2012 (10) TMI 319 - AT - Income Tax

Addition u/s 68 on account of share capital received from alleged six parties - Revenue opined such share applicants to be entry operator - Held that - Assessee issued share capital to 25 different share applicants and AO chose to add amount in respect of six applicants. It has not been denied that PAN & ITR, balance-sheet, confirmation and addresses of the share applicants were furnished by the assessee. Though assessee could not file bank statements in respect of six share applicants, it cannot be the sole reason for making the addition u/s 68 ignoring the other evidence which establishes the identity, creditworthiness and genuineness of transactions. It is undisputed that Rs 14 lacs have been received by banking channels in earlier year i.e. A.Y. 2004-05 and the remaining Rs. 1 lac in one year. Since assessee has discharged its onus cast by S68 in establishing the identity and creditworthiness of share applicants and genuineness of the transaction. Mere fact of cash deposits for withdrawals in the hands of the share applicants cannot justify the addition - Decided against Revenue

Summary

Issues:
- Addition of Rs. 15,00,000 on account of share capital received from alleged six parties
- Non-furnishing of bank statements by the assessee
- Compliance with the requirements of section 68 of the Income Tax Act

Analysis:

Issue 1: Addition of Rs. 15,00,000 on account of share capital received from alleged six parties
The Assessing Officer made the addition due to the lack of submission of bank statements by the assessee regarding the share applicants. The appellant contended that sufficient details were provided, including PAN, ITR, affidavits, and confirmations of the share applicants. The CIT(A) noted that the major portion of the amount was received in the previous assessment year and that the appellant had established the identification and genuineness of the transactions. The CIT(A) referred to legal judgments to support the appellant's case and ultimately deleted the addition.

Issue 2: Non-furnishing of bank statements by the assessee
The Assessing Officer emphasized the non-submission of bank statements of the share applicants as the basis for the addition. The appellant argued that bank statements from 19 share holders and other documents were provided, and the share applicants could not be forced to give their bank statements. The CIT(A) observed that the appellant had submitted details of all share applicants during the assessment proceedings, including bank statements for most applicants. The CIT(A) concluded that the appellant had discharged its onus by establishing the identification and genuineness of the transactions.

Issue 3: Compliance with the requirements of section 68 of the Income Tax Act
The tribunal noted that the assessment order lacked details and was based solely on the non-furnishing of bank statements. The tribunal found that the Assessing Officer did not consider all the explanations and facts on record. It was highlighted that Rs. 14 lacs were received through banking channels in the previous year, which was not disputed. The tribunal held that the appellant had fulfilled the requirements of section 68 by proving the identity and creditworthiness of the share applicants and the genuineness of the transactions. The tribunal upheld the CIT(A)'s decision to delete the addition.

In conclusion, the tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the addition of Rs. 15,00,000 based on the thorough analysis of the evidence and legal precedents presented during the proceedings.