2024 (2) TMI 212 - AT - Income Tax

Addition u/s 68 - share capital and share premium - addition in hands of promoter or assessee company - CIT(A) deleted addition as assessee has discharged the onus of establishing identity and creditworthiness of the creditor and genuineness of transaction - HELD THAT - It is not in dispute that the assessee company was incorporated and started his broadcasting business during the year. It was the assessee company s first year of business. In such a fact scenario, in our humble opinion, if addition at all was to be made, it should have been made in the hands of the promoter; it cannot be made in the hands of the assessee company. Coming to the merits of the impugned addition, during the course of appellate proceedings the assessee gave a list of 8 documents in support of his explanation as to the nature and source of credit entries appearing in the books of the assessee company. It was asserted that all the payments from Sh. Vinod Kumar Sharma came through banking channels into the bank account of the assessee company; that the creditor is Income Tax payee and has adequate financial resources and that his identity and creditworthiness has been fully established. Perusal of the CIT s order shows that he has dealt with all the points raised by the Ld. A.O in support of the impugned addition negating them all. We do not find any legal substance in the arguments of the Ld. Sr. DR. The appeal of the Revenue is bereft of any merit. Decided against revenue.

Summary

Issues:
The judgment involves the issue of addition u/s 68 amounting to Rs 5,18,00,000 received from a Director without proving identity, creditworthiness, and genuineness of the transaction. The key grounds of appeal by the Revenue include the failure to appreciate the reasons given by the AO, lack of ITR filing by the Director, and discrepancies in the share application money.

Details of the Judgment:
The assessee company, incorporated for broadcasting business, received share capital and share premium money totaling Rs 5,19,00,000 from its Director during the relevant year. The AO added this amount back to the income of the assessee under section 68 of the Act, as the Director had not filed his ITR for the relevant year and there were concerns regarding the source of funds. However, the CIT (A) held that the assessee had successfully proven the identity, creditworthiness, and genuineness of the transaction through various documentary evidence, including bank statements, loan confirmations, and income tax returns of the Director.

During the appellate proceedings, the assessee provided a list of 8 documents supporting the nature and source of credit entries, emphasizing that all payments were made through banking channels and the Director had sufficient financial resources. The CIT (A) noted discrepancies in the AO's handling of evidence and concluded that the impugned addition was not justified based on the established facts and legal precedents.

The Tribunal, after considering the submissions, upheld the CIT (A)'s decision, stating that the addition should have been made in the hands of the Director rather than the assessee company. The Tribunal found that the assessee had discharged its onus of proving the legitimacy of the transaction, citing relevant case law and documentary evidence provided during the assessment and appellate proceedings.

The Revenue's appeal was dismissed as lacking legal merit, with the Tribunal affirming the CIT (A)'s findings on the adequacy of evidence and the absence of grounds for the addition under section 68 of the Act.