| The Tax Publishers2020 TaxPub(DT) 3051 (Kol-Trib) INCOME TAX ACT, 1961
Section 68
Where the private limited company was an existing shareholder in assessee-company and director of the said private company were the own family members of BOD of assessee company, further, amount of share capital said to have been invested in assessee was explained because source of money in question was assessed in the hand of investor company, therefore, addition made under section was not maintainable.
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Income from undisclosed sources - Addition under section 68 - Unexplained cash credit - Identity, creditworthiness and genuineness of transaction was proved by assessee
During the course of scrutiny proceedings, AO found that assessee had allotted aggregate paid up share capital and share premium out of which part amount was credited during the relevant year under consideration. AO asked assessee to substantiate the identity, creditworthiness and genuineness of transactions in terms of section 68. Director of the assessee company appeared personally but failed to produce any director of investors or any credible evidence in support raising share capital during the year under consideration. Having no new evidence in terms of provisions under section 68, AO held that verification could not complete for non-compliance of summons and added share capital along with the premium on account of unexplained cash credit under section 68. S Ltd. was an existing shareholder in assessee company and the director of the said company were the own family member of Board of Directors of assessee company. During the course of scrutiny proceedings, the assessing officer found the assessee had allotted aggregate paid up share capital and share premium to the tune fo Rs. 1,92,03,000, out of which Rs. 1,60,00,000 was credited during the relevant year under consideration. The assessing officer asked the assessee to substantiate the identity, creditworthiness and genuineness of transactions in terms of section 68 of the Act. The assessee officer specifically directed to produce the directors of the subscribing company to substantiate identity and creditworthiness of the subscriber and genuineness of transactions. The director of the assessee company appeared personally but failed to produce any director of investors or any credible evidence in support raising share capital during the year under consideration. Having no new evidence interms of provisions under section 68 of the Act, the assessing officer held that the verification could not complete for non-compliance of summons and added share capital along with the premium of Rs. 1,60,00,000 on account of unexplained eash credit under section 68 of the Act. The CIT (A) deleted the said amount taking into consideration, S addition involving the same transaction made in the hands of S. Ltd. on account of unexplained income for assessment year 2012-13 by placing reliance on the order of Kolkata Tribunal in the case of Tribunal Commodities Pvt. Ltd.. Held: M/s. S was an existing shareholder in assessee company and the director of the said company were the own family members of BOD of assessee company. AO added the amounts in hands of assessee under unexplained cash credit and CIT(A) in the First Appellate Proceedings therein deleted the same only on the ground that the same amount was added in the hands of share subscribing company. The fact remains admitted the said M/s. S was assessed to tax under section 143(3) and the amount of share capital said to have been invested in assessee was explained because source of money in question was assessed in the hand of investor company. Therefore, identity of the said company, genuineness of transaction and creditworthiness was proved. Accordingly, addition made in hands of assessee was not maintainable to the fact source of share capital and premium was found to be explained in terms of provisions under section 68.
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