Case Law Details
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.
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