9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (4) TMI 1297 - AT - Income TaxAddition towards share capital u/s 68 - Summons issued u/s 131 complied with - source of source is also proved - HELD THAT - 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. The directors of share subscribing companies also presented themselves before the ld AO in response to summons issued u/s 131 in the instant case. Accordingly, the ratio laid down by the Hon ble Apex Court 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. Source of funds were never established by the investor companies in the case before the Hon ble Apex Court in CIT VERSUS NRA IRON STEEL PVT. LTD., 2019 (3) TMI 323 - SUPREME COURT , whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 by complying with the personal appearance of directors. Hence the decision relied upon by the ld DR is factually distinguishable and does not advance the case of the revenue. 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 AO. Accordingly, all the three conditions as required u/s. 68 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. - Decided in favour of assessee.
Issues Involved:
1. Justification of the addition towards share capital under Section 68 of the Income Tax Act. 2. Compliance with notices and summons issued under Sections 133(6) and 131 of the Income Tax Act. 3. Verification of the creditworthiness and genuineness of share applicants. 4. Legal precedents and their application to the case. Issue-wise Detailed Analysis: 1. Justification of the Addition Towards Share Capital Under Section 68 of the Income Tax Act: The primary issue in this case is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition made towards share capital under Section 68 of the Income Tax Act. The Assessing Officer (AO) had treated the entire share capital and share premium received during the year, amounting to ?2,04,00,000, as unexplained cash credit, adding it to the total income of the assessee. The AO concluded that the share applicants did not have the creditworthiness to make such investments. The CIT(A) initially upheld this addition based on incorrect factual assumptions. 2. Compliance with Notices and Summons Issued Under Sections 133(6) and 131 of the Income Tax Act: The AO issued notices under Section 133(6) to the share applicant companies, requesting documents such as bank statements, ledger accounts, and copies of returns. All share applicant companies complied with these notices. Additionally, summons under Section 131 were issued to the directors of the assessee company, who also complied by appearing before the AO and providing necessary documents. Despite this, the AO concluded that the share applicants lacked creditworthiness. 3. Verification of the Creditworthiness and Genuineness of Share Applicants: The assessee provided comprehensive details to the AO, including names, addresses, PAN, ITR acknowledgments, audited balance sheets, bank statements, and confirmations from share subscribing companies. These documents demonstrated the identity, creditworthiness, and genuineness of the transactions. The share capital and premium were received through account payee cheques, and the bank accounts of the share applicants showed no cash deposits before issuing cheques to the assessee company. The share applicants had substantial creditworthiness, as evidenced by their capital and reserves. 4. Legal Precedents and Their Application to the Case: The judgment references several legal precedents to support the assessee's case: - S.K. Bothra & Sons, HUF v. ITO: The initial burden of proof lies on the assessee, which can shift to the AO upon satisfactory evidence. - Crystal Networks (P) Ltd vs CIT: Basic evidence on record and failure of the creditor to appear cannot be the sole basis for addition. - CIT Kolkata III vs M/s Dataware Private Limited: The AO of the assessee cannot assess the profit and loss account of the creditor; the AO should verify the transaction with the creditor's AO. - Principal CIT vs. NRA Iron & Steel (P) Ltd: The AO must make extensive inquiries and establish links to hawala operators, which was not done in this case. The Tribunal found that the CIT(A) made factually incorrect observations and that the assessee had adequately proved the identity, creditworthiness, and genuineness of the share applicants. The Tribunal directed the AO to delete the addition made under Section 68 of the Income Tax Act, allowing the appeal of the assessee. Conclusion: The Tribunal concluded that the addition made by the AO under Section 68 was unjustified as the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the share applicants. The appeal of the assessee was allowed, and the AO was directed to delete the addition. The judgment emphasizes the importance of proper verification and adherence to legal precedents in assessing the genuineness of share capital transactions.
|
