Network Synthetics Pvt. Ltd Vs DCIT (ITAT Mumbai)
It is observed that the assessee has discharged its initial onus to prove the identity, genuineness of the transaction and creditworthiness of the parties by filing all these documents. The Tribunal in assessee’s group cases while deleting the additions made u/s. 68 of the Act observed as under: –
17. In the case of PCIT vs. Hi-Tech Residency Pvt. Ltd. (2018) 257 Taxman 335, Hon’ble Supreme Court has considered identica l issue and held that where an assessee company had discharged the onus of establishing identity, genuineness of transaction and creditworthiness of investors, no additions could be made u/s. 68 of the I.T. Act, 1961. We, further, noted that although the Apex Court has not expressed any opinion, because of dismissal of SLP filed by the assessee, the fact of the matter is that this issue has been considered by the Hon’ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd (supra), where the issue has been thoroughly examined in the light of provisions of section 68 of the Act, and held that if the share application money is received by the assessee company from alleged bogus share holders, whose names are given to the AO, then the department is free to proceed to reopen their assessment in accordance with law, but sum received from share holders cannot be regarded as undisclosed income of the assessee.
18. In this view of the matter and considering the facts and circumstances of this case and also taking into consideration various case laws as discussed hereinabove, we are of the considered view that the assessee has discharged its initial onus to prove identity, genuineness of transactions and creditworthiness of the parties by filing various documents. The AO, without carrying out further inquiries in order to ascertain the claim of the assessee, jumped into conclusion on the basis of financial statements of the subscribers that none of them had enough source of income to establish creditworthiness. Therefore, we are of the view that the AO was erred in making additions towards share capital u/s 68 of the Income Tax Act, 1961. The learned CIT(A) without appreciating relevant facts has confirmed additions made by the AO towards share capital u/s 68 of the Income Tax Act, 1961. Hence, we reverse findings o f ld. CIT(A) and direct the AO to delete the additions made towards share capital u/s. 68 of the Income Tax Act, 1961.
FULL TEXT OF THE ITAT JUDGEMENT
1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 53, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 07.03.2018 for A.Y. 2010-11 in sustaining the addition made u/s. 68 of the Act in respect of share capital/share premium received from shareholders.
2. At the outset, Learned Counsel for the assessee submitted that identical issue came up before the Tribunal in assessee group concerns emanating from the very same search and seizure operation conducted in Anand Rathi Group along with the group concerns on 24.09.2013 and the Tribunal in ITA.No. 2569 to 2573/Mum/2018 and ITA.No. 2563 & 2564/Mum/2018 dated 29.08.2019 deleted the similar addition made by the Assessing Officer u/s. 68 of the Act.
3. On the other hand, Ld. DR submits that the Tribunal decided the issue in favour of the assessee in group concerns.
4. Heard rival submissions, perused the orders of the authorities below and the decision of the Tribunal in assessee group cases. On a perusal of the order of the Tribunal in assessee’s group concerns case in the case of Aqua Proof Wall Plast Pvt. Ltd., v. DCIT in ITA.No. 2569/Mum/2018 dated 29.08.2019 I find that on identical facts the Tribunal deleted the addition as the assessee has discharged its initial onus to prove identity, genuineness of the transaction and creditworthiness of the parties by filing numerous documents. The addition was made without carrying out further enquiries in order to ascertain the claim of the assessee, the Assessing Officer jumped into conclusion on the basis of financial statements of subscribers that none of them had enough sources of income to establish creditworthiness, thus, the Tribunal deleted the additions. In the case on hand before us the assessee submitted the following information to prove the identity, genuineness of the transaction and creditworthiness of the shareholders.
