The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) has recently held that an addition under section 68 of the Income Tax Act is not valid when the assessee proves identity, creditworthiness, and genuineness of share transaction.
One Point Commercial Pvt. Ltd., the assessee challenged the order ofCIT(A)-9, passed against the assessment order by ITO, u/s. 143(3) of the Income-tax Act, 1961. The assessee filed its return on 24.09.2012, reporting total income at Rs.55,200/-. Assessee has issued 48,250 shares having a face value of Rs.10/- per share on a premium of Rs.190/- per share totalling Rs.4,78,50,000/- to the six companies.
The AO noted from the audited accounts of the assessee that it has received share application money and premium thereon amounting to Rs.4,78,50,000/-, during the year in question. The assessee furnished its replies with sufficient proof. The AO also issued notice u/s. 133(6) of the Act to the above six companies and issued summon u/s. 131 to the director of the assessee for his attendance. The AO made the addition of Rs.4,78,50,000/- under section 68 of the Act. The CIT(A) confirmed the addition.
As per section 68, any sum found credited in the books of a taxpayer, for which he does not explain the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, may be charged to income-tax as the income of the taxpayer of that year.
The assessee submitted that all the relevant details and evidence to explain the identity, creditworthiness and genuineness of the transactions were placed on record and the assessee had fully discharged its initial burden casted u/s. 68 of the Act. Further stated that the assessee has explained the source and nature of receipts of the fund and has brought on record all the documentary evidence in this respect.
The AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office and also as to get further investigation was needed by him by way of recording of statement of the directors of the assessee and the subscriber companies. The Tribunal observed that in the case of PCIT v. Paradise Inland Shipping Pvt. Ltd. [2017], it was held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case.
A two-member bench comprising of Shri Sanjay Garg, Judicial Member and Shri Girish Agrawal, Accountant Member found that the assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions towards the sum of Rs.4,78,50,000/- received during the impugned year. In light of the judicial precedence, the ITAT set aside the order of the CIT(A) and direct the AO to delete the addition made towards share capital and share premium u/s. 68 of the Act. The appeal of the assessee got allowed.
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