no reason for the AO as well as the ld.CIT(A) to doubt the genuineness of transactions merely for the reason that share certificates issued to shareholders was not furnished. CIT(A) himself has recorded in his appellate order that the assessee has filed all forms required to be filed before the Registrar of Companies for increase in authorized share capital. Once, necessary statutory forms are filed before competent authorities, then issue of share certificates to shareholders is only a formality. Therefore, for that reason doubting genuineness of transactions is not correct. Be that as it may, the assessee has filed paper-book enclosing copies of share certificates issued to shareholders - The assessee claimed that copies of share certificates were not placed before the lower authorities. Therefore, we are of the considered view that the issue needs to go back to file of the AO to verify additional evidences filed by the assessee. Hence, we set aside the appeal to file of the AO and direct him to relook the issue after considering additional evidences -Appeal filed by the assessee is treated as allowed for statistical purpose. Issues Involved:1. Jurisdiction of the Assessing Officer (AO).2. Addition of Rs. 6,22,00,000 as unexplained share capital under Section 68 of the Income Tax Act, 1961.3. Invocation of provisions of Section 68.4. Proof of identity, creditworthiness, and genuineness of transactions by the assessee.5. Levy of interest under Sections 234A, 234B, and 234C of the Act.6. Condonation of delay in filing the appeal.Issue-wise Detailed Analysis:1. Jurisdiction of the Assessing Officer (AO):The assessee contended that the order of the AO was without jurisdiction. However, this issue was not elaborated upon in the judgment, and no specific findings were provided by the Tribunal regarding the jurisdictional challenge.2. Addition of Rs. 6,22,00,000 as Unexplained Share Capital under Section 68:The AO added Rs. 6,22,00,000 to the assessee’s income as unexplained cash credits under Section 68. The AO opined that the assessee failed to substantiate the introduction of share capital with necessary evidence. The CIT(A) upheld this addition, stating that although the assessee proved the identity and creditworthiness of the subscribers, the genuineness of the transactions was not established beyond doubt.3. Invocation of Provisions of Section 68:Section 68 of the Income Tax Act, 1961, requires the assessee to satisfactorily explain the nature and source of any credit appearing in its books. The CIT(A) noted that the assessee did not disclose the enhancement of its paid-up capital from Rs. 2 crores to Rs. 10 crores to the Registrar of Companies, and the share capital was lying as Term Deposit Receipts (TDRs), indicating it was not used for the intended business purposes.4. Proof of Identity, Creditworthiness, and Genuineness of Transactions:The assessee provided various documents, including PAN numbers, financial statements, and bank statements of subscribers to prove identity and creditworthiness. However, the CIT(A) held that the genuineness of the transactions was not proved beyond doubt due to the non-submission of share certificates. The Tribunal noted that the assessee had placed all possible evidence to prove the genuineness of the transactions and that the issue of share certificates was a formality once statutory forms were filed with the Registrar of Companies. The Tribunal decided to remand the matter to the AO for verification of additional evidence, including share certificates.5. Levy of Interest under Sections 234A, 234B, and 234C:The assessee objected to the levy of interest under Sections 234A, 234B, and 234C of the Act. However, the judgment did not provide a detailed discussion on this issue, and it appears that the Tribunal's primary focus was on the addition under Section 68.6. Condonation of Delay in Filing the Appeal:The appeal was filed with a delay of 21 days, and the assessee filed a petition for condonation of delay, citing the COVID-19 outbreak and lockdown as reasons. The Tribunal accepted the reasons as a reasonable cause under the Act and condoned the delay, admitting the appeal for adjudication.Conclusion:The Tribunal concluded that the CIT(A) had accepted the identity and creditworthiness of the subscribers but doubted the genuineness of transactions due to the non-submission of share certificates. The Tribunal remanded the matter to the AO to verify additional evidence, including share certificates, and to reconsider the issue in accordance with the law. The appeal was treated as allowed for statistical purposes.