DCIT Vs Mahavir Coal Resources Pvt. Ltd. (ITAT Nagpur)
Conclusion: Addition by AO at Rs. 538 lakh under section 68 in respect to share capital contribution including share premium received was unjustified as assessee had established and satisfied all the three ingredients being identity, creditworthiness and genuineness of share capital contribution to explain credit in terms of provisions of section 68 and assessee had no obligation to explain source of source.
Held: Search action carried out under section 132(1) at the business premises as well as residential premises of the Directors of Mahavir Global Coal Ltd.. During the search and seizure operation, addition had been made by AO at Rs. 538 lakh under section 68 in respect to share capital contribution including share premium received from M/s Lupin Commodities Pvt. Ltd. The aforesaid corporate entity was one of the group concerns wherein the directors of the company were from same M/s Lupin Commodities Pvt. Ltd. was assessed to tax and was holding PAN AABCL3020H. The aforesaid corporate share holder had confirmed the contribution of share capital with assessee company. PAN details, financial statements and bank statement of corporate share holder were placed on record to substantiate the contribution of share capital contribution. AO asked assessee to prove the identity, creditworthiness as well as genuineness of transactions from the said company. Though, assessee furnished the detailed submissions during the assessment proceedings to AO, however, AO was not satisfied about the same and accordingly he treated the same as unexplained credits and held that assessee had routed its unaccounted money in the guise of share application and share premium. AO accordingly made addition of ` 538 lakh to the total income of the assessee company. It was held that following the decision in Gagandeep Infrastructure Pvt. Ltd., vide judgment dated 20/03/2017 at Para(e) at Page 5 of the judgment, wherein it was held where the Revenue urges that the amount of share application money has been received from bogus shareholders then it was for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It did not entitle the Revenue to add the same to the assessee’s income as unexplained cash credit.” Addition made in the case of assessee was held to be unjustified. Assessee had established and satisfied all the three ingredients being identity, creditworthiness and genuineness of share capital contribution to explain credit in terms of provisions of section 68. Argument of AO that assessee had obligation to explain source of source was unjustified and unsustainable and contrary to law laid down by Hon’ble Jurisdictional High Court and had no merit. On the above facts, share capital contribution could not be said to be unexplained credit.
