2021 (2) TMI 1006 - AT - Income Tax

Addition u/s 68 - bogus share capital share premium - assessee could only filed the confirmation and acknowledgment of Return of Income - The investor companies are only paper companies - HELD THAT - We have noted that the Lower Authorities have made addition after making proper enquires and giving full opportunity to assessee to prove the genuineness of transaction and credit worthiness of Investor Company. The assessee failed to prove that the transactions of share application money is genuine and the creditworthiness of Investor. Further, we have noted that the present appeal was filed in 2016, till date not a single piece of evidence is placed on record to prove the identity, genuineness of transaction of transaction and creditworthiness of the investor company. The assessee was given a number of opportunities to represent their cases, but the assessee failed to respond and honour the notices issued by this Tribunal. In view of the aforesaid discussion, we do not find any merit in the grounds of appeal raised of the assessee, accordingly, grounds of appeal raised by assessee are dismissed.

Summary

Issues:
Addition of ?80,00,000 on account of bogus share capital & share premium u/s 68 of the I.T. Act.

Analysis:
The case involved an appeal against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The Assessing Officer noted a significant increase in the share capital and share premium of the assessee company, leading to scrutiny. Specifically, the share capital and premium had risen from ?51 lakhs to ?3.27 crore compared to the previous year. The assessee had shown share premium from various family members of directors and other parties. Notably, four Kolkata-based parties had contributed to this increase. To verify the creditworthiness and genuineness of the transaction, the Assessing Officer issued a commission under section 131(1)(d) of the Act to the Investigation Wing in Kolkata. However, the report revealed that the companies at the given addresses were not found, raising doubts about the legitimacy of the transactions.

The assessee provided documents such as the memorandum of association, balance sheet, share application forms, and bank statements of the investor companies from Kolkata. Despite explanations, the Assessing Officer, based on the report, concluded that the investor companies lacked creditworthiness, and the source of their investment remained unidentified. Consequently, an addition of ?80 lakhs was made under section 68 of the Act. The Commissioner of Income Tax (Appeals) upheld this decision, leading to the appeal before the Tribunal.

During the appeal hearing, the authorized representative withdrew, and despite multiple notices, the assessee did not appear. The Departmental Representative supported the lower authorities' decision, emphasizing the failure to substantiate the genuineness of the transaction and creditworthiness of the investors. The Tribunal observed that the authorities had conducted thorough inquiries and provided ample opportunities for the assessee to prove the legitimacy of the transactions. However, the assessee failed to provide any concrete evidence to support their case. The Tribunal concluded that the share capital received by the assessee represented accommodation entries, dismissing the grounds of appeal raised by the assessee.

In summary, the Tribunal dismissed the appeal, affirming the addition of ?80 lakhs as bogus share capital and share premium under section 68 of the Income Tax Act for the assessment year 2011-12. The decision was based on the failure of the assessee to substantiate the genuineness of the transactions and the creditworthiness of the investor companies, despite multiple opportunities provided during the proceedings.