2016 (1) TMI 31 - AT - Income Tax

Addition u/s. 68 - bogus share application money/share premium received by the assessee company - CIT(A) deleted the addition - Held that - The AO has also raised doubts on the genuineness of the share application money on the premises that it is at abnormally high premium, even where the shares of the applicant company are not listed. On this issue it is observed that such features are trigger for further investigation but the matters ends at this point & the AO is enquired to investigate the issue independently and through corroborative evidences and cannot for this fact of abnormal premium the very basis for making addition u/s. 68 The first appellate authority has passed well reasoned order by passing a speaking order. He has also considered various judicial pronouncements and the relevant provisions of law. Substantial evidences were found available on record and the same were properly considered by the ld. CIT(A) impugned order. The learned DR could not be able to rebut the findings elaborately recorded by the ld. CIT(A). We are, therefore, of the view that the impugned order of the ld. CIT(A) does not call for any interference. Therefore, the impugned order is liable to be upheld and the appeal of the Revenue deserves to be dismissed. - Decided in favour of assessee.

Summary

Issues:
Deletion of addition of Rs. 50,00,000 made under section 68 of the Income Tax Act, 1961 on account of bogus share application money/share premium received by the assessee company.

Analysis:
1. The only issue in this appeal pertains to the deletion of the addition of Rs. 50,00,000 made by the Assessing Officer under section 68 of the Income Tax Act, concerning bogus share application money received by the assessee. The AO concluded that the share applicant companies were non-existent entities, and the assessee failed to establish their identity, creditworthiness, and genuineness of the transactions. The AO added Rs. 50,00,000 to the total income of the assessee. However, the CIT(A) deleted the addition based on the appellant's submissions and documents provided, including share application forms, PAN details, bank statements, and legal precedents supporting the genuineness of the transactions.

2. The appellant substantiated the existence and identity of the share applicant investor company by submitting various documents, including share certificates, bank statements, and annual returns. The appellant relied on legal propositions from previous court decisions to support their case. The CIT(A) observed that the appellant had discharged the initial burden of proof to establish the identity and genuineness of the transactions. The CIT(A) emphasized the importance of banking channels in substantiating the identity of the share applicant and the genuineness of the transaction.

3. The CIT(A) highlighted that the revenue had the power to trace individuals and that the appellant was not required to prove the "source of source." The CIT(A) held that the appellant had provided sufficient evidence to support the investment through share application money by the investor companies. The CIT(A) concluded that the AO's investigation was inadequate to refute the appellant's explanation, and the addition of Rs. 50,00,000 was directed to be deleted based on legal precedents and evidences provided by the appellant.

4. The Appellate Tribunal upheld the CIT(A)'s decision, stating that the first appellate authority had passed a well-reasoned order considering judicial pronouncements and relevant provisions of law. The Tribunal found substantial evidence on record supporting the CIT(A)'s decision and rejected the Revenue's appeal. The Tribunal concluded that the impugned order did not warrant interference, and the appeal of the Revenue was dismissed.

This detailed analysis of the judgment showcases the legal intricacies involved in the deletion of the addition of Rs. 50,00,000 under section 68 of the Income Tax Act, emphasizing the importance of evidence, legal precedents, and the burden of proof in such cases.