2021 (9) TMI 501 - AT - Income Tax

Tribunal upholds CIT(A) decision, dismisses revenue's appeal on Section 68 addition.

The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and affirming the deletion of the addition of Rs. 5,68,60,000/- under Section ... Addition u/s 68 - share application money/share capital and share premium as unexplained - onus to prove - only reason to treat the share application money as unexplained cash credit is the quantum of premium charged by the assessee - HELD THAT:- Assessee has filed all the requisite documents as well as confirmations from the investor entities to substantiate these transactions. The notices u/s 133(6) has duly been responded by investor entity. The director of M/s Rossari India Biotech Pvt. Ltd. appeared before AO and confirmed the transactions. The findings, in this regard, have already been tabulated in Annexure-1 of impugned order and the same is not in dispute. Under these circumstances, it could very well be said that the assessee had duly discharged the onus in terms of requirement of Sec.68. The onus was on revenue to dislodge assessee’s documentary evidences and rebut the same by bringing on record any cogent material to demonstrate that assessee’s own money flew back in the shape of share application / share premium - nothing of that sort has been brought on record by Ld. AO. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmises There is no doubt that the revenue authorities were not required to put blinkers while looking at the documents produced before them and they were entitled to look into the surrounding circumstances to find out the reality of the documents produced before them - no such inquiries have been made by AO except for the allegations that the share application was bogus in nature only because the quantum of premium was high - there is nothing on record to substantiate the allegation that the assessee’s own unaccounted money was routed in the books in the garb of share capital. In the absence of such findings, the impugned additions could not be sustained in law - Decided against revenue. Issues Involved:1. Deletion of addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act on account of share application money/share capital and share premium as unexplained cash credit.Detailed Analysis:Background:The revenue appealed against the order of the Commissioner of Income-Tax (Appeals) [CIT(A)], which deleted the addition of Rs. 5,68,60,000/- made by the AO under Section 68 of the Income Tax Act for the Assessment Year 2012-13. The AO had added the amount as unexplained cash credit, questioning the genuineness and substantiation of the share application money/share capital and share premium.Appellate Proceedings:1. Assessment Proceedings:- The assessee issued shares to 14 corporate entities, with premiums varying between Rs. 1370 and Rs. 1990 per share.- The AO questioned the high premium and the genuineness of the transactions, concluding that the assessee failed to justify the share premium and the genuineness of the transactions, leading to the addition of Rs. 5,68,60,000/- as unexplained cash credit under Section 68.2. Appeal to CIT(A):- The assessee justified the share premium based on the market value of its assets and goodwill accrued over 32 years.- The assessee submitted various documents to establish the identity, creditworthiness, and genuineness of the transactions, including PANs, Income Tax Returns, financial statements, and confirmations from investor entities.- The CIT(A) called for a remand report from the AO, who confirmed that the assessee had provided the necessary documents, but questioned the fairness of the share valuation.- The CIT(A) observed that the AO doubted the genuineness of the transactions due to the high premium but failed to provide contrary evidence. The CIT(A) concluded that the assessee had discharged the primary onus under Section 68.3. CIT(A) Decision:- The CIT(A) relied on various judicial precedents, including the Supreme Court's decision in CIT v/s Lovely Exports (P) Ltd., and the Bombay High Court's decision in CIT Vs. Gagandeep Infrastructure Private Limited, which held that the genuineness of the transaction is proved if the entire transaction has taken place through banking channels.- The CIT(A) noted that the provisions of Section 56(2)(viib) were not applicable for the year under consideration, and the AO had no power to question the quantum of premium.- The CIT(A) concluded that the identity, creditworthiness, and genuineness of the transactions were established, and the addition made by the AO was unsustainable in law.Tribunal Findings:1. Assessment of Evidence:- The Tribunal observed that the assessee had provided all necessary documents to substantiate the transactions, and the investor entities had responded to the notices under Section 133(6).- The director of one of the major investor entities confirmed the transactions before the AO.2. Onus of Proof:- The Tribunal noted that the onus was on the revenue to dislodge the assessee's evidence and prove that the assessee's own money was routed back as share application money. However, the AO failed to bring any cogent material to substantiate this.3. Quantum of Premium:- The Tribunal held that the AO had no power to question the quantum of premium charged by the assessee, especially since Section 56(2)(viib) was not applicable for the relevant year.4. Judicial Precedents:- The Tribunal distinguished the case from CIT V/s Independent Media Pvt. Ltd., where the assessee failed to provide confirmations or evidence to establish the genuineness of the transactions and creditworthiness of the investor entities.5. Conclusion:- The Tribunal upheld the CIT(A)'s decision, concluding that the assessee had discharged the primary onus under Section 68, and the AO's addition was based on mere suspicion without substantive evidence.Final Order:The appeal by the revenue was dismissed, and the order of the CIT(A) deleting the addition of Rs. 5,68,60,000/- was upheld. The Tribunal found that the CIT(A) had correctly assessed the issue, and no interference was required.Order pronounced on 3rd September, 2021.