2018 (3) TMI 529 - HC - Income Tax

Addition u/s 68 - ITAT deleted the addition - Held that - Initially burden cast upon the assessee had been adequately discharged by sufficient evidence. The fact that the share applicants were Directors of the assessee was also undisputed. In these circumstances, the findings of the ITAT are essentially factual

Summary

Issues: Challenge to ITAT order setting aside tax under Section 68 of the Income Tax Act, 1961 regarding share application money received from foreign nationals.

Analysis:
1. The Revenue challenged the ITAT order that set aside the tax amount brought under Section 68 of the Income Tax Act. The assessee claimed the amount was received as share application money from two foreign nationals. The AO rejected the explanation, and the CIT(A) denied additional evidence but sought a remand report. The ITAT allowed the assessee's plea.

2. The Revenue contended that the ITAT erred in not considering the persistent debit balance shown by the assessee and the lack of adequate documents to establish the genuineness, creditworthiness, and identity of the share applicants. The additional evidence produced, being photographs of relevant documents, was deemed insufficient by the CIT(A).

3. The impugned order revealed that the AO did not dispute the documents' veracity in the remand report. The two individuals who applied for shares were made Directors of the assessee company, indicating the assessee fulfilled the onus to disclose the share applicants' identity and money genuineness. The ITAT noted the AO did not doubt the identity of the individuals or the transaction's genuineness.

4. The ITAT stated that the assessee received the sum from the individuals for share allotment, supported by FIRC and tax returns showing creditworthiness. The CIT(A) rejected additional evidence on technical grounds, but the AO did not dispute its veracity. The ITAT found the evidence sufficient to establish the investors' creditworthiness, indicating the burden on the assessee was adequately discharged.

5. The ITAT's findings were factual, and no substantial legal question was identified in the appeal. The evidence presented by the assessee, including financial statements and confirmations, supported the claim of investors' creditworthiness. The fact that the share applicants were also Directors of the assessee was undisputed.

6. The appeal was dismissed as no substantial legal question arose from the ITAT's factual findings. The ITAT's conclusion was upheld, emphasizing that the burden placed on the assessee was adequately discharged with sufficient evidence.