ITO v. Sohail Financials Ltd - Taxpublishers.in

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The Tax Publishers2018 TaxPub(DT) 6558 (Del-Trib) ITO v. Sohail Financials Ltd. INCOME TAX ACT, 1961 --Income from undisclosed sources--Addition under section 68Undisclosed cash credits--Share allegedly issued at high premium being accommodation entries--Where share application money with high premium by share applicants were failed to be proved by assessee and as well as its genuineness, creditworthiness and identity hence, amount taken as accommodation entry was not justifiably deleted by CIT(A) and its order deleting addition was reversed.--AO issued show cause notice to the assessee to explain as to why addition of share capital and premium should not be made in the hands of the assessee, as the assessee had not produced any details of share capital with respect to identity, and creditworthiness of investors and genuineness of transaction. The AO also asked to produce individuals/directors of these companies along with respective documents. AO issued summons under section 131. None of the investors complied with Summons. AO issued another show cause notice referring to various statements and search carried out at the premises of T, Chartered Accountant. Therefore, addition to share capital and share premium account by the company, i.e., the total capital addition of Rs. 1,94,00,000 was hereby added to the income of assessee-company. CIT(A) deleted the addition. *Held:* There was nothing to establish genuineness of the share subscription transactions on the facts of this case. It is a settled legal position that the onus of assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions were done through banking channels or even by filing income tax assessment particulars. In the present case, assessee before lower authorities could not rebut the relationship of the assessee, a private limited company with T and his accomplices in making investment at such a huge premium. The surrounding circumstances and test of human probabilities also shows that there was no reason to invest those companies in the shares of the assessee-company at such a huge premium. CIT(A) has deleted the addition based on irrelevant documents, which does not prove the identity, creditworthiness, and genuineness of the shareholders/transactions. Therefore, in view of above facts, order of the CIT(A) deleting the addition under section 68 was reversed. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2018 TaxPub(DT) 6558 (Del-Trib)

ITO v. Sohail Financials Ltd.

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 68Undisclosed cash credits--Share allegedly issued at high premium being accommodation entries--Where share application money with high premium by share applicants were failed to be proved by assessee and as well as its genuineness, creditworthiness and identity hence, amount taken as accommodation entry was not justifiably deleted by CIT(A) and its order deleting addition was reversed.--AO issued show cause notice to the assessee to explain as to why addition of share capital and premium should not be made in the hands of the assessee, as the assessee had not produced any details of share capital with respect to identity, and creditworthiness of investors and genuineness of transaction. The AO also asked to produce individuals/directors of these companies along with respective documents. AO issued summons under section 131. None of the investors complied with Summons. AO issued another show cause notice referring to various statements and search carried out at the premises of T, Chartered Accountant. Therefore, addition to share capital and share premium account by the company, i.e., the total capital addition of Rs. 1,94,00,000 was hereby added to the income of assessee-company. CIT(A) deleted the addition. Held: There was nothing to establish genuineness of the share subscription transactions on the facts of this case. It is a settled legal position that the onus of assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions were done through banking channels or even by filing income tax assessment particulars. In the present case, assessee before lower authorities could not rebut the relationship of the assessee, a private limited company with T and his accomplices in making investment at such a huge premium. The surrounding circumstances and test of human probabilities also shows that there was no reason to invest those companies in the shares of the assessee-company at such a huge premium. CIT(A) has deleted the addition based on irrelevant documents, which does not prove the identity, creditworthiness, and genuineness of the shareholders/transactions. Therefore, in view of above facts, order of the CIT(A) deleting the addition under section 68 was reversed.