2022 (11) TMI 191 - AT - Income Tax

Appeal allowed as assessee proves shareholder details. Section 68 not applicable. Rs. 2.77 crore additions deleted.

Khushi Infraprojects Pvt. Ltd. Versus ITO, Ward-4 (4), Kolkata

The Tribunal allowed the appeal, holding that the assessee adequately explained the identity, creditworthiness, and genuineness of the shareholders. The ... Unexplained cash credit u/s 68 - Share capital with premium received from three corporate entities unexplained - HELD THAT:- Since the assessee has sufficiently explained the identity and creditworthiness of the share subscriber companies and the genuineness of the transaction of applying for to the equity shares of the assessee company and since nothing contrary to the evidence filed by the assessee has been placed on record by the Revenue, except the reason that the directors failed to appear to the notice issued u/s 131 of the Act, we fail to find any merit in the finding of the CIT(A). We are thus inclined to hold that the assessee has successfully explained the said transaction of receiving share premium and share capital and therefore provisions of section 68 of the Act cannot be invoked. Allow the Ground raised by the assessee and delete the additions made u/s 68 - Decided in favour of assessee. Issues Involved:1. Confirmation of share capital with premium as unexplained cash credit under Section 68 of the Income Tax Act, 1961.2. Examination of identity, creditworthiness, and genuineness of the shareholders.3. General grounds for potential amendments to the appeal.Issue-Wise Detailed Analysis:1. Confirmation of Share Capital with Premium as Unexplained Cash Credit under Section 68:The primary issue in this appeal is whether the share capital with premium amounting to Rs. 2,77,00,000/- received from three corporate entities should be considered as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The appellant argued that the Assessing Officer (AO) erred in treating the share capital as unexplained cash credit. The AO had observed that the assessee company, incorporated on 09.06.2011, received a substantial share premium during the Financial Year (FY) 2011-12. The AO concluded that the sum of Rs. 2,77,00,000/- was unexplained cash credit under Section 68 of the Act without adequately considering the documents provided by the assessee.2. Examination of Identity, Creditworthiness, and Genuineness of the Shareholders:The assessee submitted various documents to prove the identity, creditworthiness, and genuineness of the shareholders, including Income Tax Returns, audited balance sheets, profit and loss accounts, and bank statements. The CIT(A) admitted these documents but still confirmed the AO's action, labeling the shareholder companies as shell companies used for layering transactions. The Tribunal noted that the assessee provided sufficient evidence to prove the identity and creditworthiness of the shareholders and the genuineness of the transactions. The Tribunal emphasized that the AO failed to investigate the documents adequately and merely disregarded them due to the non-appearance of the directors. The Tribunal referred to several judicial precedents, including the cases of Exoimp Resources (India) Ltd. vs. CIT, CIT vs. Creative World Telefilms Ltd., and CIT vs. Lovely Exports Ltd., which support the assessee's position that once identity and creditworthiness are established, the burden shifts to the Revenue to prove otherwise.3. General Grounds for Potential Amendments to the Appeal:The third ground raised by the appellant was a general one, seeking leave to add, alter, adduce, or amend any ground or grounds before the date of the hearing. The Tribunal found this ground to be general in nature and did not require adjudication.Conclusion:The Tribunal concluded that the assessee had successfully explained the identity, creditworthiness, and genuineness of the shareholders. The Tribunal found no merit in the CIT(A)'s findings and held that the provisions of Section 68 of the Act could not be invoked. Consequently, the Tribunal allowed the appeal and deleted the additions made under Section 68 of the Act amounting to Rs. 2,77,00,000/-. The appeal of the assessee was allowed in full.