2018 (8) TMI 867 - HC - Income Tax

Assessment u/s 153A - allegation of generation of unaccounted money and also transfer of such money in exchange of share capital - proving any accommodation entry - reliance on third party statement - CIT(A) and ITAT deleted the additions - Held that - The ITAT on a very detailed examination was satisfied about identity, creditworthiness and genuineness of the investor companies and held that there the assessee had discharged the primary onus to prove their creditworthiness and genuineness. The ITAT in concurring with the first appellate authority found that the assessing officer has made addition under section 68 of the Act without any reasonable basis. The first appellate authority has analyzed the transaction with each and every creditor and assigned reasons as to why the loan(s) have to be treated as genuineness and upheld the order of the first appellate authority ie., Commissioner of Income-tax (Appeals) and held that it did not suffer from any legal infirmity. A decision on the fact of ITAT can be gone into by this court only if a question has been referred to it which says that the finding of the tribunal on facts is perverse. - No substantial question of law arises - Decided against the revenue.

Issues Involved:
1. Validity of additions made under Section 68 of the Income Tax Act for unexplained cash credits.
2. Examination of identity, creditworthiness, and genuineness of transactions related to share application money.
3. Allegations of accommodation entries and commission payments for acquiring such entries.
4. Adherence to principles of natural justice, particularly the opportunity for cross-examination.

Detailed Analysis:

1. Validity of Additions under Section 68:
The High Court examined whether the additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act for unexplained cash credits were justified. The AO had added amounts received as share application money by the assessee from various companies, treating them as unexplained cash credits. The appellate authorities (CIT(A) and ITAT) found that the assessee had provided substantial evidence to prove the identity, creditworthiness, and genuineness of the transactions, including bank statements, balance sheets, and confirmations from the investor companies. The ITAT upheld the CIT(A)'s findings, stating that the AO had not provided any concrete evidence to disprove the assessee's claims and had relied on suspicion and statements recorded without cross-examination.

2. Examination of Identity, Creditworthiness, and Genuineness:
The appellate authorities meticulously examined the identity, creditworthiness, and genuineness of the investor companies. They found that the investor companies were genuine entities with substantial net worth and had made investments through banking channels. The assessee provided detailed documentation, including share application forms, allotment letters, bank statements, and ROC filings, to support the genuineness of the transactions. The ITAT noted that the AO failed to bring any evidence to counter the assessee's claims and had not found any cash deposits in the bank accounts of the investor companies that could suggest accommodation entries.

3. Allegations of Accommodation Entries and Commission Payments:
The AO had alleged that the assessee received accommodation entries and paid commissions for acquiring such entries. However, the appellate authorities found no evidence to support these allegations. The investor companies had confirmed their investments and provided relevant documents. The ITAT emphasized that during the search and post-search inquiries, no incriminating material was found to suggest that the assessee had generated unaccounted cash or paid commissions for accommodation entries. The AO's conclusions were based on statements recorded without cross-examination, which were later retracted by the witnesses when examined by the appellate authorities.

4. Adherence to Principles of Natural Justice:
The appellate authorities highlighted the violation of principles of natural justice by the AO, who did not provide the assessee with the opportunity to cross-examine the witnesses whose statements were relied upon for making additions. The CIT(A) exercised powers under Section 250(4) of the Act to summon and record statements of the witnesses, who denied providing accommodation entries and stated that their earlier statements were recorded under fear and misrepresentation. The ITAT upheld the CIT(A)'s findings, noting that the AO had not raised any objections to the contents of the statements recorded by the appellate authority.

Conclusion:
The High Court dismissed the revenue's appeals, affirming the findings of the appellate authorities that the assessee had successfully discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions. The court held that the AO's additions were based on suspicion and statements recorded without cross-examination, which violated the principles of natural justice. The court found no substantial questions of law arising from the appeals, as the findings were based on a thorough examination of evidence and adherence to legal principles.

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