2024 (6) TMI 1144 - AT - Income Tax

Addition u/s 68 - unexplained share capital /share premium - AO during the assessment proceedings called for various documents and evidences qua the issue of share capital/ share premium which were accordingly filed comprising the copies of ITRs, audited accounts, share application forms, share allotment letters, bank statements, memorandum of articles of associations etc. in respect of each of the share holders - HELD THAT - The assessee has justified the issuance of share capital at a premium as the money collected were to be invested in M/s Delsey India Pvt. Ltd. which was a joint venture between M/s Sapphire Trade Associates pvt. Ltd. and M/s Delsey India Pvt. Ltd. with 49% 51% share respectively. We find that the AO has made the addition on basis of observations that the assessee is a new company formed in AY 2014-15 as recorded in the assessment order wheresas is wrong as the assessee is an old company. Besides these the general observations given by the AO without pointing out any specific defect or deficiency on the evidences and explanation furnished by the assessee is wrong. We note that the AO has made detailed investigation/enquiry even by issuing notice u/s 133(6) and 131 of the Act which were duly responded and complied with by all the subscribers. As the assessee has proved the identity, creditworthiness and genuineness of the transactions besides the fact that the revenue itself has accepted the issuance of equity shares to these parties to be genuine in AY 2016-17. We are unable to agree with the conclusion drawn by the CIT(A) upholding the order of AO by completely ignoring the facts on record and consequently we set aside the order of CIT(A) and direct the AO to delete the addition. Appeal of the assessee is allowed.

Summary

Issues:
Confirmation of addition of Rs. 2,91,60,000/- under section 68 of the Income Tax Act on account of unexplained share capital/share premium.

Analysis:
The appeal was filed against the order of the Ld. Commissioner of Income Tax (Appeals) for the AY 2014-15, specifically challenging the addition of Rs. 2,91,60,000/- as unexplained share capital/share premium under section 68 of the Act. The assessee, engaged in share/securities investment, submitted various documents during assessment proceedings, including ITRs, audited accounts, share application forms, bank statements, etc. The AO raised concerns about the premium value of shares issued by the assessee, considering it unjustified and treated the amount as unexplained investment under section 68.

In the appellate proceedings, the Ld. CIT(A) upheld the AO's decision, citing lack of evidence to prove the creditworthiness of the parties involved. However, the appellant contended that all necessary evidence was submitted, including responses to notices under section 133(6) and appearances before the AO in response to summons under section 131. The appellant also highlighted the acceptance of similar transactions in AY 2016-17 and valuation of shares by an independent firm.

The Tribunal noted that the appellant had provided substantial evidence to establish the genuineness and creditworthiness of the transactions, including responses to notices and compliance with summons. It was observed that the AO's conclusion, based on incorrect assumptions about the appellant being a new company and lacking specific defects in the evidence, was unfounded. The Tribunal, therefore, disagreed with the Ld. CIT(A)'s decision and directed the AO to delete the addition of Rs. 2,91,60,000/-.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of considering all evidence and circumstances before making additions under section 68 of the Income Tax Act.