2023 (8) TMI 1017 - AT - Income Tax

Tribunal upholds Rs. 121.88 crore addition as unexplained cash credit under Income Tax Act

M/s. Purvi Finvest Ltd. Versus The Deputy Commissioner of Income Tax, Circle-1 (1), Bilaspur

The Tribunal upheld the addition of Rs. 121.88 crore as unexplained cash credit under Section 68 of the Income Tax Act, 1961, in the case. The appeal of ... Addition u/s 68 - unexplained nature and source of the amount credited in its books of account - share application money received from the 40 investor companies - assessee company (NBFC) is primarily engaged in the business of providing unsecured loans/advances and trading in shares and securities - HELD THAT:- As per the '1st Proviso' to Section 68 of the Act an additional obligation was fastened upon the assessee company to substantiate the authenticity of its claim of having received genuine share application money, and the respective investors were required to offer an explanation as regards the nature and source of the sum so credited against their name in the books of account of the assessee company. To sum up, the claim of the assessee company of having received share application money from the 40 share applicant/subscriber companies did further cast an obligation upon it to mandatorily supplement the same with the explanations of the respective investor companies about the nature and source of such sum credited against their names in the books of account of the assessee company. In the present case before us, not only the assessee company had failed to substantiate to the hilt the nature and source of the amount credited in its books of account based on any clinching documentary evidence, but also, there is no whisper in the orders of the lower authorities about any explanation of the respective investor companies about the nature and source of such sum so credited against their names in the books of account of the assessee company. Because the assessee company had grossly failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having raised genuine share application money of Rs. 121.88 crore (approx.) from the 40 investor companies, i.e., by satisfying the double facet conditions contemplated in the aforesaid statutory provision, i.e., Sec. 68 (post-amended), viz. (i) explanation about the nature and source of the credit in its books of account; and (ii) explanation by the investor companies as regards the nature and source of the sum so credited against their name in the books of account of the assessee company - therefore, no infirmity concluding that the entire amount as unexplained cash credit u/s. 68 of the Act, we uphold the same. Decided against assessee. Issues Involved:1. Reasonable opportunity of being heard.2. Addition under Section 68 of the Income Tax Act, 1961.3. Reliance on distinguishable judgments.4. Disregard of binding judgments.5. Right to add, alter, or delete grounds of appeal.Summary:1. Reasonable Opportunity of Being Heard:The assessee company argued that the CIT(Appeals), Bilaspur, erred in dismissing the appeal without allowing a reasonable opportunity of being heard. However, the Tribunal found that the assessee was duly represented by its C.A., who argued the matter and filed written submissions. The CIT(Appeals) considered these submissions and passed a speaking order, thus dismissing this ground of appeal.2. Addition under Section 68 of the Income Tax Act, 1961:The assessee company, a Non-Banking Financial Corporation, had received share application money of Rs. 121.88 crore from 40 Kolkata-based companies. The A.O. doubted the veracity of these transactions due to the negligible business activities and losses reported by the assessee. The A.O. issued a commission to the DDIT (Inv.), Kolkata, who reported that the share applicant companies had doubtful credentials and lacked identity, genuineness, and creditworthiness. The assessee failed to produce the directors of these companies for examination. The A.O. concluded that the assessee had failed to discharge the primary onus under Section 68, treating the amount as unexplained cash credit. The CIT(Appeals) upheld this addition, and the Tribunal found no infirmity in this view, dismissing the related grounds of appeal.3. Reliance on Distinguishable Judgments:The assessee argued that the CIT(Appeals) relied on judgments distinguishable on facts and law. The Tribunal noted that the judgments cited by the assessee were rendered before the amendment to Section 68 and were not applicable to the post-amended provisions. The Tribunal upheld the addition under Section 68, dismissing this ground of appeal.4. Disregard of Binding Judgments:The assessee contended that the CIT(Appeals) disregarded binding judgments from higher courts. The Tribunal observed that the CIT(Appeals) and the A.O. had correctly applied the post-amended Section 68, which required the assessee to explain the source of the share application money and the source of funds of the investor companies. The Tribunal found that the assessee failed to discharge this onus, dismissing this ground of appeal.5. Right to Add, Alter, or Delete Grounds of Appeal:The Tribunal noted that the assessee had the right to add, alter, or delete grounds of appeal but found no merit in the additional grounds raised. Therefore, this ground was dismissed as not pressed.Conclusion:The Tribunal dismissed the appeal of the assessee company, upholding the addition of Rs. 121.88 crore as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The order was pronounced in open court on 14th August 2023.