INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of share capital/premium - AO doubted creditworthiness of investors

Assessee-company received share capital/premium. AO treated the same as unexplained credit under section 68 on the reasoning that investors companies were not having any income or have extremely low income and therefore, did not have creditworthiness to make the investment. Held: Assessee company furnished sufficient documentary evidences, to discharge the primary onus cast under section 68, i.e., Names of the Investor companies, their Addresses, PAN details, Number of shares allotted, Value of shares allotted, Share application form as filed by Investor companies and their confirmations as to having made investment explaining the source of making the investment, Copy of Income Tax Return of the Investor companies their audited annual accounts, Bank Statement of the Investor companies and affidavit of the directors of the investor companies confirming the investments made by them and also explaining the business prudence by which they made the investments. All the investors replied to the notices issued by AO under section 133(6). The evidences furnished by assessee as well as investors remained uncontroverted. Further, amended provisions of section 68, was not applicable to the assessee's case for the concerned assessment year 2012-13, therefore, assessee was not required to prove source of the source. Therefore, addition made by AO was not justified.

Relied:CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 261 (SC), Orissa Corpn. (P) Ltd. (supra) 159 ITR 78, Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj-HC) : (2003) 127 Taxman 523 (Guj-HC) : 2002 TaxPub(DT) 305 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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