| The Tax Publishers2021 TaxPub(DT) 6111 (Ind-Trib) INCOME TAX ACT, 1961
Section 68
Assessee filed ample documentary evidences so as to justify identity and creditworthiness of the share applicants and genuineness of the transactions, such as PAN details and bank statements of investors, issued summons under section 131 to the share applicants, etc., AO was therefore, not jusified in doubting amount of share application money received from these share applicants merely for the reason that share applicants could not furnish documentary evidences so as to substantiate agricultural income eanred by them as it would tantamount to seeking an explanation with regard to soure of funds invested by share applicants which was outside the domain and purview of the section 68. If AO had any doubt regarding source of investment made by share applicants, AO was free to proceed against these share applicants but by no stretch of imagination, share application money received from existing individuals duly accepted by them could be taxed as income of the assessee-company.
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Income from undisclosed sources - Addition under section 68 - Receipt of share capital -
Assessee-company received share capital and share premium money. AO issued summons under section 131 to the share applicants. Most of the share applicants appeared before him personally and accepted that they had made investment in the shares of assessee-company but these share applicants could not furnish supporting documentary evidences so as to substantiate agricultural income earned by them out of which they had made investment in the shares of assessee-company. Therefore, AO treated amount received by assessee as unexplained credit under section 68. Held: Assessee filed ample documentary evidences so as to justify identity and creditworthiness of the share applicants and genuineness of the share transactions, such as PAN details and bank statements of investors, issued summons under section 131 to the share applicants, etc., AO was, therefore, not jusified in doubting amount of share application money received from these share applicants merely for the reason that share applicants could not furnish documentary evidences so as to substantiate agricultural income eanred by them as it would tantamount to seeking an explanation with regard to soure of funds invested by share applicants which was outside the domain and purview of the section 68. If AO had any doubt regarding source of investment made by share applicants, AO was free to proceed against these share applicants but by no stretch of imagination, share application money received from existing individuals duly accepted by them could be taxed as income of the assessee-company.
Relied:CIT v. Value Capital Services (P) Ltd. (2008) 307 ITR 334 (Del-HC) : 2008 TaxPub(DT) 1946 (Del-HC), CIT, Central Circle, Salem v. Victory Spinning Mills Ltd. (2014) 50 taxmann.com 416 (Mad), CIT v. First Point Finance Ltd. (2006) 286 ITR 477 (Raj-HC : 2006 TaxPub(DT) 388 (Raj-HC) and CIT v. Deen Dayal Choudhary (2017) 293 CTR 468 (Raj).
REFERRED :
FAVOUR : In favour of assessee
A.Y. : 2012-13
INCOME TAX ACT, 1961
Section 36(1)(iii)
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