INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Share capital -

During the relevant year assessee company issued share money to share applicants being four companies totalling to Rs. 1.30 crore. AO asked the assessee to file documents to prove identity, creditworthiness and genuineness of the transaction. According to AO, summnons under section 131 was issued to SKK director of the assessee-company to produce the investor/investors' directors along with requisite documents. The AO acknowledges that the said Director of the assessee-company had only filed the requisite documents before him which have been perused by him and placed on record. Since director of the assessee-company and share subscribing companies did not appear before him, he made the addition. Aggrieved, the assessee preferred an appeal before the CIT(A), who was pleased to allow the claim of the assessee.Held: 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. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly, all the three conditions as required under section 68, i.e., the identity, creditworthiness and genuineness of the transaction was placed before the AO and 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 could not be justified.

Relied: Lovely Exports (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 261 (SC), CIT v. Kolkata-IV v. Roseberry Mercantile (P) ltd. ITAT No. 241 of 2010, dt. 10-1-2011, Dy. CIT v. Global Mercantiles (P) Ltd. ITA No. 1669/Kol/2009 dated 13-1-2016, R.B. Horticulture & Animal Projects Co. Ltd. ITA No. 632/Kol/2011, dt. 13-1-2016, ITAT Kolkata in ITA No. 1061/Ko1/2012 in the case of ITO Wd.3(2) Kol, v. Steel Emporium Ltd., dt. 5-2-2016, ITO v. Cygnus Developers (I) (P) Ltd. ITA No. 282/Kol/2012, dt. 2-3-2016, CIT v. Gangeshwari Metal (P) Ltd. ITA No. 597/2012 judgment dated 21-1-2013 and Nova Promoters and Finlease (P) Ltd. (2012) 342 ITR 169 (Del) : 2012 TaxPub(DT) 1558 (Del-HC).

REFERRED : CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 80 (SC), Orissa Corpn. (P) Ltd. (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 (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), Crystal Networks (P) Ltd. v. CIT (2013) 353 ITR 171 (Kol) : 2013 TaxPub(DT) 1470 (Cal-HC), CIT, Kolkata-III v. Dataware (P) Ltd. ITAT No. 263 of 2011, dt. 21-9-2011, CIT v. Nishan Indo Commerce Ltd., dt. 2-12-2013 ITA No. 52 of 2001, CIT v. Leonard Commercial (P) Ltd. on 13-6-2011 ITAT No. 114 of 2011, Dy. CIT v. Global Mercantiles (P) Ltd. ITA No. 1669/Kol/2009 dated 13-1-2016, R.B Horticulture & Animal Projects Co. Ltd., ITA No. 632/Kol/2011, dt. 13-1-2016, Dy. CIT v. Alcon Biosciences (P) Ltd. ITA No. 1946/M/2016, Order, dt. 28-2-2018 and CIT v. Chain House International (P) Ltd., Order, dt. 7-8-2018, decision reported in 98 Taxmann.com 47.

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