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2018 (12) TMI 563 - AT - Income TaxAddition towards share capital u/s 68 - AO issued notices u/s 133(6) on all the share subscribing companies - identity, creditworthiness and genuineness of the transaction - Held that - Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its income of the previous year in which the same was received. In the facts of the present case, both the nature & source of the share capital received with premium were fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed before the ld AO. Accordingly, all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction were placed before the ld AO and the onus shifted to the ld AO to disprove the materials placed before him. Without doing so, the addition made by the ld AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 - decided in favour of assessee.
Issues Involved:
1. Justification of deletion of addition towards share capital under Section 68 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Justification of Deletion of Addition Towards Share Capital Under Section 68 of the Income Tax Act, 1961: The core issue in this appeal is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition made by the Assessing Officer (AO) towards share capital under Section 68 of the Income Tax Act, 1961. The AO had treated the entire share capital and share premium received during the year as unexplained cash credit and added the same to the total income of the assessee. Facts and Arguments: - The assessee issued equity shares at a premium, totaling ?6,00,00,000 during the financial year 2011-12. - The AO issued notices under Section 133(6) to the share applicant companies, who complied by submitting the required documents. - Summons under Section 131 to the Director of the assessee company returned unserved, leading the AO to treat the share capital and premium as unexplained cash credit. Assessee's Contentions: - The assessee argued that the AO's claim of non-existence was incorrect since notices under Sections 143(2) and 142(1) were duly served. - The assessee submitted all relevant documents, including ITR acknowledgments, final accounts, and bank statements, proving the genuineness of the share capital and premium. - The share applicant companies responded to notices under Section 133(6) with supporting evidence, proving identity, creditworthiness, and genuineness of the transactions. - Reliance was placed on the Supreme Court decision in CIT vs Orissa Corporation P Ltd, which held that no addition is warranted if the assessee proves identity, creditworthiness, and genuineness, even if no one appears in response to a summon under Section 131. CIT(A)'s Observations and Decision: - The CIT(A) observed that notices under Section 133(6) were duly served to share applicants, proving their identities. - The share applicants, registered under the Companies Act, 1956, provided Permanent Account Numbers and responded to statutory notices with financial statements and audit reports, proving their identities and creditworthiness. - The transactions were genuine, as payments were made through bank accounts, and the share applicants had sufficient net worth. - The CIT(A) concluded that the assessee had discharged its burden under Section 68, and the AO's addition was based on insufficient grounds. - The CIT(A) relied on the Supreme Court decision in CIT vs Lovely Exports Ltd, which stated that if share application money is received from alleged bogus shareholders, the department is free to reopen their individual assessments. Tribunal's Analysis and Conclusion: - The Tribunal noted that the assessee had provided all necessary details, and the AO issued notices under Section 133(6), which were duly responded to by the shareholders. - The Tribunal found that the assessee had proved the identity, creditworthiness, and genuineness of the share applicants. - The Tribunal emphasized that the AO should have verified the details from the AO of the share applicants if there were doubts. - The Tribunal relied on various judicial precedents, including the Supreme Court and High Court decisions, which held that the onus shifts to the AO once the assessee provides satisfactory evidence. - The Tribunal concluded that the addition made by the AO was based on suspicion and not on proper evaluation of evidence. Final Order: - The Tribunal upheld the CIT(A)'s decision to delete the addition of ?6,00,00,000 made by the AO under Section 68, dismissing the revenue's appeal. Conclusion: The judgment comprehensively addressed the issue of addition towards share capital under Section 68, emphasizing the importance of proving identity, creditworthiness, and genuineness of transactions. The Tribunal's decision was based on detailed analysis and reliance on judicial precedents, affirming that the assessee had discharged its burden, and the AO's addition was unjustified.
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