The Tax Publishers2019 TaxPub(DT) 1118 (Kol-Trib)

INCOME TAX ACT, 1961

Section 68

Where assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, the onus shifted to AO to disprove the materials placed before him and without doing so, the addition made by the AO was based on conjectures and surmises hence, could not be justified.

Income from undisclosed sources - Addition under section 68 - Alleged unexplained share application money - Both nature and source of credit explained by assessee

As no directors of assessee company or the share subscribers appeared before him in compliance to summons issued under section 133(6) till the completion of assessment, the AO doubted genuineness of the transaction of share capital raised by the assessee and added the entire share application money under section 68. CIT(A) deleted the addition made by the AO. Held: In case, the AO was dissatisfied about the source of cash deposited in the bank accounts of the creditors, proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the court had further stressed the presence of word 'may' in section 68. The un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee. Section 68 should be read along with section 106 of Evidence Act. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee. In the absence of any investigation, much less gathering of evidence by the AO, an addition cannot be sustained merely based on inferences drawn by circumstance. Both the nature and source of the share application received was fully explained by the assessee. The addition made by the AO as based on conjectures and surmises cannot be justified.

Relied:CIT v. Smt. P. K. Noorjahan (1999) (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 80 (SC), Orissa Corpn. (P) Ltd. (supra) (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC), Nemi Chand Kothari (2003) 264 ITR 254 (Gau) : 2003 TaxPub(DT) 1401 (Gau-HC), CIT v. S. Kamaljeet Singh in (IT Ref No. 154 of 1991, dt. 28-1-2005) : 2005 TaxPub(DT) 1275 (All-HC), S.K. Bothra & Sons, HUF v. ITO, Ward-46(3), Kolkata (2012) 347 ITR 347 (Cal.) : 2012 TaxPub(DT) 815 (Cal-HC), Crystal Networks (P) Ltd. v. CIT (2013) 353 ITR 171 (Kol) : 2013 TaxPub(DT) 1470 (Cal-HC), CIT, Kolka TA-III v. Dataware (P) Ltd. in (ITAT No. 263 of 2011, dt. 21-9-2011), Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295, CIT, Kolkata-IV v. Roseberry Mercantile (P) Ltd. in (ITAT No. 241 of 2010, dt. 10-1-2011), CIT v. M/s. Nishan Indo Commerce Ltd., dt. 2-12-2013 in (Income Tax Appeal No. 52 of 2001), CIT v. Ruby Traders and Exporters Limited (2003) 263 ITR 300 (Cal-HC) : 2003 TaxPub(DT) 1106 (Cal-HC), CIT v. Gangeshwari Metal (P) Ltd. (ITA No. 597 of 2012), dt. 21-1-2012), CIT v. Novo Promoters & Finlease (P) Ltd. (2012) 342 ITR 169 (Delhi) : 2012 TaxPub(DT) 1558 (Del-HC), CIT v. Lovely Exports (2009) 319 ITR 5 (SC) : 2009 TaxPub(DT) 261 (SC) and Finlease (P) Ltd. (2012) 342 ITR 169 (Del) : 2012 TaxPub(DT) 1558 (Del-HC). Followed:Dy. CIT v. Global Mercantiles (P) Ltd. in [ITA No. 1669/Kol/2009, dt. 13-1-2016], R.B Horticulture & Animal Projects Co. Ltd. [ITA No. 632/Koll2011, dt. 13-1-2016], ITA No. 1061/Ko1/2012 in the case of Income Tax Officer Wd.3(2) Kol, v. M/s. Steel Emporium Ltd., dt. 5-2-2016 and ITO v. Cygnus Developers (I) (P) Ltd. [ITA No. 282/Kol/2012, dt. 2-3-2016].

REFERRED :

FAVOUR : In assessee's favour.

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