INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Onus on assessee to prove genuineness of investment made by parties concerned and their creditworthiness -

Assessee issued Equity Shares and was required to prove the genuineness, and credit worthiness of share applicant as well as justification of share premium received on the shares. Assessee submitted that share capital was raised after complying with SEBI Rules and regulations and the money so raised was used for the purpose of assessee's business. The response from the share applications was received which was duly considered by AO and bank statements of the investor was analyzed which revealed that except for immediate debit/credit transactions, there was no major activity/regular flow in the bank accounts. Since assessee, in the opinion of AO could not justify the excessive share premium qua intrinsic value of shares and the nature and source of credit entries remained unexplained, the provisions of section 68 were applicable to assessee. However, CIT(A) deleted the addition. Held: AO had doubted the transactions primarily by questioning the high share premium. However, to reiterate, the revenue could not make addition in the hands of the assessee as unexplained cash credit under section 68 unless it was established that assessee's unaccounted money was routed in the books through the mechanism of fictitious share allotment. So far the provisions of section 56(2)(viib) do not apply to assessee in view of the fact that these provisions are inserted by Finance Act, 2012 and applicable with effect from 01-04-2013 only. Therefore, CIT(A) was justified in providing relief to assessee in terms of catena of judicial pronouncements.

Relied:CIT v. M/s. Lovely Exports (P) Ltd. 2009 TaxPub(DT) 0261 (SC) CIT v. M/s. Gagandeep Infrastructure (P) Ltd. (2017) 80 Taxmann.com 272 (Bom) : 2017 TaxPub(DT) 1238 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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