INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained share capital money - Directors of share subscribers did not turn up before AO

During the scrutiny proceedings, AO noticed that assessee-company had raised a fresh share capital including security premium In order to look into the three limbs of basic parameters, i.e., identity and creditworthiness of the share applicants as well as genuineness of the transactions, summons under section 131 was issued to the director of the assessee company, requesting for personal appearance. At the same time, it was also requested to produce all the Directors of the subscribers companies. But, there was no response on the part of the assessee-company. Neither the Director of the assessee-company appeared nor any Director of any share subscriber company was produced. In this instant case, the assessee-company failed to discharge its onus, therefore the identity, creditworthiness and genuineness of the subscriber companies remained unexplained hence, AO was of the opinion that they have lacked regarding the normal business prudence. Therefore, considering the above facts and judicial pronouncement, the AO made addition to the tune of Rs. 2,97,75,000 under section 68. CIT(A) confirmed the impugned addition.Held: Main plank on which the AO made the addition was because the directors of the share subscribers did not turn up before him. It was noted that all the above requisitioned documents were furnished before the AO which substantiated the transaction between the assessee company and the share applicants. It was, therefore, not a case where the documents sought from the applicants to examine the transaction were not available before the AO. CIT(A) had categorically stated that the scrutiny assessments were framed on the share subscribing companies for the assessment year 2012-13 which shows their existence was genuine and transactions carried out by them were the subject-matter of examination by the Income Tax Department in scrutiny proceedings. This fact had not been controverted by the Revenue before this Tribunal. In the facts of the present case, both the nature and 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. Without doing so, the addition made by the AO was based on conjectures and surmises cannot be justified. Therefore, the addition made by the AO to the tune of Rs. 2,97,75,000 was deleted.

Followed:Pr. CIT v. Paradise Inland Shipping (P) Ltd. (2017) 84 Taxmann.com 58 (Bom) : 2017 TaxPub(DT) 2140 (Bom-HC). Relied:CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 19 Taxmann.com 26/206 Taxman 254/(2014) 361 ITR 220 (Del) : 2012 TaxPub(DT) 1644 (Del-HC), CIT. v. Lovely Exports (P) Ltd. (2009) 216 CTR 295 (SC) : 2009 TaxPub(DT) 261 (SC) and Pr. CIT v. Vaishnodevi Refoils & Solvex reported in (2018) 96 Taxmann.com 469 (SC) : 2018 TaxPub(DT) 4509 (SC) : (2018) 89 Taxmann.com 80 (Guj HC) : 2018 TaxPub(DT) 274 (Guj-HC).

REFERRED : CIT v. Prarmeshwar Bohra, ((2008) 301 ITR 404 (Raj) : 2008 TaxPub(DT) 0459 (Raj-HC)), CIT v. Smt. P. K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 80 (SC), Anand Prakash Agarwal (2008) 6 DTR (All-Trib) 191 : 2008 TaxPub(DT) 1632 (All-Trib), CIT v. Roseberry Mercantile (P) Ltd. ITAT No. 241 of 2010, dated 10-1-2011, Anand Prakash Agarwal (2008) 6 DTR (All-Trib) 191 : 2008 TaxPub(DT) 1632 (All-Trib), CIT v. Nishan Indo Commerce Ltd. ITA No. 52 of 2011, dated 2-12-2013: 2014 TaxPub(DT) 1934 (Cal-HC),CIT v. Leonard Commercial (P) Ltd. ITAT No. 114 of 2011, dated 13-6-2011 and Pr. CIT v. Hi-tech Residency (P) Ltd. (2018) 96 Taxmann.com 402 (Del) : 2018 TaxPub(DT) 4805 (Del-HC).