2021 (6) TMI 816 - AT - Income Tax

Unexplained u/s 68 - fresh funds in the form of share application money and share premium amount in the books of assessee company - HELD THAT - We find no justifiable basis to interfere with the findings of the lower authority as the assessee has failed to provide necessary explanation to the satisfaction of the AO about the genuineness of the transaction including the related matters of valuation and creditworthiness of the investor company. Therefore, the ground of appeal so taken by the assessee is dismissed and the order of the ld CIT(A) is hereby sustained. Appeal of the assessee is dismissed.

Summary

Issues:
Appeal against addition of share capital and premium under section 68 of the Income Tax Act.

Detailed Analysis:

Issue 1: Addition of Share Capital and Premium
- Facts: The Assessing Officer observed infusion of funds as share application money and premium in the books of the assessee company. The AO made an addition of ?1,60,88,000 under section 68 of the Act due to suspicions regarding the genuineness of the transactions.
- AO's Findings: The AO noted various reasons for the addition, including lack of financial worth of the company, absence of business activities, unencashed cheques, and suspicious share premium. The AO concluded that the company was formed as a special purpose vehicle for introducing unaccounted money.
- CIT(A) Findings: The CIT(A) upheld the addition, emphasizing the lack of basis for determining share premium, discrepancies in property transactions involving multiple parties, and unencashed cheques. The CIT(A) suggested tax evasion motives behind the transactions.
- ITAT Decision: The ITAT dismissed the appeal, stating that the assessee failed to provide satisfactory explanations regarding the genuineness and valuation aspects of the transactions. The ITAT upheld the lower authorities' findings, sustaining the addition of ?1,60,88,000 under section 68 of the Income Tax Act.

This case highlights the importance of substantiating the genuineness of transactions and the need for proper documentation and explanations to avoid adverse tax implications. The judgment underscores the significance of transparency and compliance in financial dealings to prevent suspicions of tax evasion or irregularities.