2020 (9) TMI 757 - AT - Income Tax

Disallowance of share premium received on issue of share - undisclosed income of the assessee u/s 68 - HELD THAT - AO has not been able to prove that the premium charged by the assessee is unjustified or bogus or sourced from undisclosed or unexplained funds/ source. It is also noted from the available records that most of the corporate subscribers were filing returns and they were being regularly assessed to tax. The AO has not brought any adverse findings against them. Assessee had submitted a valuation report for charging of premium before the AO during the assessment proceeding but the same had neither been mentioned nor controverted in the assessment order by the AO. If the AO had any doubts regarding the source of investment of the subscribers, he could have examined the bank accounts from where the investment was routed. AO is duty bound to investigate the creditworthiness of the creditors/ subscribers, verify the identity of the subscribers and ascertain whether the transaction is genuine or these are bogus entries of name lenders but it was not properly done. - Decided against revenue.

Summary

Issues Involved:
1. Admissibility of additional evidence by the Revenue.
2. Deletion of addition made by the AO on account of share premium received on the issue of shares.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Evidence by the Revenue:
The Revenue sought to admit additional evidence, including copies of View Director Master data and company addresses from the Ministry of Corporate Affairs portal. The Tribunal evaluated Rule 29 of the Appellate Tribunal Rules, 1963, which restricts parties from producing additional evidence unless the Tribunal requires it for substantial cause. The Tribunal found that the Revenue did not explain why these documents were necessary or how they were connected to the controversy. Consequently, the application for additional evidence was dismissed as it did not meet the criteria under Rule 29.

2. Deletion of Addition Made by the AO on Account of Share Premium:
The Revenue challenged the deletion of the addition of ?2,63,15,000/- made by the AO under Section 68 of the Income Tax Act, 1961. The AO had added this amount, arguing that the share premium received by the assessee was unexplained. However, the CIT(A) deleted this addition, stating that the assessee had discharged its primary onus by providing identity, creditworthiness, and genuineness of the investors.

The Tribunal upheld the CIT(A)'s decision, emphasizing several key points:
- The assessee had provided complete details of the share subscribers, including their PAN, tax returns, and bank statements.
- The AO did not conduct proper enquiries or issue notices under sections 133(6) or 131 to verify the subscribers.
- The AO's general observations and lack of specific findings did not justify the addition under Section 68.
- The Tribunal cited multiple judgments, including CIT v. Dwarkadhish Investment (P) Ltd., CIT v. Value Capital Services (P.) Ltd., and CIT v. Green Infra Ltd., which support the principle that once the assessee provides sufficient evidence, the onus shifts to the Revenue to disprove the claims.

The Tribunal concluded that the AO failed to prove that the share premium was unjustified or sourced from undisclosed funds. The appeal filed by the Revenue was dismissed, and the deletion of the addition by the CIT(A) was upheld.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming that the CIT(A) had correctly deleted the addition of ?2,63,15,000/- made by the AO. The Tribunal found that the AO did not conduct a thorough investigation and failed to disprove the evidence provided by the assessee regarding the share premium.