2024 (3) TMI 516 - AT - Income Tax

Addition u/s 68 - share application money received as unaccounted cash credit - identity and creditworthiness of the share subscribers and genuineness of the transaction - CIT(A) deleted the addition - HELD THAT - We fail to find any infirmity in the finding of ld. CIT(A) who has examined the facts of the case in order to come to a conclusion that a genuine transaction of investment was carried out by the alleged share applicants in the equity of the assessee company and the identity of the share applicants is not in doubt as they are all private limited companies duly registered with Ministry of Corporate Affairs and creditworthiness of the transactions is supported by the fact that they have been routed through banking channel and source of the alleged sum is from the financial liquidity available with the investor companies having sufficient net worth to make the investment in the equity share capital of the assessee company. Thus, the alleged transaction is not fit to be covered under the provisions of Section 68 of the Act. We are inclined to hold that all the necessary documentary evidences have been placed on record which are sufficient enough to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction and the assessee has successfully discharged its onus of explaining the source of alleged sum. Thus, we fail to find any infirmity in the finding of ld. CIT(A) deleting the impugned addition made u/s 68 - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of Delay in Filing Appeal
2. Deletion of Addition under Section 68 of the Income Tax Act
3. Verification of Identity, Creditworthiness, and Genuineness of Transactions
4. Compliance with Supreme Court and High Court Judgments

Summary:

Condonation of Delay in Filing Appeal:
The appeal filed by the Revenue was time-barred by 50 days. The Revenue filed a condonation application detailing the reasons for the delay, including procedural steps and communications between various tax offices. The Tribunal was satisfied with the reasons provided and condoned the delay, admitting the appeal for adjudication on merits.

Deletion of Addition under Section 68 of the Income Tax Act:
The Revenue challenged the deletion of an addition of Rs. 2.45 Crore made under Section 68 of the Income Tax Act by the Commissioner of Income Tax (Appeals)-NFAC, Delhi. The Assessing Officer (AO) had initially made the addition, citing the assessee's failure to establish the identity, creditworthiness of shareholders, and the genuineness of the transaction. The AO referred to previous Tribunal decisions and noted that the share applicant companies had no substantial track record or asset base, leading to the conclusion that the transactions were bogus.

Verification of Identity, Creditworthiness, and Genuineness of Transactions:
The assessee, a non-banking finance company, provided various documents to explain the nature and source of the share capital and premium received. During the remand proceedings, the AO verified the identity and creditworthiness of the share applicants and the genuineness of the transactions. The remand report supported the assessee's claim, noting that the investor companies were genuine, had substantial capital, and the transactions were conducted through banking channels. The CIT(A) relied on this remand report and other submitted documents to delete the addition, concluding that the assessee had discharged its primary onus of substantiating the genuineness of the transaction.

Compliance with Supreme Court and High Court Judgments:
The Tribunal referred to several judgments, including those from the Hon'ble Supreme Court and various High Courts, which supported the assessee's position. These judgments emphasized that if the assessee provides sufficient documentary evidence to prove the identity and creditworthiness of the share subscribers and the genuineness of the transaction, the addition under Section 68 is not justified.

Conclusion:
The Tribunal found no infirmity in the CIT(A)'s findings and upheld the deletion of the addition made under Section 68 of the Income Tax Act. The appeal filed by the Revenue was dismissed, and the order was pronounced in the open Court on 22nd February 2024.