The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has held that mere non-production of directors of the Company is not a ground to made addition under section 68 of the Income Tax Act, 1961.
The assessee was aggrieved with the order of the Assessing Officer who added Rs. 1,85,00,000/- on account of accommodation entries under section 68 of the Income Tax Act. The assessee contended that the addition made u/s 68 of the Act is for mere reason of non-production of directors in person of shareholder companies same cannot be a justified ground to draw adverse inference u/s 68 of the Act where those shareholders are found to be existing and identified in detail as summons has been duly served on them.
On the second appeal, the Tribunal noted that the assessee has filed all evidence like share application form, board resolution confirming investment made, confirmation of share capital raised, Share certificate, income tax particulars of shareholders, bank statement of shareholders and form 2 for allotment of shares along with their audited final a/c in support of share capital received to establish its case.
The Tribunal further finds that nowhere any shareholder company was found to be fictitious or non-existing rather all shareholder companies are duly found to be existing as summons have been served on them. It was noted that no cogent material is brought on records in assessment order by Ld AO to demolish the copious evidence furnished by the assessee.
“We find that Ld AO nowhere made any independent enquiry from concerned and competent AO of shareholder companies etc. We find that only on basis of investigation wing report (unconfronted to assessee) acting purely on borrowed satisfaction without any independent application of mind addition has been made u/s 68 by Ld AO. We find that nowhere in entire assessment order Ld AO framed his own independent objective and rational “opinion” on basis of material placed on record within the meaning of the provision of section 68 of the Act. Further Ld CIT-A has also simply and easily endorsed finding of Ld AO without making any independent efforts on inquiry on his part, which finding of Ld CIT-A also do not objectively consider the various submissions and arguments of the assessee. So, we have no hesitation in accepting Ld AR’s argument that for the mere reason of non-production of directors in the person of shareholder companies same cannot be a justified ground to draw adverse inference u/s 68 of the Act. We are supported by decisions relied on Ld AR as mentioned above,” the Tribunal said.
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