2020 (12) TMI 102 - AT - Income Tax

Power of CIT(A) in enhancing the addition - violating the law u/s 251(2) - enhancement of addition made u/s. 68 - as per assessee, CIT(A) enhanced the addition in a haste, without even enquiring the veracity of the voluminous documents and the statement recorded by AO which were available in the assessment folder - HELD THAT:- All the share subscriber companies have sufficient Capital / networth to invest in the share capital of the assessee company - share subscribers have also filed before the AO the source from which they subscribed to shares of assessee except M/s Alexa Vintrade Pvt. Ltd. (though not required as per law in force for AY 2012-13).

All of the share subscribers have filed their responses, bank statement, audited balance sheet, certificate of ITR etc. The assessee had discharged the onus on it about the creditworthiness of the shareholders. It is also noted that the source of the investments has been clearly brought to the notice of the AO during assessment proceedings - bank statements of all the shareholders as well as that of the assessee were filed before the AO which revealed that the share capital and premium have been subscribed by them through normal banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction.

Based on the documents and materials called for by the AO who accepted the same after verification is an act of enquiry and the view taken by the AO in the light of the material / documents is a probable view - though these materials were available in the assessment folder, the ld. CIT(A) has neither found any infirmity about the documents furnished by assessee or the share applicants nor had any information or material in his possession to challenge the veracity of the documents referred to above - CIT(A)’s omission to carry out any enquiry to show that the AO’s enquiry was wrong, his opinion casting aspersions on the AO’s action based on suspicious and conjectures cannot be accepted and so we reverse his actions of enhancement made and restore the assessment order.

Thus in this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, and the AO was satisfied with the identity, creditworthiness and genuineness of the share applicants to the tune of ₹ 20.54 crores which action of AO was a plausible view -coming to the action of Ld CIT(A) in enhancing the addition by ₹ 20.54 crores cannot be accepted in the absence of any investigation, much less gathering of evidence by the CIT(A) to disprove the documents found placed in the assessment folder, therefore section 68 addition could not have been made by Ld CIT(A).

The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, and the AO was satisfied with the identity, creditworthiness and genuineness of the share applicants - Therefore, we hold that addition confirmed as well as the enhancement made by Ld CIT(A) cannot be sustained because it was merely based on surmises and conjectures - Decided in favour of assessee.