INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained share capital - Share subscribing company's directors allegedly did not turn up before AO

AO noted that during the year under consideration a total amount of Rs. 2,40,00,000 was credited in the books of account of the assessee-company in which the share capital was to the tune of Rs. 80,00,000 and share premium was to the tune of Rs. 1,60,00,000. AO issued letter to the assessee-company asking them to produce all the directors of the companies or persons from whom share application money had been received and shares allotted subsequently during this assessment year. However, according to AO, the assessee failed to produce any of the directors on stipulated date and time. The AO issued summons to the director of assessee-company S.K. Dutta under section 131 and also to the director/principal officer of the assessee-company. However, according to the AO, there was no compliance to the summons issued by him. AO was of the opinion that the assessee failed to show the genuineness and creditworthiness of the transaction and moreover, the assessee's failure to produce its own directors as well as the directors of the share subscribing companies. AO drew adverse inference against the assessee and after citing few case laws made the entire addition of Rs. 2.40 crores under section 68. CIT(A) was pleased to give partial relief to the assessee by deleting the sum of Rs. 1.5 crores and confirmed Rs. 90 lakhs against the assessee.Held: AO had not found the documents furnished by the assessee to be sham or fabricated merely because the directors did not appear was no ground to disbelieve/brush aside the documents produced before him and to draw adverse inference. 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 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. 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.

Relied:Orissa Corpn. (P) Ltd. (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), Dy. CIt Rohini Builders (2002) 256 ITR 360 (Guj) : (2003) 127 Taxman 523 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC), Dy. CIT v. Global Mercantiles Pvt. Ltd. in [ITA No. 1669/Kol/2009, dated 13-1-2016] : 2016 TaxPub(DT) 1420 (Kol-Trib), R.B. Horticulture & Animal Projects Co. Ltd., ITA No. 632/Kol/2011, dated 13-1-2016, ITAT Kolkata in ITA No. 1061/Kol/2012 : 2016 TaxPub(DT) 1414 (Kol-Trib), ITO v. Cygnus Developers (I) (P) Ltd. ITA No. 282/Kol/2012, dated 2-3-2016, CIT v. Gangeshwari Metal (P) Ltd., [ITA No. 597 of 2012, dated 21-1-2012] : 2013 TaxPub(DT) 1319 (Del-HC), CIT v. Lovely Exports Pvt. Ltd. (2009) 319 ITR 5 (SC) : (2009) 216 CTR 295 (SC) : 2009 TaxPub(DT) 261 (SC), Promoters and Finlease Pvt. Ltd. (2012) 342 ITR 169 (Del) : 2012 TaxPub(DT) 1558 (Del-HC) and judgment in the case of CIT v. Lovely Exports (2009) 319 ITR 5 (SC) : (2009) 216 CTR 295 (SC) : 2009 TaxPub(DT) 261 (SC) and Finlease Pvt. 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. (supra) (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : (2003) 127 Taxman 523 (Guj) : 2002 TaxPub(DT) 0305 (Guj-HC), CIT v. S. Kamaljeet Singh (2005) 147 Taxman 18 (All.) : 2005 TaxPub(DT) 1275 (All-HC), S.K. Bothra & Sons, HUF v. ITO (2012) 347 ITR 347 (Cal) : 2012 TaxPub(DT) 0815 (Cal-HC), Crystal Networks (P.) Ltd. v. CIT (2013) 353 ITR 171 (Cal) : 2013 TaxPub(DT) 1470 (Cal-HC), Lovely Exports as has been reported as judgment delivered by the CTR at (2009) 216 CTR 295 (SC) : 2009 TaxPub(DT) 261 (SC), CIT v. Roseberry Mercantile (P) Ltd. ITAT No. 241 of 2010, dated 10-1-2011, CIT v. Nishan Indo Commerce Ltd., dated 2-12-2013 in Income Tax Appeal No. 52 of 2001 : 2014 TaxPub(DT) 1934 (Cal-HC) 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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