2022 (8) TMI 454 - AT - Income Tax

Tribunal upholds CIT(A) decision on Section 68 additions, assessee proves transaction legitimacy

The Income Tax Officer-4 (1), Raipur. Versus M/s. Sharda Shree Agriculture & Developers Pvt. Ltd.

The Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO under Section 68 of the Income-tax Act, 1961, as the assessee provided ... Addition u/s 68 - assessee having received share application money and share premium from two investor companies being unexplained - HELD THAT:- Both investor companies had placed on record supporting documentary evidences which duly substantiated their identity and creditworthiness, as well as the genuineness of the transaction in question, which had neither been rebutted by the A.O in the course of the original assessment proceedings; nor in the remand proceedings, therefore, the department without dislodging the primary onus that was duly discharged by the assessee could not have drawn adverse inferences as regards the transactions in question. We find substantial force in the claim of the Ld. AR that now when the A.O i.e. ITO, Ward-11(1), Kolkata while framing the assessment of one of the investor company, viz. M/s. Neel Kamal Vanijya Pvt. Ltd. had accepted the share capital of Rs.11.67 crore that was received by it in A.Y.2009-10 against which it had allotted 233470 shares, and thereafter it had not raised any fresh capital upto the date of subscription of the shares of the assessee company, therefore, it could safely be concluded that the source of availability of funds with the said investor company was not only proved to hilt, but in fact the same had also been accepted by the department. As regards the share application money received by the assessee company from the other investor company, viz. Chandrika Vanijya Pvt. Ltd., we find that though the documentary evidences substantiating the identity, creditworthiness and genuineness of the transaction in question that were filed by the assessee were confronted by the CIT(Appeals) to the A.O with a direction to file a remand report,, however, the A.O in the said case too had failed to rebut the documents as were available before him. Apart from that, the fact that the aforesaid share application money had been refunded by the assessee company in two tranches had also been lost sight of by the A.O while drawing adverse inferences as regards the authenticity of the transaction in question. Thus now when the assessee company on the basis of substantial documentary evidences had proved to the hilt the identity and creditworthiness of the investor companies, as well as the genuineness of the respective transactions in question, which had not been dislodged by the A.O, as there is no whisper by him either in the course of the assessment proceedings or in the remand proceedings, therefore, the onus that was shifted upon him to disprove the claim of the assessee had remained undischarged. Assessee in the course of the proceedings before the CIT(Appeals) had placed on record copies of the returns of income a/w. computation of income, bank details etc. to substantiate its claim of having received share application money from the aforementioned eight parties i.e. directors of the assessee company and their close relatives, however, the A.O in his remand report had failed to place on record any material which would dislodge the authenticity of the said documents. In the backdrop of the aforesaid facts, we are of the considered view that as the assessee had discharged the primary onus that was cast upon it as regards proving the identity, creditworthiness and genuineness of the transaction of having received share application money from the aforesaid eight parties i.e directors of the assessee company and their close relatives/friends, which the AO had absolutely failed to dislodge by placing on record any such material which would prove to the contrary - Decided in favour of assessee. Issues Involved:1. Deletion of addition of Rs.2,70,00,000/- made by the AO under Section 68 of the Income-tax Act, 1961.2. Deletion of addition of Rs.1,33,50,000/- received from Chandika Vanijya Pvt. Ltd.3. Deletion of addition of Rs.1,33,50,000/- pertaining to M/s Chandika Vanijya Pvt. Ltd.4. Deletion of addition of Rs.1,10,50,000/- received from Neel Kamal Vanijya Pvt. Ltd.5. Acceptance of transactions with Neel Kamal Vanijya Pvt. Ltd. by the jurisdictional AO.6. Acceptance of fresh evidence by CIT(A) without proper opportunity to AO.7. Deletion of addition of Rs.26,00,000/- received from close relatives and directors.8. Ignoring judicial precedent regarding res-judicata.9. Contradiction with the judgment of the Hon'ble High Court of Calcutta in M/s Rajmandir Estate Pvt. Ltd. Vs Pr. CIT Kolkata-III.10. Contradiction with ITAT, Kolkata '13' Bench decision in M/s Subhlakshmi Vanijya (P) Ltd. Vs CIT-1, Kolkata.11. Contradiction with ITAT, Kolkata Bench decision in M/s Bisakha Sales (P) Ltd. Vs CIT-II, Kolkata.12. Acceptance of identity, creditworthiness, and genuineness of entities investing in share capital.13. Decision in favor of the assessee without proper nexus between conclusion and primary facts.14. General error in the order of CIT(A).15. Any other ground adduced at the time of hearing.Issue-wise Detailed Analysis:1. Deletion of Addition of Rs.2,70,00,000/- made by the AO