Facts of the Case

The assessee filed its return of income for Assessment Year 2012-13 on 26.09.2012 declaring total income of ₹1,120. The case was selected for scrutiny on account of large share premium received. During the year, the assessee issued 30,000 equity shares of face value ₹10 at a premium of ₹490 to eight private limited companies and received ₹1,50,00,000 as share capital and share premium. Notices under Sections 143(2) and 142(1) were issued and the assessee furnished complete details including PAN, income-tax returns, audited financial statements, bank statements, share application forms, confirmations and board resolutions of the share subscribers. The Assessing Officer issued summons under Section 131 to the directors of the subscriber companies, which were not complied with through personal appearance. On this basis, the Assessing Officer treated the entire amount of ₹1,50,00,000 as unexplained cash credit under Section 68. The addition was confirmed by the CIT(A), leading to the appeal before the Tribunal.

Issues Involved

Whether addition under Section 68 can be sustained merely due to non-appearance of share subscribers in response to summons under Section 131 when the assessee has furnished complete documentary evidence establishing identity, creditworthiness and genuineness of the transactions.

Petitioner’s Arguments

The assessee submitted that it had discharged the onus under Section 68 by furnishing all primary evidences including PAN, income-tax returns, audited accounts, bank statements and confirmations of the share subscribers. It was argued that non-appearance of the directors of subscriber companies could not be the sole basis for making addition when the documentary evidence remained uncontroverted. Reliance was placed on judicial precedents including the Supreme Court decision in Orissa Corporation Ltd. and the Calcutta High Court decision in Crystal Networks Pvt. Ltd.

Respondent’s Arguments

The Revenue supported the orders of the Assessing Officer and the CIT(A) and contended that the failure of the subscriber companies to appear personally in response to summons under Section 131 showed lack of genuineness and justified the addition under Section 68.

Court Order / Findings

The ITAT Kolkata held that the assessee had furnished all necessary documentary evidences proving the identity and creditworthiness of the share subscribers and the genuineness of the transactions. The Tribunal observed that the Assessing Officer had not pointed out any defect in the documents filed nor conducted any further enquiry to disprove them. It was held that addition under Section 68 cannot be made merely on the ground that the share subscribers did not appear personally in response to summons under Section 131. The Tribunal relied on the Supreme Court decision in Orissa Corporation Ltd., the Calcutta High Court decision in Crystal Networks Pvt. Ltd., and the Bombay High Court decision in Orchid Industries (P.) Ltd. to hold that non-appearance of shareholders is not decisive once documentary evidences are on record.

Important Clarification

The Tribunal clarified that the burden under Section 68 stands discharged when the assessee proves identity, creditworthiness and genuineness of the transaction through reliable documentary evidence. The Revenue is required to conduct further enquiry or bring contrary material on record to rebut such evidence. Mere non-attendance of share subscribers pursuant to summons under Section 131 is insufficient to sustain an addition.

Final Outcome

The appeal filed by the assessee was allowed, and the addition of ₹1,50,00,000 made under Section 68 of the Income-tax Act for Assessment Year 2012-13 was directed to be deleted in full.

Source Link- https://itat.gov.in/public/files/upload/1768297491-Gaem3Q-1-TO.pdf

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