INCOME TAX ACT, 1961

Section 68

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

Assessee was a public limited company issued 70,000 fresh shares having face value of Rs. 10 each and premium of Rs. 190 per share. Thus, assessee received share capital of Rs. 1.4 crore (70,000 x 200) during the year under consideration. However, AO noticed that some of the shareholders/investors had declared income between Rs. 1.5 lakh to Rs. 2 lakh in their respective returns of income, whereas they have invested amount in shares for Rs. 5 lakh to 10 lakh. Thus, AO took the view that these shareholders/investors did not have creditworthiness to invest such huge amount and accordingly, such transactions were not genuine within the meaning of section 68. Consequently, AO made addition of Rs. 40 lakh under section 68. Held: Assessee furnished necessary details such as copy of PAN, driving licence, ITR, confirmation of parties. Similarly, there was also no dispute to the fact that all the transactions were carried out through the banking channel and bank statements, etc. Thus, assessee discharged onus cast under section 68 to prove identity of investors, their creditworthiness/investments; and genuineness of the transaction but undisputedly, neither AO nor CIT(A) carried out any verification from respective parties, despite having all the necessary details in their possession. Therefore, assessee could not be penalized for inaction of revenue and addition made under section 68 was deleted.

Relied:CIT v. Chanakya Developers (2014) 43 Taxmann.com 91 (Guj) : 2014 TaxPub(DT) 2934 (Guj-HC), CIT v. Orissa Corp. (P.) Ltd. (1986) 159 ITR 78 (SC) : (1986) 25 Taxman 80 (SC) : 1986 TaxPub(DT) 1425 (SC) and Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj-HC) : (2003) 127 Taxman 523 (Guj-HC) : 2002 TaxPub(DT) 305 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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