under Section 68 of the Act:The AO made an addition of Rs.2,70,00,000/- under Section 68 of the Act, which included share application money from two investor companies and directors/relatives. The CIT(A) deleted this addition, stating that the assessee had provided sufficient documentary evidence to substantiate the identity, creditworthiness, and genuineness of the transactions. The Tribunal upheld this decision, noting that the AO failed to disprove the evidence provided by the assessee.2. Deletion of Addition of Rs.1,33,50,000/- received from Chandika Vanijya Pvt. Ltd.:The AO added Rs.1,33,50,000/- received from Chandika Vanijya Pvt. Ltd. as unexplained cash credit. The CIT(A) deleted this addition, observing that the assessee had refunded the entire amount in two tranches, and the AO had overlooked this fact. The Tribunal agreed with the CIT(A), stating that the AO's adverse inference was unjustified.3. Deletion of Addition of Rs.1,33,50,000/- pertaining to M/s Chandika Vanijya Pvt. Ltd.:Similar to the previous issue, the AO's addition of Rs.1,33,50,000/- was deleted by the CIT(A) due to the refund of the amount by the assessee. The Tribunal upheld this decision, noting that the AO failed to consider the refund while making the addition.4. Deletion of Addition of Rs.1,10,50,000/- received from Neel Kamal Vanijya Pvt. Ltd.:The AO added Rs.1,10,50,000/- received from Neel Kamal Vanijya Pvt. Ltd. as unexplained cash credit. The CIT(A) deleted this addition, stating that the investor company had raised share capital in A.Y. 2009-10, which was accepted by the AO in its assessment. The Tribunal upheld this decision, noting that the source of funds was proved and accepted by the department.5. Acceptance of Transactions with Neel Kamal Vanijya Pvt. Ltd. by the Jurisdictional AO:The CIT(A) accepted the transactions with Neel Kamal Vanijya Pvt. Ltd., noting that the AO had accepted the share capital raised by the investor company in A.Y. 2009-10. The Tribunal upheld this decision, stating that the AO's adverse inference was unjustified.6. Acceptance of Fresh Evidence by CIT(A) without Proper Opportunity to AO:The AO claimed that the CIT(A) accepted fresh evidence without allowing proper opportunity to examine it. The Tribunal noted that the CIT(A) had called for a remand report from the AO, who failed to rebut the evidence provided by the assessee. Therefore, the Tribunal upheld the CIT(A)'s decision.7. Deletion of Addition of Rs.26,00,000/- received from Close Relatives and Directors:The AO added Rs.26,00,000/- received from close relatives and directors as unexplained cash credit. The CIT(A) deleted this addition, stating that the assessee had provided sufficient evidence to substantiate the identity, creditworthiness, and genuineness of the transactions. The Tribunal upheld this decision, noting that the AO failed to disprove the evidence provided by the assessee.8. Ignoring Judicial Precedent regarding Res-Judicata:The AO claimed that the CIT(A) ignored the judicial precedent that the principle of res-judicata is not applicable to income tax proceedings. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence to substantiate the transactions.9. Contradiction with the Judgment of the Hon'ble High Court of Calcutta in M/s Rajmandir Estate Pvt. Ltd. Vs Pr. CIT Kolkata-III:The AO claimed that the CIT(A)'s decision contradicted the judgment of the Hon'ble High Court of Calcutta. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence to substantiate the transactions.10. Contradiction with ITAT, Kolkata '13' Bench Decision in M/s Subhlakshmi Vanijya (P) Ltd. Vs CIT-1, Kolkata:The AO claimed that the CIT(A)'s decision contradicted the ITAT, Kolkata '13' Bench decision. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence to substantiate the transactions.11. Contradiction with ITAT, Kolkata Bench Decision in M/s Bisakha Sales (P) Ltd. Vs CIT-II, Kolkata:The AO claimed that the CIT(A)'s decision contradicted the ITAT, Kolkata Bench decision. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence to substantiate the transactions.12. Acceptance of Identity, Creditworthiness, and Genuineness of Entities Investing in Share Capital:The AO claimed that the CIT(A) erred in accepting the identity, creditworthiness, and genuineness of the entities investing in the share capital. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence to substantiate the transactions.13. Decision in Favor of the Assessee without Proper Nexus between Conclusion and Primary Facts:The AO claimed that the CIT(A) erred in giving a decision in favor of the assessee without proper nexus between conclusion and primary facts. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence to substantiate the transactions.14. General Error in the Order of CIT(A):The AO claimed that the CIT(A)'s order was erroneous both in law and on facts. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient evidence to substantiate the transactions.15. Any Other Ground Adduced at the Time of Hearing:No additional grounds were raised during the hearing.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO under Section 68 of the Act, stating that the assessee had provided sufficient evidence to substantiate the identity, creditworthiness, and genuineness of the transactions. The appeal filed by the Revenue was dismissed.