INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained share capital and premium - Assessee discharged its onus

Assessment under section 153A was carried out and it was found that assessee had issued share capital at different premium from different assesses on different dates and, therefore, assessee was asked to prove identity and creditworthiness of these companies. AO found that these companies do not have much operation but have a robust balance sheet. These companies have common directors. The companies were operated by Kolkata based operator. Further, during the course of search blank sign share transfer forms, blank signed power of attorney and other documents necessary for transfer of shares were found and seized. These documents related to the companies from which the assessee was claimed to received share capital and share premium. Thus, the AO noted that the entire transaction was a sham transaction. He stated that the amounts so received, as share capital was nothing but the assessee's own money that was routed back to the assessee-company in the form of share capital. thus, the AO made an addition as unaccounted income of the assessee which had been introudced into the books in the form of share capital and share premium. AO further made addition of 2% of the amount of share capital as commission to obtain share capital. CIT(A) confirmed the addition with respect to the share capital under section 68. He also confirmed the addition because of commission paid allegedly for the above share capital.Held: It was clear that assessee produced sufficient documentary evidences before the AO to prove that money routed from the assessee itself which came back to the assessee in the form of share capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of section 68. AO however did not make any further enquiry on the documentary evidences filed by the assessee. The AO did not verify the trail of the source of funds received by assessee through various entities. Assessee had been able to prove that it had received genuine amounts which was routed through various companies. Therefore, there was no justification to make any addition under section 68 . Further, there was no evidence on record that assessee paid any amount on account of commission for arranging any transaction because it was a genuine transaction between the parties. Therefore, there was no justification to make the addition under section 69C as well. In view of the above, the Orders of the authorities below were set aside and the entire addition was therefore, deleted in all the assessment years under appeals.

Relied:Kishanchand Chellaram 91980) 125 ITR 713 (Sc) : 1980 TaxPub(DT) 1130 (SC) : Andaman timber Industries (2015) 281 CTR 214 (SC) : 2015 TaxPub(DT) 5186 (SC).

REFERRED : CIT v. Continental warehousing Corp Ltd. & All Cargo Global Logistics Ltd. (2015) 374 ITR 645 (Bom) : 2015 TaxPub(DT) 2182 (Bom-HC), Pr. CIT v. Sayumya Construction Private Ltd. (2016) 387 ITR 529 (Gujarat) : 2016 TaxPub(DT) 3466 (Guj-HC), Pr.CIT v. NRA Iron and Steel (2019) 103 Taxmann.com 48 (SC) : 2019 TaxPub(DT) 1628 (SC), NDR Promoters Private Limited 2019-TIOL-172-HC-Del-IT : 2019 TaxPub(DT) 0886 (Del-HC), Vijay Proteins Ltd. v. Asstt. CIT (2015) 58 Taxmann.com 44 (Guj) : 2018 TaxPub(DT) 7917 (Guj-HC), Sanjay Oilcake Industries v. CIT (2009) 316 ITR 274 (Guj) : 2009 TaxPub(DT) 370 (Guj-HC), Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC), CIT v. U.K. shah (1973) 90 ITR 396 (Bom) : 1973 Tax Pub(DT) 251 (Bom-HC), CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC) and CIT v. Winstral Petrochemicals (P.) Ltd. (2011) 330 ITR 603 (Del) : 2011 TaxPub(DT) 259 (Del-HC).

FAVOUR : In assessee's favour.

A.Y. : 2012-13 to 2017-18

INCOME TAX ACT, 1961

Section 69 and 145(3)

SUBSCRIBE FOR FULL CONTENT