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2018 (12) TMI 565 - AT - Income TaxAddition u/s 68 - Addition made towards share premium - summons u/s 131 to the director of the assessee company to produce the directors of the investor companies - Held that - All the share applicant companies in the instant case before us are assessed to income tax - the assessee had duly proved the source of source of source in the instant case. Even if the creditworthiness of the share applicants are to be doubted , then it would be the duty of the AO of the assessee to make enquiries through the ld AO of the concerned share applicants. Once the relevant details are filed by the assessee before the AO to prove the creditworthiness of share applicants, then the same cannot be questioned / disputed by the ld AO of the assessee as the same would be travelling beyond his jurisdiction - the creditworthiness of the share applicant companies would have to be examined by the Assessing Officer of those companies and not by the Assessing Officer of the assessee herein. The share subscribing companies are duly assessed to income tax. It is not in dispute that the share subscribing companies are in existence. It is not in dispute that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record . Hence it could be safely concluded that they are genuine shareholders and not bogus and fictitious. Accordingly, the ratio laid down in the case of M/s Earthmetal Electricals P Ltd 2010 (7) TMI 1137 - SUPREME COURT would be squarely applicable to the facts of the instant case. 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 - Decided in favour of assessee
Issues Involved:
1. Justification of the deletion of addition towards share premium by the CIT(A). Issue-wise Detailed Analysis: 1. Justification of the deletion of addition towards share premium by the CIT(A): The Revenue's appeal challenges the order of the CIT(A) which deleted the addition of ?2,70,45,800/- towards share premium. The core issue is whether the CIT(A) was justified in deleting this addition. Facts and Findings: - The assessee company raised share capital and share premium totaling ?5,96,00,000/- during the assessment year 2012-13. - The Assessing Officer (AO) questioned the substantial share premium due to the lack of significant business activities by the assessee. - The AO verified the share capital and premium by issuing notices under section 133(6) to the shareholders, who responded directly, confirming their investments. - The AO observed that the replies were almost identical and noted common directors and addresses among some companies, suspecting connivance. - Summons under section 131 were issued to the directors of the assessee and the shareholder companies. The directors appeared, and their statements were recorded, confirming the investments. - Despite these confirmations, the AO concluded that the assessee failed to corroborate the creditworthiness of the investors and treated the entire receipt as unexplained cash credit under section 68. CIT(A) Findings: - The CIT(A) appreciated the various evidences submitted by the assessee, including documents supporting the payment of share subscription amounts. - The CIT(A) noted that the assessee had furnished all required details, including names, addresses, PAN, income tax assessment particulars, bank statements, and audited financial statements of the shareholders. - It was established that the amounts were received through account payee cheques or RTGS, and statutory returns were filed with the Registrar of Companies. - The CIT(A) concluded that the assessee had discharged its onus of proving the nature and source of the credits within the meaning of section 68. Tribunal's Analysis: - The Tribunal noted that the assessee had complied with all requisitions and provided extensive documentation to support the share subscriptions. - The identity, genuineness, and creditworthiness of the share applicants were established through various documents, including balance sheets, income tax returns, and bank statements. - The Tribunal emphasized that the AO did not draw any adverse inference from the depositions of the directors of the investor companies. - The Tribunal referred to several judicial precedents, including the Supreme Court's decision in Orissa Corporation P Ltd and the Gujarat High Court's decision in DCIT vs Rohini Builders, which support the view that the onus shifts to the Department once the assessee furnishes the necessary details. - The Tribunal highlighted that the AO's suspicion alone, without concrete evidence, cannot justify the addition under section 68. Conclusion: The Tribunal upheld the CIT(A)'s decision, concluding that the assessee had adequately explained the nature and source of the share capital and premium. The Tribunal dismissed the Revenue's appeal, affirming that no addition was warranted under section 68 of the Act based on the facts and evidence presented. Order: The appeal of the Revenue is dismissed, and the order pronounced in the Court on 07.12.2018 confirms the deletion of the addition towards share premium by the CIT(A).
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