2014 (8) TMI 905 - DELHI HIGH COURT

Addition u/s 68 - Onus of proving the identity and credit-worthiness of the share subscriber - Genuineness of subscription - Whether the Tribunal fell into error in upholding the deletion which was directed to be added back by virtue of section 68 of the Act – Held that:- In COMMISSIONER OF INCOME TAX Versus NOVA PROMOTERS & FINLEASE (P) LTD [2012 (2) TMI 194 - DELHI HIGH COURT] the legal effect of section 68 of the Act is mentioned - the money was received through banking channels, but did not reflect actual genuine business activity - The share subscribers did not have their own profit making apparatus and were not involved in business activity - They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques - The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction - The beneficiaries, including the assessee, did not give any share-dividend or interest to the entry operators/subscribers - The profit motive normal in case of investment, was entirely absent - no profit or dividend was declared on the shares - Any person, who would invest money or give loan would certainly seek return or income as consideration.

The court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction - The onus to prove the three factum is on the assessee as the facts are within the assessee’s knowledge - Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up - These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive - Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them.

The Tribunal has merely reproduced the order of the CIT(A) and upheld the deletion of the addition - the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the AO from the concerned bank, the AO has observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions - the matter is required to be remitted back to the tribunal for fresh adjudication – Decided in favour of Revenue.