Addition u/s 68 unsustainable as identity and creditworthiness of share subscribing companies proved

Manju Credit Pvt. Ltd. Vs ITO (ITAT Kolkata)

ITAT Kolkata held that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions. Accordingly, addition made towards share capital and share premium u/s. 68 unsustainable.

Facts- During the assessment proceeding, Ld. AO noted that assessee had introduced Rs.230 lacs in the form of share capital including share premium for which it has issued 4,60,000 shares at a face value of Rs.10/- each with a premium of Rs.40/- each to eighteen different share subscribing companies. AO in the course of assessment proceedings directed the assessee to produce the director of the assessee and also the directors of the allottee companies along with relevant documentary evidence and details. By applying the test of human probability, AO made an addition of Rs.230 lacs u/s. 68 of the Act. Aggrieved, assessee went in appeal before the Ld. CIT(A) who confirmed this addition made by the AO. Aggrieved, assessee is now in appeal before the Tribunal.

Conclusion- AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee of the share subscribing companies. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. Ld. AO has simply added the amount of share capital and share premium on the ground that assessee has not produced the directors/shareholders. Thus, going by the records placed by the assessee of all the share subscribing companies, it can be safely held that the assessee has discharged his initial burden and the burden shifted on the AO to enquire further into the matter which he failed to do so. It is also noted that all the investing companies have sufficient own funds available with them to make investment in the assessee.

We find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions towards sum of Rs.121.50 lacs received during the impugned year. Accordingly, considering these facts and in the light of the judicial precedence referred above, we set aside the order of the ld. CIT(A) and direct the ld. AO to delete the addition made towards share capital and share premium u/s. 68 of the Act.

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