DCIT Vs Devi Iron & Power Pvt Ltd (ITAT Raipur)
ITAT Raipur held that addition as an unexplained cash credit u/s 68 of the Income Tax Act unsustainable in as much as the assessee company has duly discharged the onus of proving the identity and creditworthiness of the investor company.
Facts- Post search operations, during the course of the assessment proceedings, it was observed by the AO that the assessee company had during the year under consideration received share application money and share premium from a Kolkata-based investor company as well as an in-house company.
Accordingly, AO called upon the assessee to substantiate the identity and creditworthiness of the shareholders as well as the genuineness of the transaction of receipt of the share application money from the aforesaid share applicant companies.
AO after referring to the balance sheets of the aforesaid share applicant’s companies concluded that they did not have the creditworthiness to make investments of substantial amounts with the assessee company. Accordingly, AO held the same to be an unexplained cash credit u/s 68 of the Act.
The CIT(Appeals) vacated the addition that was made by the A.O by treating the share application money received by the assessee company from the aforesaid investor companies as unexplained cash credits u/s.68 of the Act.
Conclusion- We, thus, in terms of our aforesaid observations are of the considered view that now when the assessee company had duly discharged the onus that was cast upon it as regards proving the identity and creditworthiness of the investor company, and also the genuineness of the transaction of receipt of the share application money from the latter. There could have been no justification for the Assessing Officer to have drawn adverse inferences as regards the authenticity of the transaction and characterization of the receipt as an unexplained cash credit u/s. 68 of the Income Tax Act.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeals filed by the department are directed against the consolidated order passed by the CIT(Appeals), Raipur dated 18.07.2014 which in turn arises from the orders passed by the A.O u/s.153A r.w.s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 27.03.2014 for A.Ys. 2011-12 & 2012-13 AND u/s.143(3) of the Act dated 30.03.2016 for A.Y.2013-14. Also the assessee is before us as cross-objector for A.Ys. 2011-12 and 2012-13. As the issues involved in the captioned appeals are inextricably interlinked; or in fact interwoven, therefore, the same are being taken up and disposed off together by way of a consolidated order.
2. We shall first take up the appeal filed by the revenue in ITA No.267/RPR/2014 for the assessment year 2011-12 wherein the impugned order has been assailed on the following grounds of appeal before us:
“1. “On the facts and in the circumstances of the case the CIT(A) erred in deleting the additions of Rs.4,07,00,000/- made on account of share application/capital received as unexplained cash credits u/s. 68 of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case the CIT(A) erred in overlooking the facts that the creditworthiness and the genuineness of the transactions has not been established by the appellant. There are evidence to the contrary produced by the department which establishes that the investors did not have the income earning apparatus and hence did not have creditworthiness.
3. On the facts and in the circumstances of the case the CIT(A) erred in overlooking the investigation of facts and evidences on record to establish suppression of production by the assessee.
4. On the facts and in the circumstances of the case the CIT(A) erred in deleting the additions of Rs.6,57,83,016/- made on account of suppression of production based on the lower yield declared by the assessee and hence corresponding unrecorded sale thereof.
5. The CIT (A) has erred in passing the appellate order wherein he has acted in a perverse manner while passing the order which has been made in haste without giving reasonable opportunity to the AO to give his submissions on issues.”
3. Succinctly stated, the assessee company which is engaged in the business of manufacturing of sponge Iron had filed its return of income for the assessment year 2011-12 on 26.09.2011, declaring an income of Rs. Nil. Search and seizure proceedings u/s.132 of the Act were conducted at the business premises of various concerns and the residences of the individuals belonging to “Mahamaya Group”. The assessee company being a group entity was also covered under the aforesaid search proceedings. Notice u/s.153A of the Act dated 04.05.2012 was issued to the assessee company calling upon it to file its return of income for the aforesaid year under consideration i.e. A.Y. 2011-12. In compliance the assesee company filed its return of income u/s.153A on 08.08.2012 declaring its income as originally returned at Rs. Nil.
4. During the course of the assessment proceedings, it was observed by the A.O that the assessee company had during the year under consideration received share application money and share premium from a Kolkata based investor company as well as an in-house company, as under:
