DCIT Vs Nishrin Trading and Investment Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai held that addition u/s 68 justified as investment made by the companies in the assessee company lacks trust and details of transactions submitted by the assessee didn’t inspire confidence as the credibility of the companies are questionable as per the financials of the same.
Facts-
The solitary issue involved in this present appeal is that CIT(A) has erred in deleting the addition of Rs.11 crores made by AO on account of unexplained cash credit u/s. 68 of the Income-tax Act, 1961 without appreciating the fact that the assessee has received share application money from those entities who were providing accommodation entries and without appreciating the fact that the Hon’ble Supreme Court in the case of Sumati Dayal vs CIT (1995) 214 ITR 207 (SC) has held that genuineness could validly be decided on the ground or principles of preponderance of human possibilities which form a valid ground or parameter for determining the genuineness.
Conclusion-
The transactions in the bank statements does not inspire confidence in us that these were genuine transactions. From the assessment order of M/s Bhawna Computers P Ltd, it is seen that the said company has received share application of Rs.15,08,50,000/- from various parties which was added to the income of the said company under section 68 of the I.T Act as unexplained cash credits.
Similar transactions are also found in case of other alleged investor companies, and the assessee has not produced any evidence to show the actual business carried out by the alleged companies either before us or before the lower authorities and also no evidence in support of accumulated income has been filed by the assessee. Resultantly, the investment made by these companies in the assessee company lacks trust as to its genuineness and creditworthiness doubtful.
The Assessing Officer has relied on the judgement of Hon’ble Supreme Court in the case of Navodaya Castle, wherein it was held that mere production of certificate of incorporation, PAN and other details are not suffice to prove the identity of subscriber company, which otherwise was seen to be a paper company. The Assessing Officer has further cast onus upon the assessee to prove the nature and source of receipt to the satisfaction of the Assessing Officer.
Though the assessee has submitted details of the said transaction such as bank statements, profit and loss account, balance-sheet, copy of PAN, etc. the same did not inspire confidence as to the alleged impugned transaction because the credibility of the said concerns are questionable as per the financials of the same. The bank transactions of the investor companies seem to be ficitious and none of these alleged investor companies has shown the source of investment. Accordingly, order of CIT(A) deleting the addition is set aside.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been filed by the Revenue as against the order of the Ld.Commissioner of Income-tax (Appeals)-49, Mumbai, dated 30/07/2019 passed under section 250 of the Income-tax Act, 1961 pertaining to assessment year 2008-09.
2. The solitary issue involved in this present appeal is that the Ld.CIT(A) has erred in deleting the addition of Rs.11 crores made by the Assessing Officer on account of unexplained cash credit under section 68 of the Income-tax Act, 1961 without appreciating the fact that the assessee has received share application money from those entities who were providing accommodation entries and without appreciating the fact that the Hon’ble Supreme Court in the case of Sumati Dayal vs CIT (1995) 214 ITR 207 (SC) has held that genuineness could validly be decided on the ground or principles of preponderance of human possibilities which form a valid ground or parameter for determining the genuineness.
3. The brief facts are that the assessee company has filed its return of income on 14/09/2008 declaring total income of Rs.17,40,372/-. The case of the assessee was reopened vide notice under section 148 dated 16/03/2015 upon information received from the Investigation Wing during search / survey action conducted in the case of Lotus / Kamadhenu / Green Valley group dated 09/10/2014 that the assessee company is one of the beneficiaries of having received share application money of Rs.2 crores and Rs.4 crores from M/s Bhawna Computers Pvt Ltd and M/s Rowland Trexin Pvt Ltd, respectively alongwith other companies totalling Rs. 12 crores for which the details of the parties with the amount of share application money is as below:-
