INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained share capital and share premium - Assessee discharged its onus

AO noted that the assessee company have received share capital of Rs. 1,05,40,000 after issuing equity share of 1 each at a premium of Rs. 10,95,60,000, totaling Rs. 12,01,00,000 during the year under consideration. According to the AO from the documents available on record, identity and creditworthiness of the investor could not be properly verifiable, so he issued summons under section 131 to the directors of the assessee company for personal depositions and also to produce the details. According to the AO, none responded to the summons so issued and also the assessee failed to produce investors/share subscribers before him, so he made an addition of Rs. 12,01,00,000. Aggrieved, the assessee preferred an appeal before the CIT(A) pleased to delete the same. Held: Assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus stood shifted to AO to disprove the documents furnished by assessee. Same cannot be brushed aside by the AO to draw adverse view cannot be countenanced. 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. Tribunal was inclined to uphold the order of the CIT(A). In the facts of the present case, both the nature and source of the share application received was fully explained by the assessee. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. The onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO was based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under section 68. Impugned order of CIT(A) was confirmed and consequently the appeal of revenue was dismissed.

Relied:CIT v. Dataware Private Limited, in (ITAT No. 263 of 2011 & GA No. 2856 of 2011, dt. 21-9-2011) : 2013 TaxPub(DT) 1384 (Cal-HC), CIT v. Smt. P. K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 80 (SC), Crystal Networks (P) Ltd. v. CIT (2013) 353 ITR 171 (Kol) : 2013 TaxPub(DT) 1470 (Cal-HC), Dy. CIT v. Global Mercantiles (P) Ltd. in ITA No. 1669/Kol/2009 dated 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 ITO Wd.3(2) Kol, v. M/s. Steel Emporium Ltd. dated 5-2-2016, ITO v. Cygnus Developers (I) (P) Ltd. in ITA No. 282/Kol/2012 dated 2-3-2016, CIT v. Gangeshwari Metal (P) Ltd. (ITA No. 597 of 2012) dated 21-1-2012, CIT v. Lovely Exports (P) Ltd. (2009) 319 ITR 5 (SC) : 2009 TaxPub(DT) 0261 (SC), Finlease (P) Ltd. (2012) 342 ITR 169 (Del) : 2012 TaxPub(DT) 1558 (Del-HC) ITA 232/2012 judgment dt. 22-11-2012

REFERRED : CIT v. Nova Promoters and Finlease (P) Ltd. ITA No. 342 of 2001, dt. 15-2-2012 (Del-HC), CIT v. Orchid Industries (P) Ltd. ITA No. 1433 of 2014 (SC), Gopal Iron & Steel Co. (Gujrat) Ltd. v. ITO dt. 12-9-2017 (Guj-HC), Pragati Financial Management (P) Ltd. v. CIT, dt. 7-2-2017 (Kol-HC), Bishakha Sales (P) Ltd. ITA No. 1493, Subhalakshmi Vanijya (P) Ltd. v. CIT ITA No. 1104/Kol/2014. Sukannya Merchantiles (P) Ltd. v. ITA, ITA No. 291/Ko1/2016, Orissa Corpn. (P) Ltd. (supra) (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC) and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC), Nemi Chand Kothari (2004) 136 Taxman 213 (Gau) : 2003 TaxPub(DT) 1401 (Gau-HC), CIT v. S. Kamaljeet Singh (2005) 147 Taxman 18 (All.) : 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), CIT v. Dataware Private Limited (ITAT No. 263 of 2011 & GA No. 2856 of 2011, dt. 21-9-2011) : 2013 TaxPub(DT) 1384 (Cal-HC), Lovely Exports CTR at 216 CTR 295, CIT v. Roseberry Mercantile (P) LTD. ITAT No. 241 of 2010, dt. 10-1-2011, CIT v. Nishan Indo Commerce Ltd. dt. 2-12-2013 in ITA No. 52 of 2001 and CIT v. Leonard Commercial (P) Ltd. on 13-6-2011 ITAT No. 114 of 2011.

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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