2024 (2) TMI 916 - AT - Income Tax

Addition u/s 68 - bogus LTCG on shares - onus to prove - share application money and premium received from two share applicants unexplained - statutory obligation to substantiate the nature and source - Whether Appellant discharged the burden of proving identification, credit-worthiness and genuineness of transaction? HELD THAT - As per the mandate of Section 68 of the Act, i.e., post- amended vide the Finance Act, 2012 w.e.f. 01.04.2013, where the sum credited in the books of the assessee company consists of share application money, share capital, share premium, or any such amount by whatever name called, an additional onus is cast upon the assessee company, as per which the person being a resident in whose name such credit is recorded in the books of the assessee company is required to offer to the satisfaction of the A.O an explanation about the nature and source of such sum so credited. When the aforesaid sum is found to be credited in the books of the assessee company, which had been disclosed by the latter as an amount received by it as share application money from the aforementioned share subscriber companies, then, the assessee company remains under a statutory obligation to substantiate the nature and source of the said sum credited as per the mandate of Section 68 of the Act, failing which, the same is to be treated as unexplained cash credit in its hand. There is no material available on record that would conclusively prove to the hilt that the assessee company had merely acted as a facilitator for routing the unaccounted money to the latters coffer; therefore, the said claim of the assessee cannot be accepted. We are of the considered view that as the aforesaid contention of the Ld. AR that it had merely acted as a facilitator for routing the funds from the share subscriber companies, is devoid and bereft of any merits, thus, the same does not merit acceptance. We, thus, in terms of our aforesaid observations, find no infirmity in the view taken by the CIT(Appeals), who had rightly concluded that the amount received by the assessee company in the garb of share application money was rightly held by the A.O as unexplained cash credit u/s. 68 - Decided against assessee.

Summary

Issues Involved:
1. Addition of Rs. 1,87,00,000/- under Section 68 of the Income-tax Act, 1961.
2. Verification of the source of source for the share application money.

Summary:

1. Addition of Rs. 1,87,00,000/- under Section 68 of the Income-tax Act, 1961:
The assessee company contested the addition of Rs. 1,87,00,000/- made by the Assessing Officer (A.O.) under Section 68, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The A.O. observed that the assessee company received substantial share capital/premium from two companies, M/s. Eagle Commotrade Pvt. Ltd. and M/s. Krishnakali Distributors Pvt. Ltd., without substantiating their creditworthiness or the genuineness of the transactions. Notices issued under Section 133(6) to these companies were either unserved or not complied with, leading the A.O. to treat the transactions as unexplained cash credits. The CIT(A) upheld this addition, noting the assessee's failure to explain the source of the funds received by the share applicant companies.

2. Verification of the source of source for the share application money:
The CIT(A) admitted additional evidence submitted by the assessee under Rule 46A and remanded the matter to the A.O. for verification. The CIT(A) acknowledged that Rs. 2,26,41,500/- was received in earlier years and directed the A.O. to verify and take necessary action in the respective assessment years. However, for the Rs. 1,87,00,000/- received during the year under consideration, the CIT(A) found that the assessee failed to establish the source of the funds received by the share applicant companies, thus confirming the addition under Section 68.

Alternative Contention:
The assessee argued that the amount received was immediately transferred to M/s. Rashi Steel & Power Ltd., which had been assessed as undisclosed income in the latter's hands. The assessee claimed that this would result in double taxation. However, the Tribunal rejected this argument, stating that the assessee failed to substantiate the nature and source of the funds as required under Section 68. The Tribunal found no material evidence to support the claim that the assessee merely acted as a facilitator for routing the funds.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming the addition of Rs. 1,87,00,000/- as unexplained cash credit under Section 68 of the Act. The appeal of the assessee was dismissed.