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2014 (11) TMI 475 - AT - Income TaxAddition u/s 68 Share application money received during the year Initial burden discharged by assessee or not - Held that - The assessee had discharged the initial burden of proof that lay on it - The investor company M/s VIP Leasing & Finance Pvt. Ltd. directly sent a confirmation letter to the Assessing Officer, along with its balance sheet - The AO had the PAN No. and complete address of the investor company - the assessee produced all the documents and evidences which he could and whereas, the revenue failed in conducting any enquiry or in gathering any evidence against the assessee As decided in COMMR. OF INCOME TAX Versus M/s LOVELY EXPORTS(PVT) LTD 2008 (1) TMI 575 - SUPREME COURT OF INDIA - if the assessee produces the names, addresses, PAN details of the shareholders then the onus on the assessee to prove the source of share application money stand discharged - If the Assessing Authority to verify the same in the hands of the shareholders concerned - as the assessee has discharged its initial burden of proof and as the revenue did not do any enquiry or investigation and hence did not discharge the onus that shifted to it, the contentions of the assessee is upheld Decided in favour of assessee.
Issues Involved:
1. Addition of Rs. 50,00,000/- under Section 68 of the Income Tax Act. 2. Burden of proof regarding the genuineness of share application money. 3. Non-production of the investor before the Assessing Officer. 4. Assessment of the creditworthiness and genuineness of the investor company. Detailed Analysis: 1. Addition of Rs. 50,00,000/- under Section 68 of the Income Tax Act: The Assessing Officer (AO) added Rs. 50,00,000/- to the total income of the assessee under Section 68, citing that the assessee failed to prove the creditworthiness and genuineness of the share premium received from M/s VIP Leasing and Finance (Pvt.) Ltd. The AO concluded that the investor company had negligible profits and was not engaged in any real business, suspecting it to be involved in providing accommodation entries. 2. Burden of proof regarding the genuineness of share application money: The assessee argued that it had discharged its burden of proof by providing the complete identity, including the income tax particulars and creditworthiness of the share applicant, as well as the genuineness of the transaction. The assessee contended that the AO and the Commissioner of Income-tax (Appeals) [CIT(A)] did not make any effort to conduct enquiries or obtain details from the investor. 3. Non-production of the investor before the Assessing Officer: The AO and CIT(A) held that the non-production of the investor before the AO amounted to furnishing a non-satisfactory explanation regarding the share capital. The assessee countered that it had requested the AO to use his powers to enforce the attendance of the witness, which was not done. The investor company had directly sent a confirmation letter and its balance sheet to the AO, which was ignored. 4. Assessment of the creditworthiness and genuineness of the investor company: The Tribunal observed that neither the AO nor the CIT(A) attempted to conduct any enquiry or investigation to negate the assessee's claim. The assessee had provided all possible documents and evidence, including the investor's PAN number and complete address, but the revenue failed to conduct any enquiry or gather evidence against the assessee. Judgment: The Tribunal held that the assessee had discharged its initial burden of proof by producing all necessary documents and evidence. The revenue, on the other hand, failed to conduct any enquiry or investigation. The Tribunal relied on various case laws, including CIT vs. Victor Electrodes Ltd., CIT vs. Pradeep Gupta, and CIT vs. Gangeshwari Metal Pvt. Ltd., which supported the assessee's contention that the burden of proof had shifted to the revenue once the assessee provided sufficient evidence. The Tribunal concluded that the decisions cited by the Departmental Representative and the CIT(A) were not applicable to the facts of this case. The Tribunal applied the proposition laid down by the Jurisdictional High Court and upheld the assessee's contentions, deleting the addition of Rs. 50,00,000/-. Conclusion: The appeal of the assessee was allowed, and the addition of Rs. 50,00,000/- under Section 68 was deleted. The Tribunal emphasized the importance of the revenue conducting proper enquiries and investigations before making such additions. The judgment was pronounced in the open court on 21st March 2014.
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