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2022 (6) TMI 26 - AT - Income TaxAddition u/s 68 - unexplained cash credit - share application money receipts - sole basis for the AO to draw an adverse inference against assessee is investigation report of Income Tax Department Ahmadabad and statements of certain persons recorded at the time of investigation - HELD THAT:- AO never disputed fact that the assessee has filed necessary evidences, but he has ignored all the evidences filed by the assessee only on the basis of statement recorded from Mr. Shrish Chandrakanth Shah and came to the conclusion that transactions of share capital / share application money is nothing but undisclosed income of the assessee which has been routed through share application money from web off companies floated by Mr.Shrish Chandrakanth Shah through multiple layers. In our considered view, the conclusion drawn by the Assessing Officer on the basis of statement of some persons is completely on the basis of suspicion and surmises without there being any further evidences to support his findings. Further, we have gone through statements recorded from some persons, which are part of assessment order and we find that nowhere persons directly alleged that the assessee is involved in the activity of taking accommodation entries of share capital / share application money from those companies. In fact, the assessee has proved with necessary evidence that an allegation of the Assessing Officer is wrong and transaction between the assessee and investor companies are genuine business transactions. Therefore, we are of the considered view that the Assessing Officer has completely erred in making additions towards share capital / share application money received from certain companies as unexplained cash credit which is taxable u/s.68. Thus the assessee, by filing enormous details, has discharged its initial onus to prove identity, genuineness of transactions and creditworthiness of the shareholders. The AO, without carrying out further inquiries in order to ascertain the claim of the assessee, jumped into conclusion on the basis of report of Investigation wing, and financial statements of the subscribers that none of the subscribers had enough source of income to establish creditworthiness. Even though there were circumstances leading to suspicion, yet having taken an action u/s.132 and enquiries made in the assessment proceedings, the assessing authority had not brought any positive material or evidence to indicate that share application money as such represented assessee’s own undisclosed money brought back in the garb of share capital. Merely because of his subjective satisfaction that source of availability of money with the shareholder or their creditworthiness were not established, the AO could not treat the genuinely raised share capital as deemed income u/s.68. AO was erred in making additions towards share capital, including share premium u/s 68 - Decided in favour of assessee. Disallowance of rent u/s.40A(2)(b) - lease rent paid by the assessee to related party - HELD THAT:- We find that a similar issue had been considered by the Tribunal for earlier and subsequent assessment years in assessee’s own case [2019 (8) TMI 400 - ITAT CHENNAI] where, the issue has been set aside to the file of the Assessing Officer to reconsider the issue of disallowance of lease rent paid by the assessee to related party u/s.40A(2)(b) - Thus set aside this issue to the A.O and direct the Assessing Officer to reconsider the issue. Validity of assessment order u/s.143(3) r.w.s 153A - HELD THAT:- We find that there is no merit in legal ground taken by the assessee challenging validity of assessment order passed u/s.143(3) r.w.s. 153A - We further noted that assessment for the impugned assessment year has been completed consequent to search operation conducted in the case of the assessee, where certain incriminating materials were found and seized which suggest escapement of income. Therefore, we are of the considered view that there is no merit in legal ground taken by the assessee in light of certain judicial precedents and thus, grounds of appeal filed by the assessee are rejected.
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