INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained share application money - Burden of proof discharged by the assessee

Assessee, during the assessment proceedings, submitted name and address of the investing companies and notice under section 133(6) were issued by AO and confirmations were received, confirming the assessee's claim. The assessee was asked to produce the director of the companies for explaining the issues, AO noted that the assessee and investing companies were not coming forward with the explanations, hence the financial statement and other relevant data submitted by them in the ROC were obtained by AO. AO, noted that the assessee company had failed to prove the identity, creditworthiness and genuineness of the share subscriber companies, therefore, he made an addition to the tune of Rs. 1,60,00,000. CIT(A) had deleted the addition. The main plank on which the AO made the addition was because the directors of the share subscribers did not turn up before him. Held: In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required under section 68 i.e., the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO was based on conjectures and surmises hence, could not be justified. Therefore, the order of CIT(A) in deleting the addition of Rs. 1,60,00,000 was to be confirmed.

Relied:DCIT v. Global Mercantiles (P) Ltd. ITA No. 1669/Kol/2009, dt. 13-01-2016, R.B Horticulture & Animal Projects Co. Ltd. ITA No. 632/Kol/2011, dt. 13-1-2016, ITAT Kolkata in ITA No. 1061/Ko1/2012 in the case of ITO Wd.3(2) Kol, v. Steel Emporium Ltd., dated 5-2-2016, ITO v. Cygnus Developers (I) (P) Ltd. ITA No. 282/Kol/2012 dt. 2-3-2016, CIT v. Gangeshwari Metal (P) Ltd. (ITA No. 597 of 2012), dt. 21-1-2012, CIT v. Novo Promoters & Finlease (P) Ltd. (2012) 342 ITR 169 (Del) : 2012 TaxPub(DT) 1558 (Del-HC), CIT v. Lovely Exports (P) Ltd. (2009) 319 ITR 5 (SC) : 2009 TaxPub(DT) 0261 (SC) and Finlease (P) Ltd. (2012) 342 ITR 169 (Del) : 2012 TaxPub(DT) 1558 (Del-HC) ITA 232/2012 judgment dt. 22-11-2012. Applied:CIT, Kolkata-III v. Dataware Private Limited ITAT No. 263 of 2011, dt. 21-9-2011.

REFERRED : Gagandeep Infrastructure 80 Taxmann.Com 272 (Bom) : 2017 TaxPub(DT) 1238 (Bom-HC), S Hastimal v. CIT (1963) 49 ITR 273 (Mad), Northern Bengal Jute Trading Company v. CIT (1968) 70 ITR 407 (Cal) : 1968 TaxPub(DT) 0085 (Cal-HC), CIT v. Stellar Investments Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC), CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC), CIT v. Data ware (P) Ltd. ITAT No 263 of 2011, GA No 2856 of 2011, dt. 21-9-2011, Lovely Exports by the CTR at 216 CTR 295, CIT v. Nishan Indo Commerce Ltd. dt. 2-12-2013 in Income Tax Appeal No. 52 of 2001 CIT v. Roseberry Mercantile (P) Ltd. ITAT No. 241 of 2010, dt. 10-1-2011, CIT v. Ruby Traders and Exporters Limited (2003) 263 ITR 300 (Cal) : 2003 TaxPub(DT) 1106 (Cal-HC), CIT v. Leonard Commercial (P) Ltd. on 13-6-2011 ITAT No. 114 of 2011, CIT v. Smt. P. K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 0080 (SC), Orissa Corpn. (P) Ltd. (supra) (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 0305 (Guj-HC), S.K. Bothra & Sons, HUF v. ITO, Ward- 46(3), Kolkata (2012) 347 ITR 347 (Cal.) : 2012 TaxPub(DT) 0815 (Cal-HC), Crystal Networks (P) Ltd. v. CIT (2013) 353 ITR 171 (Kol) : 2013 TaxPub(DT) 1470 (Cal-HC), CIT, Kolkata-IV v. Roseberry Mercantile (P) Ltd., ITAT No. 241 of 2010 dated 10- 1-2011, CIT. v. Lovely Exports (P) Ltd. (2008) 216 CTR 195, CIT v. Nishan Indo Commerce Ltd. dated 2-12-2013 in Income Tax Appeal No. 52 of 2001

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