While dismissing the appeal filed by the revenue Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that the share application money received cannot be treated as unexplained for the purpose of Section 68 of the Income Tax Act, 1961 if the Assessing Officer (AO) doesn’t made any investigation on the documentary evidences at the period of assessment.
In the instant case the assessee company has filed its return of income for the relevant assessment year declared a loss of Rs.2,75,807.
During the course of assessment proceedings, the AO noticed that during the year under consideration, the assessee-company has received fresh share application money of Rs.10,63,50,000 from M/s. Jaisri Properties Exports Pvt. Ltd and the assessee was asked to furnish evidence in support of the genuineness of the share application money. In response, the assessee submitted all the supporting documents of the genuineness of the share application received from the Investor Company including name of the party, address, PAN, bank statement etc.
Without considering the above evidences, the AO confirmed the addition by observing that the assessee company has failed to prove the financial capacity of the investor firm.
Assessee approached the Tribunal against the order.
After analyzing the facts in deep, the bench comprising of Judicial Member Bhavnesh Saini and Accountant Member Prashant Maharishi observed that the assessee company produced sufficient documentary evidence before A.O. to prove the source of share application money. And it is also clear that the AO failed to conduct any enquiry and scrutiny of the documents at assessment stage, it indicate that the AO did not perform his duties at the assessment stage so as to make addition against the assessee-company.
The division bench further said that the assessee-company discharged initial onus to prove identity of the Investor Company including its creditworthiness and genuineness of the transaction in the matter. Hence in such a situation the AO has no right to made any addition cannot be treated the share application money as unexplained.
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