Shanta Blankets Pvt. Ltd. Vs ITO (ITAT Delhi)
The appeals were filed by five assessees against separate orders of the Commissioner of Income Tax (Appeals) for Assessment Year 2016-17. The common issues before the Tribunal were whether the Commissioner (Appeals) was justified in confirming additions under Section 68 in respect of share capital and share premium received by the assessees, and whether the Commissioner (Appeals) was justified in enhancing income under Section 251(1) read with Section 56(2)(viib) on a protective basis after rejecting the valuation reports furnished under Rule 11UA(2).
The cases had been selected for limited scrutiny to verify whether the share premium received represented funds from disclosed sources. During assessment proceedings, the Assessing Officer issued statutory notices and notices under Section 133(6) to investor companies. According to the assessment orders, additions were made by doubting the identity and credibility of the investors and the genuineness of the transactions. The Commissioner (Appeals) upheld these additions and further enhanced the assessees’ income by invoking Section 56(2)(viib) after rejecting the valuation reports submitted under Rule 11UA(2).
The assessees contended that they had discharged the burden under Section 68 by furnishing documentary evidence establishing the identity, creditworthiness and genuineness of the investor companies. They submitted certificates of incorporation, Memorandum and Articles of Association, audited financial statements, income tax returns, bank statements, confirmations, share application forms and valuation reports prepared under Rule 11UA(2). They also argued that the investor companies were active entities whose credentials could be verified through official records and that investments had been made through banking channels.
