INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of share capital - AO doubted source of funds in the hands of non-resident investors

Assessee-company received share application money from Mauritius entities. AO doubted creditworthiness of investors to make investments in assessee-company on the ground that balance in the bank accounts on a day before funds were invested in assessee and the day after investment was made, was meagre which established that transaction was undertaken by assessee to evade taxes. Accordingly, AO treated amount involved as unexplained credit under section 68. Held: Assessee duly furnished financial and bank statements and tax returns of investor companies and letters of Mauritius Revenue Authorities. The letters categorically established that payment was made by telegraphic transfer; funds enabling investments were obtained through financing transaction with other group companies. Mauritius revenue authorities in their letter had not given any adverse comments on identity and working of entities or source of their funds which justified in making addition under section 68.

Followed:Vodafone International Holding B.V. v. UOI (2012) 341 ITR 1 (SC) : 2012 TaxPub(DT) 370 (SC). Relied:Dy.CIT v. JSW Ltd.n ITA No. 6264/Mum/2018 & 6103/Mum/2018, Assessment year 2013-14, Order, dated 14-5-2020 : 2020 TaxPub(DT) 2142 (Mum-Trib), CIT v. CIT v. Lovely Exports (2009) 216 CTR 195 (SC) : 2009 TaxPub(DT) 261 (SC), CIT v. Steller Investments Ltd., (2001) 251 ITR 263 (SC) : 2001 TaxPub(DT) 507 (SC), Russian Technology Center (P) Ltd. v. Dy. CIT ITA 4932, 4933/Del/2011 : 2013 TaxPub(DT) 1898 (Del-Trib) and P.K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 80 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2006-07

INCOME TAX APPELLATE TRIBUNAL RULES, 1963

Rule 34(5)(c)

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