Share capital addition with premium on mere surmises / conjectures unjustified

ITO Vs M/s. Sankalp Corporate Services Pvt. Ltd. (ITAT Mumbai)

Conclusion:

Addition under section 68 made by AO of the entire share capital and premium received during the year  on the basis of negative observation about availability of funds with share applicant was unjustified as the share applicant was the sister concern of assessee, from whom similar share application with premium were received in the earlier year and the balance sheet of the share applicant showed ample source of funds.

Held:

AO made addition of the entire share capital and premium received during the year u/s 68, treating the share capital and premium as unjustified and from undisclosed source. He inferred that the assessee had taken accommodation entries from one of its associate concern M/s I Pvt. Ltd and the nature and the source both could not be proved by any means. Thus share premium remained unjustified and hence an amount received during the year on account of issue of shares at a high premium was hereby added back to the total income of assessee u/s 68. It was held assessee had submitted all the necessary details in support of the share applicant and share premium receipt. AO had not pointed out any defect in the documents. AO had not even issued a notice u/s. 133(6) to the share applicant, if he had any doubt about the identity, genuineness and creditworthiness of the share applicant. In fact, the share applicant was the sister concern of assessee, from whom similar share application with premium were received in the earlier year. It was further noted that the assessment of the share applicant had also been completed u/s. 143(3) and no adverse comment had been made by the AO in that case. The balance sheet of the share applicant showed ample source of funds. Hence, AO’s negative observation about share applicant’s availability of funds was factually incorrect and addition made under section 68 had to be deleted..

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