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TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 306
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....me Tax Act, 1961 on account of share capital/premium as unexplained cash credit despite the respondent assesse failing to establish the genuineness of the transactions as well as identity and creditworthiness of the share subscribers? 2) Whether the Learned Tribunal has committed substantial error in law in deleting the addition made under Section 68 of the Income Tax Act, 1961 by ignoring the judicial precedents that the onus is on the assessee to explain and establish the source of funds which in the instant case, the assessee has failed to do? 3) Whether the Learned Tribunal has committed substantial error in law in deleting the addition made under Section 68 of the Income Tax Act, 1961 without giving due weightage to the unjustified receipt of high premium from seemingly unprospectively entities and ignoring the ration laid down in the case of Principal Commissioner of Income Tax (Central ) - I Kolkata Vs. NRA Iron and Steel (P) Ltd. reported in (2019) 103 taxmann.com 48 and in the case of PCIT (Central) - 2, Kolkata Vs. BST Infratech Ltd. In ITAT No. 67 of 2024 by the Jurisdictional High Court? 4) Whether in the facts and circumstances of the case, the Learned Tribunal h....
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....ke the investment. In order to verify the genuineness of the transactions, summons were issued under Section 131 of the Act to Shashi Mehta, the director for personal appearance and to produce the investors/investor directors along with the documents which were requisitioned. In response to the summons, Kunal Mehta and other directors of the assessee company appeared and due to the ill health of Shashi Mehta she was unable to attend. Statement was recorded from Kunal Mehta. None of the directors of the subscriber companies appeared nor any proper reason was assigned for their non-appearance. Therefore, the assessing officer came to the conclusion that in the absence of personal appearance of the directors of the subscriber companies, the genuineness and creditworthiness remained unexplained. More so when the onus is on the assessee to prove the genuineness, creditworthiness and the identity of the investors. Thus, on analysis of all these facts the assessing officer opined that the assessee company has raised share capital and/or premium in order to route its undisclosed money to the desired end of the beneficiaries taking recourse of the corporate veil. It was further observed th....
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....missioner of Income Tax Versus Independent Media Private Limited [2012] 25 Taxmann.com 276 (Delhi). Thus, it was pointed out that the existence of the material showing that the share subscriptions were collected as part of the pre-meditated plan, a "smoke screen" conceived and executed with the connivance or involvement of the assessee company has been satisfactorily proved. In such factual circumstances, the assessing officer came to the conclusion that the identity, creditworthiness of the subscriber companies and the genuineness of the transaction has not been established and the sum of Rs. 1,10,00,000/- received from 8 subscribers out of 9 subscriber companies in the books of the assessee companies is cash credit under Section 68 of the Act and accordingly added the amount and completed the assessment. 5. The assessee filed appeal before the National Faceless Appeal Centre (NFAC) contending that the observations/findings made in the assessment order were perverse, the addition of Rs. 1,10,00,000/- is not called for and the same is required to be deleted and that the assessing officer failed to appreciate the evidence filed before him and the addition was made merely on conject....
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....erefore, it was held that the onus is on the assessee to explain the nature and source of credit and it does not get discharged merely by filing confirmative details or demonstrating that the transactions are done through banking channels or even by filing income tax assessment particulars. That the genuineness of the transaction as a whole is a very important and critical factor in the examination of the explanation of the assessee as required under Section 68 of the Act. Further the appellate authority noted that the assessee had submitted details and documentary evidence from which the identity of the shareholders was proved but the same is not sufficient to prove the nature and genuineness of the transactions and creditworthiness of the share subscriber companies, which can be considered to examine or verify the nature and genuineness of the transactions and source of investment by shareholders particularly when the investments were made with huge premium. 7. Further the appellate authority noted that no requisite details were submitted by the assessee during the course of the assessment proceedings or during the appellate proceedings in respect of the share subscriber compani....
