Case Law Details
Moti Adhesives Pvt. Ltd Vs. ITO (ITAT Delhi)
Once assesseee places all the reliable and trustworthy documentary evidences to support the veracity of transaction u/s 68 of the Act, it is the duty of AO to dispassionately consider the same with objective standards and not to make the additions simply reproducing at length from the internal report of investigation wing prepared at the time of search (here on Jain Brothers). That is AO cannot make addition u/s 68 on mere basis of ifs and buts only and some credible incriminating material must be brought on records to displace the detailed evidence filed by the assessee during assessment proceedings. That is if reopening u/s 148 and addition u/s 68 are allowed to be made on same subjective standards of prima-facie opinion only which are generally required to reopen/start the case, and additions are allowed to be made without any credible material which can validly counter assessee’s evidences in my view same would totally frustrate the entire object/scheme of the law. In my view, AO is under a bounden legal duty to discharge his secondary burden u/s 68 of the Act before making any addition therein, where in present case as evident from facts noted above, only ground made is non production of director concerned which is plainly incorrect. For this reliance is placed on decisions which are narrated below. Moreover it looks from cursory reading from the impugned assessment order passed by AO that same is passed on merely borrowed satisfaction of investigation wing without independent application of mind by AO which is completely wrong and incorrect as AO u/s 148 while passing final order and before making addition of unexplained income under deeming provisions of section 68 etc cannot put cart before the horse and cannot pass the final assessment order just reproducing from investigation wing report which are made basis to reopen the case. The fact that present order is passed on mere basis of borrowed satisfaction only is evident if one compares the reasons recorded, show cause notice issued and final order as impugned before this Tribunal. At all three stages same and similar allegations are made dehors the evidences filed by assesssee.
Turning back to facts of present case, I find from paper book running into 84 pages all the relevant and necessary documents required to establish the subject transaction of share capital received are brought on records before AO and Ld CIT(A) and have totally remained uncontroverted. Specially the fact of positive response made by share holder in response to enquiry made u/s 131 and confirmation of subject investment therein by share holder to AO clinches the issue in favor of assessee. Moreover the share holder company having handsome net worth and assessed u/s 153C/153A for subject period also supports assessee’s case. Further AO has remained sited with folded hands and has not made any independent enquiry from concerned AO of share holder company which itself is sufficient to knock off the addition made. On basis of this I have no hesitation to delete the additions of Rs 25,00,000 and Rs 45,000 made u/s 68 by AO in reopened proceedings u/s 148 of the Act, as alleged accommodation entry obtained, on sole and mere basis of non production of directors of share holder company which in my considered view is plainly incorrect and unjustified. Notably, there is no statutory presumption that all cash credits and share capital are deemed to unexplained unless otherwise proved.
Mere non production of Director of said share holder company cannot justify adverse inference u/s 68 of the Act. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon’ble High Court in CIT vs DATAWARE (supra) which has not been done, so no adverse view could have been drawn. In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee and in my view it cannot be brushed aside by the AO to draw the adverse view which here in present facts cannot be countenanced. Therefore addition of Rs. 25,45,000 made by AO and sustained by Ld CIT(A) are hereby deleted.
FULL TEXT OF THE ITAT JUDGMENT
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