Case Law Details
Paramshakti Distributors Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Introduction: The recent case of Paramshakti Distributors Pvt. Ltd. vs. ACIT, adjudicated by the Income Tax Appellate Tribunal (ITAT) Mumbai, has significant implications as the ITAT deleted the addition of share application money. The tribunal ruled in favor of the assessee, emphasizing the establishment of identity, creditworthiness, and genuineness of the transactions. This article provides a detailed overview of the case and the key findings.
Background: During the assessment year 2006-07, Paramshakti Distributors Pvt. Ltd. received share application money from various companies. The Assessing Officer (AO) contended that the assessee failed to prove the identity, creditworthiness, and genuineness of the share application money totaling Rs. 21,96,00,000 from 15 companies.
Assessee’s Defense: In response to the AO’s allegations, Paramshakti Distributors Pvt. Ltd. presented a robust defense. The appellant submitted comprehensive documentation, including details of the address and PAN identity of the subscribers, confirmations, audited balance sheets, bank statements, share application copies, resolutions, and more. The appellant argued that, once the identity of subscribers is established, there is no basis for treating the amount as an unexplained cash credit under section 68 of the Income Tax Act.
Legal Precedents and Arguments: The appellant relied on legal precedents such as CIT v. Lovely Exports and other relevant cases, emphasizing that the addition in respect of share capital cannot be made under section 68 if the identity of subscribers is proven. The appellant contended that the AO failed to make a case of unexplained cash credits, given the extensive evidence provided. The appellant’s arguments were supported by a chart detailing the reasons for AO’s disallowance and the appellant’s counterarguments.
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