2024 (8) TMI 971 - AT - Income Tax

Addition u/s 68 - assessee has received share premium from various entities and failed to establish the identity and creditworthiness of the share applicants and also genuineness of the transaction - HELD THAT - We observe that during the impugned assessment year i.e. 2013-14 based on the material found during search, AO observed that certain funds were moved through the assessee by Surya Processed Food Pvt. Ltd. which belongs to Priya Gold Group. AO made substantive addition in the hands of Surya Processed Food Pvt. Ltd. and protective addition in the hands of the assessee. CIT (A) deleted the protective assessment in the hands of the assessee considering the fact that assessee is only a paper company and substantive addition is already made in the hands of Surya Processed Food Pvt. Ltd.. No reason to disturb the findings of ld. CIT(A). Accordingly, the appeal filed by the Revenue is dismissed. AO has determined the commission @ 2.5% on the value which was transferred by book entry to Surya Processed Food Pvt. Ltd.. Since no representation from the assessee side we are not in a position to appreciate the facts on record and ld. CIT (A) has sustained the above said addition, we do not see any reason to disturb the same. Accordingly, the appeal filed by the assessee is dismissed.

Issues:
1. Appeal against orders of the Learned Commissioner of Income Tax (Appeals) for Assessment Years 2009-10 and 2013-14.
2. Failure of the assessee to appear for hearings.
3. Addition made under section 68 of the Income-tax Act, 1961.
4. Analysis of the findings and decisions of the lower authorities.
5. Dismissal of appeals by the Appellate Tribunal ITAT Delhi.

Analysis:

1. The assessee filed appeals against the orders of the Learned Commissioner of Income Tax (Appeals) for Assessment Years 2009-10 and 2013-14. The cases were repeatedly scheduled for hearings, but the assessee failed to appear, prompting the Tribunal to proceed with the assistance of the Revenue's representative.

2. The primary issue revolved around the addition made under section 68 of the Income-tax Act, 1961, concerning share application money received by the assessee from entities related to Priya Gold Group. The Assessing Officer considered the assessee a conduit company for rotating funds, leading to the addition under section 68.

3. The assessee contended that it was a shell company and acted as an intermediary for the Priya Gold Group, emphasizing that the share capital represented investments made by another entity. However, the lower authorities upheld the addition, citing the failure to establish the identity and creditworthiness of the share applicants.

4. In the appeal for Assessment Year 2013-14, similar issues arose regarding the assessee's role as a paper company facilitating fund rotation for Surya Processed Food Pvt. Ltd. The Assessing Officer made substantive and protective additions, which were partially sustained by the Commissioner of Income Tax (Appeals).

5. The Appellate Tribunal upheld the decisions of the lower authorities, dismissing both the assessee's and Revenue's appeals for both assessment years. The Tribunal found no reason to disturb the findings regarding the nature of the transactions and the failure to substantiate the legitimacy of the share transactions and fund movements.

In conclusion, the Appellate Tribunal affirmed the additions made under section 68 for both assessment years due to the failure to establish the genuineness of transactions and the identity of the share applicants. The Tribunal's decision highlighted the importance of substantiating financial transactions to avoid adverse tax implications.

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