INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Share application receipt -

AO on the basis of investigation of Investigation Wing noted that entire transaction of receipt of share application monies from two companies lacks ingredients of genuineness and was totally fishy. It could, therefore, be safely inferred that this amount was unaccounted money of assessee introduced in his books of account after routing the same through entry providers/groups to avoid taxing of such amounts. CIT(A) confirmed order of AO. Held: There was nothing to establish genuineness of share subscription transactions on facts of this case. Assessee does not know anything about these companies or these persons. Assessee had no documents about their financial activities or their balance sheets. Assessee was a private limited company and these entities could not have, therefore, been rank outsiders like walk in investors and yet assessee does not throw enough light on these entities. Onus of assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions were done through banking channels or even by filing income tax assessment particulars.There was thus no escape from proving genuineness of a transaction. Assessee had failed to do so. Addition in respect of alleged share subscriptions received from these two companies was therefore, confirmed.

Followed:Pavankumar M Sanghvi v. ITO (2018) 404 ITR 601 (Guj) : (2018) Tax Pub (DT) 992 (Guj-HC). Applied:Mumbai Kamgar Sabha v. Abdulbahi Faizullabhai AIR 1976 SC 1455, CIT v. United Commercial and Industrial Co. (P) Ltd. 91991) 187 ITR 596 (Cal) : 1991 Tax Pub (DT) 95 (Cal-HC), CIT v. Precision Finance (P) Ltd. (1994) 208 ITR 465 (Cal) : 1994 Tax Pub (DT) 368 (Cal-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2005-06

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