2024 (4) TMI 594 - AT - Income Tax

Addition u/s 68 - share capital/share premium received as unexplained - onus to prove - no compliance of summons issued u/s 131 to the directors of the assessee - HELD THAT - When the assessee has filed all the evidences as desired by the AO ,then the assessee is presumed to have discharged the onus cast upon it and the onus shifts to the revenue to conduct an enquiry on this evidences and record findings as to how the investment/money received by the assessee are covered u/s 68 of the Act. However in the present case, we note that no such enquiry was conducted into the evidences filed by the assessee and the addition was made simply for the reason that there was no compliance of summons issued u/s 131 to the directors of the assessee for enquiry and to produce the directors of the subscribing companies. In our opinion, there is no substantive ground for making the impugned addition and non production of directors of subscribing companies cannot be a justification for addition u/s 68 - Also assessee has filed all the details/evidences/ information from his own source as well as from all the subscribers. In the present case before us the assessee has furnished all the evidences before the AO but the AO has failed to conduct any further enquiry into these details /evidences and merely relied on the theory of non production of directors of the subscribing companies by the assessee while issuing no summons u/s 131 or notices u/s 133(6) of the Act to the subscribers. Decided in favour of assessee.

Summary

Issues Involved:

1. Confirmation of addition u/s 68 of the Act by treating the share capital/share premium received as unexplained.

Summary:

Issue: Confirmation of addition u/s 68 of the Act by treating the share capital/share premium received as unexplained

The case of the assessee was selected for scrutiny to examine large share premium received during the year. Statutory notices were issued, and the assessee provided various documents including audited financial statements, ITR, PAN, ledger accounts, and bank statements. The AO issued summons u/s 131 directing the assessee to produce directors of the subscribing companies, but only the directors of the assessee company complied. The AO did not issue any summons u/s 131 or notices u/s 133(6) to individual subscribers. The AO added the entire share capital/share premium amounting to Rs. 1,98,00,000/- to the income of the assessee u/s 68 as unexplained cash credit, which was confirmed by the Ld. CIT(A) on the grounds of non-genuine transactions due to high premium.

Upon appeal, it was found that the assessee had furnished all required evidences, thus discharging the onus cast upon it. The AO did not conduct any investigation into the submitted evidences and made the addition solely based on the non-production of directors of the subscribing companies. The Tribunal held that non-production of directors cannot justify an addition u/s 68 when other evidences are available and verified. The Tribunal also referenced various decisions supporting this view, including the case of Yash Movers Pvt. Ltd. vs. ITO and PCIT vs. Naina Distributors Pvt. Ltd., which highlighted that mere non-production of directors is insufficient for such an addition if identity, creditworthiness, and genuineness are otherwise established.

Consequently, the Tribunal set aside the order of the Ld. CIT(A) and directed the AO to delete the addition, allowing the appeal of the assessee.

Order pronounced in the open court on 12th April, 2024.