2022 (4) TMI 278 - AT - Income Tax

Addition u/s 68 - unexplained share capital - HELD THAT - Before the lowers authorities, assessee has filed copy of the income tax return, PAN numbers of the concerned persons and also filed bank statements. But learned AO doubted the creditworthiness of the concerned persons. In support of its contention, the assessee/persons have not filed all the relevant details before the lower authorities, meaning thereby, the assessee has not discharged his onus. In our considered opinion, the abovesaid details do not prove the creditworthiness of the persons those have paid premium. So, in view of the above, we set aside this matter back to the file of the AO to revisit the issue and assessee is directed to file relevant details of the persons those have paid premium to the extent that they had creditworthiness of such huge payment. The learned CIT(A) has not passed reasoned and detailed order. Therefore, the captioned appeal filed by the Revenue is allowed for statistical purposes.

Summary

Issues:
1. Appeal against order of CIT(A) deleting addition under section 68 of the Income Tax Act.
2. Treatment of share subscription amount as genuine.
3. Requirement to establish identity, genuineness, and creditworthiness under section 68.

Analysis:
The appeal was filed by the Revenue against the order of the CIT(A) concerning the addition of a substantial amount under section 68 of the Income Tax Act. The case involved the issuance of shares by the assessee company with a significant premium, leading to doubts regarding the creditworthiness of the investors. The AO had added the amount to the total income of the assessee due to insufficient evidence establishing the identity, genuineness, and creditworthiness of the investors.

Upon review, the ITAT found that the assessee had provided some documents like income tax returns, PAN numbers, and bank statements to support their case. However, the AO remained unconvinced about the creditworthiness of the investors. The ITAT concluded that the evidence presented did not sufficiently demonstrate the creditworthiness of the investors who paid the substantial premium. As a result, the ITAT set aside the matter for the AO to re-examine the issue and directed the assessee to provide more relevant details to establish the creditworthiness of the investors adequately.

The ITAT noted that the CIT(A) had not provided a detailed and reasoned order, leading to the decision to allow the Revenue's appeal for statistical purposes. The judgment highlighted the importance of meeting the requirements of section 68 by establishing the identity, genuineness, and creditworthiness of investors to avoid adverse consequences. The case underscored the significance of providing comprehensive and convincing evidence to support financial transactions, especially when substantial amounts are involved.

In conclusion, the ITAT's decision emphasized the need for thorough documentation and evidence to substantiate financial transactions, particularly in cases involving share subscriptions and premium payments. The judgment served as a reminder of the importance of meeting statutory requirements and providing clear proof of the legitimacy and creditworthiness of parties involved in financial dealings to avoid potential tax implications and disputes.