ITO v. Synergy Finlease (P) Ltd.

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The Tax Publishers2019 TaxPub(DT) 2405 (Del-Trib) : (2019) 177 ITD 0160 : (2019) 199 TTJ 0793

INCOME TAX ACT, 1961

Section 68

As assessee failed to discharge its onus of explaining creditworthiness and genuineness of the transaction as required under section 68, AO was justified in taxing share capital along with premium as unexplained cash credit.

Income from undisclosed sources - Addition under section 68 - Receipt of share capital along with premium - Assessee failed to establish creditworthiness and genuineness of transaction

AO noticed increase in share capital including share premium during the year under consideration and required assessee to prove genuineness of the transaction and creditworthiness of share applicants. Assessee furnished bank statement balance sheets and income-tax acknowledgement and assessment order in case of shareholder companies. AO being not satisfied made addition of entire amount under section 68.Held: Merely presenting of documents of incorporation of share applicants and making payment for application shares through bank in itself or appearance by current director before AO and admitting the fact of share application made, was in itself not sufficient to justify genuineness of the transaction. Assessee company for the year under consideration had shown losses of Rs. 9,900 and in the immediately preceding year there was a small profit of Rs. 985. It was against the human probability that anyone would invest and pay share premium of Rs. 50 per share without having any net worth of the company or any future prospectus of earning by the company. Also, alleged share applicants were having very meagre or nominal income in their hands and pattern of receipt of money and immediate withdrawal of almost equal amount was identical in all the alleged share applicants. All the factual information in respect of the alleged share applicants companies goes to establish that the companies are not having creditworthiness for making such huge investment and accordingly to addition made under section 68 was justified.

Followed:Pr. CIT v. NRA Iron & Steel Pvt. Ltd. [SLP (Civil) No. 29855 of 2018, dt. 5-3-2019] : 2019 TaxPub(DT) 1628 (SC) and Pr. CIT v. NDR Promoters (P) Ltd. [ITA No. 49/2018, dt. 17-1-2019] : 2019 TaxPub(DT) 0886 (Del-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2006-07

IN THE ITAT, DELHI BENCH