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2023 (7) TMI 677 - AT - Income TaxAddition u/s 68 - creditworthiness of investor unexplained - non discharge on mandatory onus - arguments of assessee are that all the transactions are among sister concerns which are asset to tax and scrutinized u/s. 143(3), it is not the case where cash has been deposited and entries are taken, additions have been made on the basis of conjectures and surmises despite the fact that the assessee has successfully explained not only source but also sources of the source of receipt of share application money and premium - HELD THAT - The identical issue was placed in the case of Riddhi Promoters Pvt. Ltd. 2015 (4) TMI 338 - DELHI HIGH COURT wherein examining the requirement of sec 68 as held that it is not sufficient that the identity of share applicant or the creditor should be establish by the assessee to discharge the initial onus upon the assessee but under the requirement of sec 68 the assessee has to further satisfied the revenue as to the creditworthiness of share applicant/creditor and genuineness of transaction. In the present case the assessee has failed to discharge such mandatory onus. Thus we reach to a logical conclusion that the documents submitted to prove the genuineness of transaction are itself from to be malaises created with the intention to cover up the true nature of transaction and thus the CIT(A) rightly held that the amount received by the appellant company as share capital and premium are nothing but arranged transactions to introduce its unaccounted income/money as share capital through group concerns to give a clear color to the undisclosed income of assessee. Accordingly, grounds of assessee are dismissed.
Issues Involved:
1. Confirmation of income addition under section 143(3) of the Income Tax Act. 2. Addition under section 68 of the Income Tax Act for share capital credits. 3. Disregard of evidence furnished by the assessee. 4. Adverse findings recorded by the Assessing Officer. 5. Basis of the impugned order passed by the Commissioner of Income Tax (Appeals). Summary: 1. Confirmation of Income Addition under Section 143(3) of the Income Tax Act: The assessee contended that the Commissioner of Income Tax (Appeals) erred in confirming the order of the Assessing Officer (AO) which framed the income at Rs. 4,35,23,740/- against the returned income of Rs. (-) 25,460/-. The AO noted that the assessee received share capital from Sabka Media Pvt. Ltd., with a significant portion as share premium. The AO scrutinized the bank statements and observed numerous credit and debit entries, with unknown sources of funds and no business activity. 2. Addition under Section 68 of the Income Tax Act for Share Capital Credits: The AO added Rs. 4,35,49,200/- under section 68, representing credits in the share capital account. The assessee provided documents such as ITR details, balance sheets, and bank statements, but the AO found these insufficient to prove the creditworthiness and genuineness of the transactions. The AO emphasized that mere filing of confirmations or income tax returns does not establish the identity or genuineness of the subscriber company. 3. Disregard of Evidence Furnished by the Assessee: The assessee argued that the Commissioner of Income Tax (Appeals) disregarded the evidence furnished, which included bank statements and financial documents. The AO, however, found that these documents did not substantiate the creditworthiness of the investor company. The AO highlighted that the investor company had no substantial revenue from business activities, and the funds were transferred through a series of transactions among group concerns, raising doubts about their genuineness. 4. Adverse Findings Recorded by the Assessing Officer: The AO's findings were based on the observation that the investor companies were involved in providing accommodation entries, and the transactions were not genuine. The AO noted that the assessee failed to produce the directors of the investor companies for examination, which was crucial to establish the genuineness of the transactions. 5. Basis of the Impugned Order Passed by the Commissioner of Income Tax (Appeals): The Commissioner of Income Tax (Appeals) upheld the AO's addition, noting that the assessee failed to discharge the onus of proving the creditworthiness and genuineness of the transactions. The appellate authority considered various judgments and concluded that the transactions were arranged to introduce unaccounted income as share capital through group concerns. The appellate authority emphasized that the burden of proof remains on the assessee to establish the genuineness of the transactions beyond mere documentary evidence. Conclusion: The appeal of the assessee was dismissed, with the Tribunal agreeing with the findings of the lower authorities that the assessee failed to prove the creditworthiness and genuineness of the share capital transactions. The Tribunal upheld the addition made under section 68 of the Income Tax Act, concluding that the transactions were not genuine and were intended to introduce unaccounted income.
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