2023 (3) TMI 774 - AT - Income Tax

Tribunal upholds deletion of Rs. 1,65,00,000 addition under Income Tax Act Section 68. Investor companies' creditworthiness confirmed.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 1,65,00,000 under Section 68 of the Income Tax ... Addition u/s 68 - Bogus investment in the share capital and share premium - CIT-A deleted the addition - HELD THAT:- Both the share applicants are duly assessed to tax and financial statements are audited, transactions have been carried out through banking channel and both share applicants have replied to the notices issued by ld. AO confirming the said transactions and also stated that they are part of the same group of companies, that for the transfer of shares of Shivalaya Ispat & Power Pvt. Ltd., a Share Sale Agreement was entered into with Real Ispat and Power Ltd. and by carrying out the sale transactions the sale consideration received has been utilized for making the investment in the share capital and share premium of the assessee company. Reliance placed by the assessee on the various decisions and judgments referred in the paperbook extracted above also supports our view that under the given facts and circumstances, addition u/s 68 of the Act was uncalled for. We, therefore, under the given facts and circumstances of the case are satisfied that the assessee has properly explained the identity and creditworthiness of the share applicants and the genuineness of the alleged transactions and has also explained the source of source of the alleged sum received by the assessee. Thus, we do not find any reason to interfere in the finding of ld. CIT(A). Appeal filed by the Revenue is dismissed. Issues Involved:1. Whether the CIT(A) was justified in deleting the addition of Rs. 1,65,00,000/- made under Section 68 of the Income Tax Act.2. Whether the CIT(A) properly considered the identity, genuineness, and creditworthiness of the investor companies.3. Whether the CIT(A) followed the law as declared by the Hon'ble Supreme Court in relevant cases.Summary:Issue 1: Justification of Deleting Addition under Section 68The Revenue challenged the deletion of Rs. 1,65,00,000/- added under Section 68 of the Income Tax Act by the CIT(A). The CIT(A) had deleted the addition by accepting the assessee's explanation regarding the share capital and share premium raised from two group companies, M/s. Wholetime Commotrade and M/s. Volgina Finvest Pvt. Ltd. The CIT(A) concluded that the transactions were genuine and supported by documentary evidence, including bank statements and share sale agreements.Issue 2: Identity, Genuineness, and Creditworthiness of Investor CompaniesThe CIT(A) found that the assessee had purchased a flat, financed by raising share capital from the group companies. The CIT(A) verified the bank statements and share applications of the investor companies, confirming that the funds were sourced from the sale of shares of Shivalaya Ispat & Power Pvt. Ltd. to Real Ispat and Power Ltd. The CIT(A) concluded that both investor companies and the transactions were genuine, and the companies had the requisite creditworthiness.Issue 3: Compliance with Supreme Court JudgmentThe CIT(A) examined the facts and circumstances of the case, including the financial statements and the creditworthiness of the entities involved. The CIT(A) concluded that the provisions of Section 68 were not attracted as the transactions were genuine and the investor companies had sufficient creditworthiness. The Tribunal upheld the CIT(A)'s findings, noting that the Revenue did not rebut the CIT(A)'s conclusions and that the assessee had adequately explained the source of the funds.Conclusion:The Tribunal dismissed the Revenue's appeal, agreeing with the CIT(A) that the assessee had properly explained the identity, creditworthiness, and genuineness of the transactions. The Tribunal found no reason to interfere with the CIT(A)'s findings and dismissed all grounds of appeal raised by the Revenue.