2024 (2) TMI 584 - AT - Income Tax

Assessee successfully proves share application money genuineness under section 68, burden shifts to AO for verification

Income Tax Officer, Ward - 5 (1), Kolkata Versus M/s. Express Tradelink Pvt. Ltd., Kolkata

ITAT Kolkata upheld CIT(A)'s deletion of addition under section 68 for unexplained share application money. The assessee successfully discharged burden of ... Addition u/s 68 - unexplained share application money in the form of share capital and share premium - burden of proof - CIT(A) deleted the addition - HELD THAT:- From perusal of the financial statements of the share subscribing companies, we notice that they had sufficient share capital and accumulated Reserves and surplus which are sufficient enough to cover up the share application money invested by them in the equity of the assessee company. D/R has merely given a general statement that these companies are paper/shell companies but no concrete evidence is filed on record which could prove the substance in such submissions failing which the issue in hand can be decided only on the basis of documentary evidence available on record and which clearly states that the assessee has explained the nature and source of the alleged sum thereby proving the identity and creditworthiness of the share subscribers and genuineness of the transactions. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted AO in this case has not made any independent enquiry to verify the genuineness of the transactions. Assessee having furnished all the details and documents before the AO and the AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the AO to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. We find that the assessee has successfully discharged the burden of proof primarily casted upon it to explain the identity and creditworthiness of all the alleged share applicants and genuineness of the share transactions and correctness of such details has not been disputed by the Revenue Authorities except making general observations. Therefore, considering the evidences placed by Ld. A/R to explain the nature and source of the alleged share application money, we find no reason to interfere with the detailed finding on facts by the ld. CIT(A) deleting the addition made u/s 68 - Decided in favour of assessee. Issues Involved:1. Delay in Filing Appeal2. Deletion of Addition of Share Capital and Premium3. Verification of Identity, Creditworthiness, and Genuineness of Transactions4. Application of Supreme Court's Principles in NRA Iron & Steel Pvt. Ltd.5. Compliance with Section 68 of the Income Tax Act6. Remand to Assessing Officer for Fresh Verification7. Violation of Rule 46A of the Income Tax RulesSummary:1. Delay in Filing Appeal:The Tribunal condoned the delay of 36 days in filing the appeal by the revenue, finding sufficient cause for the delay.2. Deletion of Addition of Share Capital and Premium:The revenue challenged the deletion of an addition of Rs. 7,26,50,000/- made by the Assessing Officer (AO) on account of share capital and premium, arguing that the identity, genuineness, and creditworthiness of the transactions were not verified.3. Verification of Identity, Creditworthiness, and Genuineness of Transactions:The assessee provided comprehensive details to prove the identity, creditworthiness, and genuineness of the share applicants, including PAN cards, share application forms, bank statements, and ITRs. The CIT(A) sent these documents to the AO for a remand report, who found no discrepancies.4. Application of Supreme Court's Principles in NRA Iron & Steel Pvt. Ltd.:The CIT(A) concluded that the judgment in NRA Iron & Steel Pvt. Ltd. was not applicable to this case, as the facts differed significantly. The AO failed to conduct proper inquiries despite having sufficient documentary evidence.5. Compliance with Section 68 of the Income Tax Act:The Tribunal observed that the assessee had discharged the primary onus under Section 68 by providing necessary documents. The AO did not make any independent inquiry or point out discrepancies in the documents provided.6. Remand to Assessing Officer for Fresh Verification:The revenue argued that the CIT(A) should have remanded the matter to the AO for fresh verification. However, the Tribunal found that the CIT(A) had already sent the documents to the AO, who found no discrepancies.7. Violation of Rule 46A of the Income Tax Rules:The revenue contended that the CIT(A) violated Rule 46A by not remanding the matter to the AO for fresh verification. The Tribunal found no merit in this argument, as the AO had already reviewed the documents during the remand proceedings.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 7,26,50,000/- made under Section 68, finding that the assessee had successfully explained the identity, creditworthiness, and genuineness of the share applicants. The appeal of the revenue was dismissed.