INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Identity, creditworthiness and genuineness of share capital -

During assessment proceedings under section 143(3), it was noted by the AO that assessee-company during the financial year 2011-12 issued its shares to primarily different private limited companies against high premium. In order to examine the reasons of high premium, the AO summoned directors of the investing companies. In response, instead of appearing in compliance to the summons, all directors of investing companies, filed the written submission before the AO. During the assessment proceedings, none appeared before the AO, in response to summons under section 131. Even the directors of the assessee-company did not appear in response to the summons. AO noted that assessee-company had received huge share premium without any business activity. AO held that there was absolutely no justitication for quantum of premium, then it can safely be held that nature of premium was not proved and the case gets covered by section 68 and this way the AO made the addition under section 68. CIT(A) however, deleted the addition.Held: In the facts of the present case, both the nature and source of the share application received was fully explained by the assessee. 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 and the onus was 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. In these peculiar facts and circumstances and in view of AO's supportive remand report, no addition was warranted under section 68. That being so, Tribunal was declined to interfere in the order passed by the CIT(A), his order on this issue was upheld.

Relied:CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 0080 (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) : (2003) 127 Taxman 523 (Guj) : 2002 TaxPub(DT) 0305 (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. Income Tax Officer, Ward- 46(3), Kolkata (2012) 347 ITR 347 (Cal) : 2012 TaxPub(DT) 0815 (Cal-HC), Crystal Networks (P.) Ltd. v. Commissioner of Income Tax (2013) 353 ITR 171 (Cal) : 2013 TaxPub(DT) 1470 (Cal-HC), CIT v. Dataware Private Limited, ITAT No. 263 of 2011, dt. 21-9-2011 : 2013 TaxPub(DT) 1384 (Cal-HC), Lovely Exports CTR at (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 0261 (SC), CIT v. Roseberry Mercantile (P) Ltd., ITAT No. 241 of 2010, dt. 10-1-2011, CIT v. Nishan Indo Commerce Ltd., dt. 2-12-2013 in ITA No. 52 of 2001 : 2014 TaxPub(DT) 1934 (Cal-HC), CIT v. Leonard Commercial (P) Ltd. on 13-6-2011 ITAT No. 114 of 2011, Dy. CIT v. Global Mercantiles Pvt. Ltd. ITA No. 1669/Kol/2009, dt. 13-1-2016 : 2016 TaxPub(DT) 1420 (Kol-Trib), R.B Horticulture & Animal Projects Co. Ltd. ITA No. 632/Kol/2011, dt. 13-1-2016, ITO v. Cygnus Developers (I) (P) Ltd. ITA No. 282/Kol/2012, dt. 2-3-2016 and CIT v. Gangeshwari Metal (P) Ltd. [ITA No. 597 of 2012, dt. 21-1-2012]. Distinguished:Raj Mandir Estate Private Limited (2016) 70 Taxmann.com 124 (Cal) : 2016 TaxPub(DT) 2834 (Cal-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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