Case Law Details
ITO Vs Sri Endarsh Investment & Finance Pvt (ITAT Delhi)
In a noteworthy decision by the Income Tax Appellate Tribunal (ITAT) Delhi, the case of the Income Tax Officer (ITO) Vs Sri Endarsh Investment & Finance Pvt revolved around an important legal provision, section 68 of the Income Tax Act. The case shed light on the responsibility of the assessee in terms of unexplained share application money.
Analysis: The matter in question was whether the CIT(A) was correct in deleting the addition of Rs.18 crores made by the AO on account of unexplained share application money under section 68 of the Act. The AO believed that the money the assessee showed as received for share capital, with a premium from two different companies, was actually its own, funneled through paper companies.
However, the assessee contended that they have fulfilled all the obligations under section 68, providing identities of the creditors, the creditworthiness of the creditor, and the genuineness of the transaction. Yet, the ITAT Delhi decided that simply establishing the identities of share applicant companies is not enough. The assessee had to present substantial evidence proving that the share applicant companies were indeed creditworthy enough to subscribe to the shares.
Conclusion: This case serves as a reminder that assessees must thoroughly discharge the initial onus under section 68. Until the assessee does so, the AO is under no obligation to conduct further inquiries. Therefore, it is essential that assessees prove not only the identity of the creditor but also their creditworthiness and the genuineness of the transaction.
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