Case Law Details
Sharda Ferro Works Pvt. Ltd. Vs DCIT (ITAT Kolkata)
The case of Sharda Ferro Works Pvt. Ltd. vs. DCIT (ITAT Kolkata) revolves around the contentious issue of unexplained cash credit under section 68 of the Income-tax Act, 1961. The appellant, Sharda Ferro Works Pvt. Ltd., contested the addition of Rs. 2,05,50,000 as unexplained cash credit by the Assessing Officer (AO). The appellant provided substantial evidence to establish the legitimacy of the transactions. However, the AO, without adequate investigation, added the amount as unexplained cash credit. The matter was appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the AO’s decision. Subsequently, the appellant approached the Income Tax Appellate Tribunal (ITAT) Kolkata seeking relief.
The ITAT Kolkata scrutinized the case meticulously, considering the evidence provided by the appellant and the observations made by the lower authorities. The appellant had diligently furnished all relevant documents, including PAN of share applicants, bank statements, and notices served under section 133(6). These documents evidenced the genuineness of the transactions and the financial capability of the share subscribing companies.
Despite the appellant’s efforts, the AO raised doubts regarding the legitimacy of the transactions, alleging them to be arranged affairs. However, the ITAT noted that the AO failed to substantiate these claims with concrete evidence. Furthermore, the AO’s insistence on personal appearance of the appellant’s directors, without addressing the documents provided, was deemed unjustified.
The ITAT referred to various judicial precedents emphasizing the importance of thorough investigation by the revenue authorities. It cited cases where courts ruled in favor of the assessee when documentary evidence was provided but not adequately considered by the AO. The burden of proof, once initial evidence is provided by the assessee, shifts to the revenue to disprove the legitimacy of the transactions.
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