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Facts
The assessee received share application money of Rs. 18.12 crores from M/s. Jai Jyoti India Pvt. Ltd. The Assessing Officer (AO) added this amount as unexplained money under Section 68 of the Income Tax Act, viewing the transactions as not genuine. The CIT(A) confirmed the addition.
Held
The Tribunal held that the assessee had discharged its initial burden under Section 68 by providing evidence of the transaction through banking channels. It noted that the funds were invested by M/s. Jayganga Exim India Pvt. Ltd. from its own collected funds, thereby establishing genuineness and creditworthiness.
Key Issues
Whether the addition of share application money of Rs. 18.12 crores under Section 68 of the Income Tax Act is justified when the assessee has provided evidence of banking channels and the investor's source of funds has been explained.
Sections Cited
68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI “D” BENCH : MUMBAI
Before: SHRI B.R. BASKARAN & SHRI NARENDER KUMAR CHOUDHRY
Date of Hearing : 20-03-2025 Date of Pronouncement : 08-04-2025 O R D E R PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dated 04-08-2021 passed by the Ld. Commissioner of Income Tax (Appeals)-3, Bhopal [„Ld.CIT(A)‟] and it relates to AY. 2014-15. The assessee is aggrieved by the decision of the Ld.CIT(A) in confirming the addition of Rs.18.12 crores made by the AO u/s. 68 of the Income Tax Act, 1961 („the Act‟).
The assessee is engaged in share trading business. During the course of assessment proceedings, the AO noticed that the assessee has received share application money of 18.12 crores from M/s. Jai Jyoti India Pvt. Ltd. The AO noticed that M/s. Jai Jyoti India Pvt. Ltd., had in turn, received share application money of Rs. 110.96 crores from various subscribers. Hence, the AO took the view that the transactions are not genuine and are from credit worthy party. Accordingly, the AO assessed the share application money of Rs.18.12 crores as „un-explained money‟ u/s. 68 of the Act. The Ld.CIT(A) also confirmed the same.
We heard the parties and perused the record. In the instant case, the addition has been made u/s 68 of the Act, wherein cash credits, which are essentially capital receipts, are deemed to be revenue receipts by legal fiction, if the assessee fails to prove the nature and source of cash credits. “Nature of cash credit” would mean that the assessee is required to show that it is not of revenue nature. In order to prove the sources, the assessee should discharge initial burden to prove the cash credits placed upon his shoulders of the assessee u/s 68 of the Act, i.e.., the assessee is required to prove three main ingredients, viz., the identity of the creditor, the genuineness of the transactions and the credit worthiness of the creditor. If the assessee discharges the initial burden, then the burden would shift to the shoulders of the assessing officer, i.e., it is the responsibility of the AO to disprove the claim of the assessee by bringing evidences on record.
Now, we shall examine the facts prevailing in this case. We notice that the AO of M/s. Jai Jyoti India P Ltd (presently known as Jay Ganga Exim India P Ltd) had also made an addition of Rs. 116.50 crores in the hands of M/s. Jayganga Exim India Pvt. Ltd.,in respect of share capital and share premium received from 35 subscribers. We notice that the AO of the assessee herein himself has stated that M/s. Jayganga Exim India Pvt. Ltd.,has invested an amount of Rs. 18.12 crores out of the money collected by it. Hence, the source of money for making investment with the present assessee stands explained, meaning thereby the credit worthiness of the M/s. Jayganga Exim India Pvt. Ltd stands proved. The AO has not expressed any doubt about the identity of the investor. Though, the AO has expressed the view that he is doubting the genuineness of the transactions, yet the fact would remain that the amount of Rs.18.12 crores has been received through banking channels and the AO is also aware that the above said investment was made by M/s Jayganga Exim India P Ltd out of funds collected by it. Hence, we are of the view that the genuineness of transactions cannot be doubted with. Thus, we notice that the assessee has discharged the burden placed upon it shoulders u/s 68 of the Act. On the contrary, we notice that the AO did not find fault with any of the documents furnished by the assessee, but proceeded to disbelieve the transactions on suspicion and surmises, which is not permitted u/s 68 of the Act.
Accordingly, we are of the view that no addition u/s. 68 of the Act is called-for in the facts of the present case. Accordingly, we set aside the order passed by the Ld.CIT(A) and direct the AO to delete the addition of Rs. 18.12 crores made by the AO.
In the result, the appeal filed by the assessee is allowed.