2022 (11) TMI 532 - AT - Income Tax

Addition u/s. 68 - unexplained share capital and premium - HELD THAT - The assessee company did not furnish the aforesaid details before the ld. AO, which means that the assessee right from the very beginning did not want to reveal the identity and address of its directors, even its own proper address. The facts are apparent that the assessee company might be a paper company incorporated for the purpose of routing unexplained funds in the shape of share application and share premium. Though the assessee company was represented through a Ld. Counsel not only before the ld.AO, but also before the CIT(A), but at the same time, the assessee company concealed its own identity, address as well as the identity and address of its directors. The motive being that in case the assessee company is burdened with the additions/taxes, it may avoid the payment of the same by concealing its identity and identity of its directors. The assessee/appellant has not come to the court with clean hands. The appellant in this case wants to abuse the process of law. Facts are apparent that the assessee/appellant company being a paper company has indulged in routing the unaccounted money. The assessee company miserably failed to prove not only its existence, identity and the identity of its directors, but also the identity, credit worthiness of share subscribers and genuineness of the transactions. There is no merit in the appeal of assessee and the same is hereby dismissed.

Summary

Issues:
Appeal against addition made under section 68 of the Income-tax Act, 1961 for unexplained share capital and premium.

Analysis:
1. The appeal was filed against the addition of Rs. 213,369,500 under section 68 of the Income-tax Act, 1961, for unexplained share capital and premium.
2. The assessing officer (AO) raised concerns about the verifiability of the identity and creditworthiness of share subscribers and the genuineness of the transaction.
3. Despite summons issued to provide necessary details, the assessee failed to establish the legitimacy of the share capital and premium.
4. The Commissioner of Income-tax (Appeals) upheld the addition, noting the lack of substantiated identity, creditworthiness of share subscribers, and genuineness of the transaction.
5. The appellant challenged the CIT(A)'s decision before the Appellate Tribunal.
6. The Tribunal observed the absence of the appellant during the initial hearing and directed a re-notice for a subsequent hearing.
7. At the next hearing, the appellant's counsel appeared but failed to comply with providing necessary details as directed by the Tribunal.
8. The Tribunal noted the appellant's reluctance to disclose essential information, indicating a potential attempt to evade tax liabilities.
9. Despite legal representation, the appellant's deliberate concealment of identity and relevant details raised suspicions of being a paper company for illicit fund routing.
10. The Tribunal concluded that the appellant failed to prove its existence, identity, creditworthiness of share subscribers, and genuineness of transactions, leading to the dismissal of the appeal.
11. The Tribunal pronounced the order dismissing the appeal on 03-11-2022.