ACIT v. River Valley Meadows & Township Pvt. Ltd.

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The Tax Publishers2019 TaxPub(DT) 2392 (Del-Trib) : (2019) 201 TTJ 0529

INCOME TAX ACT, 1961

Section 68

As burden cast upon assessee to prove the identity of Investor, its creditworthiness and the genuineness of the transaction, had been discharged, no addition could be made under section 68 merely on presumption that investor company had been used only as a condust to route unaccounted income to assessee-company through the investor.

Income from undisclosed sources - Addition under section 68 - Receipt of share capital -

Assessee-company received share application money of Rs. 7 crores from the holding company M/s. P based at Mauritius. AO took the view that meagre profit earned by M/s P showed that investment in subsidiary company had been financed through borrowings and one 'S' having interest in lending concerns had routed his unacounted income through, M/s 'P' and assessee was the ultimate beneficiary of unaccounted funds. Accordingly, AO treated share application money as unexplained credit under section 68. Accordingly, AO treated share application money as unexplained credit under section 68. Held: Assessee-company filed Tax Residence Certificate issued by Tax Department of Government of Mauritius, Certificate issued by Registrar of Companies, Letter addressed to Reserve Bank of India and Form FC-GPR, Compliance Certificate issued by Company Secretary and details issued by IDBI Bank. These documents supported the explanation of assessee-company that it received genuine share application money. AO, instead of examining documentary evidences and record in depth, made an attempt to link Mr. S, who was having interest in entities, which had provided loans and funds to Investor Companies. Even if certain documents were found during the course of search in case of Mr. 'S'. however, no material was found to prove that Mr. 'S' was dealing with unaccounted money, rather department had made similar addition in the hands of Mr. 'S' which stood deleted by ITAT. As burden cast upon assessee to prove the identity of investor, its creditworthiness and the genuineness of the transaction, had been discharged, no addition could be made merely on presumption basis.

Relied:CIT v. Shri Suresh Nanda 2015 TaxPub(DT) 2362 (Del-HC), Rohini Builders (2002) 256 ITR 360 (Guj.) : 2002 TaxPub(DT) 0305 (Guj-HC), Dwarakadheesh Investment Pvt. Ltd. (2011) 330 ITR 298 (Del.) : 2011 TaxPub(DT) 0374 (Del-HC) and Zafar Ahmed & Co. 30 taxmann.com 269 (Alld.).