Share Transaction cannot be treated as Bogus when Assessee produced all Relevant Documents but Parties are not Traceable: Bombay HC [Read Judgment]

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In CIT v. M/s. Orchid Industries Pvt. Ltd, a division bench of the Bombay High Court held that share transactions cannot be treated as bogus under section 68 of the Income Tax Act when Assessee produced all the relevant documentary evidence to prove the genuineness of the transaction in order to discharge its onus.

Justices S.V Gangapurwala and A M Badar, while dismissing the departmental, said that in such a case, the AO cannot invoke section 68 merely for the reason that the shareholders never responded to the intimations sent by him and never appeared before him.

Assessee received Rs. 95 lakhs as share application money for the year under consideration. As required by the department, the assessee furnished all documents such as PAN details, Bank statements etc to prove the genuineness of the transaction. The Assessing Officer however, added the amount as unexplained credit of the assessee under section 68 of the Act on ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the him and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared.

The Tribunal, allowed the second appeal filed by the assessee by holding that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money.

Concurring with the findings of the Tribunal, the bench held that “the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee.

Read the full text of the Judgment below.

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