Addition u/s 68 merely for reason of higher premium claimed is not valid if assessee has proved its onus of creditworthiness and genuineness of transaction
Brief facts of the Case
The assessee in the instant case issued shares at a premium ranging from Rs.24000-39000 to some applicant companies. During the assessment proceedings, AO sought details of such applicants which in turn was provided by the assessee in the form of their bank account statements, the Memorandum and Articles of Association, Income Tax Return, Balance Sheets, PAN details etc. However, the notices issued by the AO to concerned share applicant companies u/s 133(6) were returned un-served. After considering the submissions and materials placed on the record, AO added back the sum of Rs.12,78,60,000/- u/s 68 of the Income Tax Act, 1961 which was set aside concurrently by the CIT(A) and the ITAT. Aggrieved revenue filed the appeal before the Hon’ble High Court.
Contention of the Revenue
The AO had relied on the inquiry of the Inspector that the concerned companies were not found existing on the given addresses.
Contention of the Assessee
It was contended that all necessary documents to establish the identity of the share applicants, their creditworthiness and genuineness of the transaction had been placed on record. In these circumstances, the AO could not have on the basis of suspicion fueled by the higher premium claimed by the assessee and the lack of response of the notices issued, added back the amounts to the assessee’s income.
Held by High Court
Hon’ble High Court relied on the below mentioned findings and decisions recorded by ld. CIT(A) and ITAT wherein it was held:-
Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. Therefore, the emphasis is on genuineness of all the three aspects, identity, creditworthiness and the transaction. In the light of observations of the Hon’ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd. reported in 216 CTR 295, the onus on the appellant has been duly discharged.
For the above reasons, the Court opined that the concurrent findings of fact, as to the true identity of the share applicants, their creditworthiness and genuineness of the transaction, are based on sound reasoning and do not call for interference. No substantial question of law arises. The appeals of revenue dismissed.