The burden of proving the genuineness of share transactions lies with the assessee, requiring evidence of identity, creditworthiness, and genuineness, which must withstand scrutiny beyond mere banking transactions.

JUDGMENT :

T.S. Sivagnanam, J.

1. This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated 30.11.2022 passed by the Income Tax Appellate Tribunal “A” Bench, Kolkata (Tribunal) in ITA NO. 2655/Kol/2019 for the Assessment Year 2012-13. The revenue has raised following substantial questions of law for consideration:

A) Whether the Learned Tribunal has committed substantial error in law by deleting the addition of Rs. 14,63,00,000/-that had been made on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961.

B) Whether the Learned Tribunal has committed substantial error in law in not considering the judicial Principles laid down in the matter of Pr. CIT 5, Kolkata Vs Swati Bajaj reported in 2022 SCC Online 1572 (Cal).

C) Whether the order of the Learned Tribunal is perverse inasmuch as the same has been passed without considering the facts of the case in its proper perspective.

D) Whether the learned Tribunal has committed substantial error in law by failing to appreciate that neither the identity and creditworthiness of the creditors nor the genuineness of the transactions has been established and that being no addition made by the AO and CIT(A) were perfectly justified.

2. We have heard Mr. Om Narayan Rai and Mr. Soumen Bhattacharjee, Learned Senior Standing Counsel for the appellant and Mr. JP Khaitan learned Senior Counsel assisted by Ms. Swapna Das and Mr. Siddharth Das learned Advocates for the respondent assessee.

3. The assessee filed its return of income for the Assessment Year 201213 declaring income of Rs. 20,555,090/-. The case was selected for scrutiny and notice under Section 143(2) was issued on 12.082013 and subsequently notice under Section 142(1) along with the questionnaire was issued on 24.02.2014. The assessee was represented by their authorized representative who appeared in person before the Assessing Officer and filed certain details and documents. The Assessing Officer while completing the assessment under Section 143(3) of the Act by order dated 12.03.2015 noted that the assessee issued shares to 5 companies, (i) Gainwell Textrade Pvt. Ltd., (ii) Lucky Tradelink Pvt. Ltd., (iii) Pawapuri Mercantile Pvt. Ltd. (iv) HIL Engineering Pvt. Ltd., (v) Mubarak Cosmetics Pvt. Ltd.

4. The Assessing Officer stated that there is rampant practice of introducing undisclosed income in the guise of share application/ share allotment to different companies/ individuals; the companies took the shelter of corporate veil to channelize the undisclosed income; to protect this practice the Income Tax Act was amended with effect from 01.04.2012. The Assessing Officer referred to a letter dated 23.01.2015 which was served on the assessee requesting them to produce the new share-holders as well as the Directors before the Assessing Officer within 15 days to prove the genuineness, credit-worthiness of their investment. The assessee was directed to produce the bank statements of share-holders for the Financial Year 2011-12; books of account of the share-holders for Financial Year 2011-12; Profit and loss, balance sheet, computation and return AD of the share-holders for Financial Years 2010-11, 2011-12, 2012-13 and profit and loss, balance sheet, computation and return AD of the directors to the company for the Financial Years 2010-11, 2011-12 and 2012-13. The assessee was directed to be present at the time of recording their statement and for the purpose of cross-examination. It appears that the investor companies submitted a few documents but none of the directors appeared before the Assessing Officer. After considering all the materials the Assessing Officer held that the assessee company entered into a share transaction with the investor to introduce the unaccounted income in form of share application/allotment; they did not have any regular business transaction or regular acquaintance with the investors; the investors had no reason to invest s