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....al appearance to prove the identity, creditworthiness of the subscribers and the genuineness of the transactions. The tribunal faulted the assessing officer for having taken an adverse view as he could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished and also to get further investigation to be done by him by way of recording statements of the directors of the assessee and subscriber company. In support of such conclusion, reference was made to the decision in Principal Commissioner of Income Tax Versus Paradise Inland Shipping Private Limited [2017] 84 Taxmann.com 58 (Bom) and Crystal Networks Private Limited Versus Commissioner of Income Tax 353 ITR 171 (Cal). Further the learned tribunal held that the assessing officer has not bothered to discuss or point out any defect or deficiency in the document furnished by the assessee of the share subscribing companies and these evidences have not been controverted by the assessing officer nor anything substantive was brought on record to justify the addition. 9. The learned tribunal further held that going by the documents placed by the assessee of all the shar....
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....thority, the case on hand is required to be examined on merits and therefore the revenue is entitled to maintain this appeal before this Court. Accordingly, the preliminary objection raised on behalf of the respondent assessee is rejected. 13. The expression "the assessee offers no explanation" occurring in Section 68 of the Act was explained by Hon'ble Supreme Court in P. Mohanakala to mean where the assessee offers no proper reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee and that the opinion of the assessing officer is required to be formed objectively with reference to the materials available on record and application of mind is the sine qua non for forming the opinion. Further it was held that Section 68 itself provides where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assessee of the previous year, if the explanation offered by the assessee about the nature and source of such sums found credited in the books of the assessee is in the opinion of the assessing officer not satisfactory, such opinion found itself constitute....
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....ealt with each of the subscribing companies and has noted the amount of investment made and also the common feature that all the investing companies reported NIL income. 17. The learned tribunal also faulted the appellate authority stating that none of the points have been discussed. This is factually incorrect as could be seen from the findings recorded by the appellate authority from paragraph 8.2 of the order dated 20.10.2023. The appellate authority has noted several decisions of the Hon'ble Supreme Court and the High Court and in paragraph 8.7 has discussed the factual position in the assessee's case bearing in mind, the legal principle laid down in all those decisions and then proceeded to assign its own reasons to concur with the decision of the assessing officer. Therefore, we find that the learned tribunal erred in faulting the appellate authority on the ground that the appellate authority has not discussed about the material facts of the case of the assessee, this being the factually incorrect finding, the same requires interference. 18. The learned Senior Advocate appearing for the respondent assessee placed reliance on the decision in Principal Commissioner of Income ....
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.... Reality Solutions Private Limited (supra) also involved consideration of the factual circumstances where the directors responded to the summons, submitted documents to establish the identity and creditworthiness of the shareholders and genuineness of the transactions. This not being the case before us, the decision in Vish Reality Solutions Limited cannot be of any assistance to the respondent assessee. 21. The Hon'ble Supreme Court in Principal Commissioner of Income Tax (Central) -1 Versus NRA Iron and Steel Private Limited [2019] 103 Taxmann.com 48 (SC) pointed out that use of words "any sum found credited in the books" in Section 68 indicates that the section is widely worded and includes investments made by the introduction of share capital or share premium. Further it is settled law, the initial onus is on the assessee to establish by cogent evidence the genuineness of the transaction and creditworthiness of the investors under Section 68. The assessee is expected to establish to the satisfaction of the assessing officer (i) prove of identity of the creditors (ii) capacity of creditors to advance money and genuineness of transaction. The Hon'ble Supreme Court noted the deci....
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....hand, the irrestible conclusion that can be arrived is that the assessee did not discharge the legal obligation to the satisfaction of the assessing officer. Admittedly, in the instant case the share were by way of a private placement. Though the investing companies might have been incorporated under the provisions of the Company's Act that by itself will not validate the transaction. The assessee thwarted the enquiry/investigation that was to be done by the assessing officer by issuing summons to the directors of the investing company which were not responded. In such circumstances, the assessing officer proceeded to analyse the financial stability of the investing company and has clearly recorded the findings that those investing companies though might have been incorporated under the Company Act have no visible business activity and creditworthiness to make their investment. The assessing officer rightly observed that non-compliance of the summons issued under Section 131 shows the evasive tactics adopted and riggle out of the difficult situation they may be put to if they had responded to the summons. 24. In Principal Commissioner of Income Tax (Central) 2 Versus BST Infratech....