Addition towards share capital and premium u/s 68 unsustainable as identity and creditworthiness proved

One Point Commercial Pvt. Ltd. Vs ITO (ITAT Kolkata)

ITAT Kolkata held that addition towards share capital and share premium under section 68 of the Income Tax Act untenable as assessee discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions.

Facts- In the course of assessment proceeding, AO noted that the assessee has received share application money and premium thereon amounting to Rs.4,78,50,000/-, during the year in question. AO called for details and explanation on the above transaction to which assessee furnished its replies as noted in the assessment order. AO also issued notice u/s. 133(6) of the Act to the above six companies. He also issued summon u/s. 131 to the director of the assessee for his personal attendance and also directed to produce the directors of the six allottee companies along with relevant documentary evidence and details. Out of six directors of the allottee companies, directors of two companies namely, UP Account Law Services Pvt. Ltd. and UP Agro Farm & Export Pvt. Ltd. did not appear in person in response to notice u/s. 133(6) of the Act and summon issued u/s. 131 of the Act. All the six subscriber companies furnished their replies along with required documentary evidence in response to notice u/s 133(6) of the Act, all of which are placed on record.

Not finding satisfaction with the details and explanation any by applying the test of human probability, AO made the addition of Rs.4,78,50,000/- u/s. 68 of the Act. Aggrieved, assessee went in appeal before the Ld. CIT(A), who confirmed this addition. Aggrieved, assessee is now in appeal before the Tribunal.

Conclusion- 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.4,78,50,000/- 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. Accordingly, ground taken by the assessee in this respect is allowed.

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