The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has upheld the additional holding that the Assessing officer (AO) was not bound to make enquiry unless the assessee had discharged the initial onus under Section 68 of the Income Tax Act, 1961.
Assessee, Endarsh Investment & Finance Pvt. filed return of income declaring income as Nil. During the course of the scrutiny assessment AO noticed that the assessee had shown to have received share capital with share premium on sale of 1800000 nos. of shares of face value of Rs.10/- per share with premium of Rs. 90/- per share from two different subscribers Wonder Trading Company Ltd. and Carewell Exim Ltd.
On enquiries conducted in the case of these two companies the AO observed that these companies were not doing real business and were engaged in the business of providing accommodation entries only and these two companies were just paper companies with dummy directors.
The AO was of the firm belief that the money of the assessee which was rooted through the accounts of these two companies and these credits in the books of accounts in the accounts of the assessee in the shape of share capital were unexplained and liable to be added to the total income of the assessee under Section 68 of the Income Tax Act and made addition.
The Commissioner of Income Tax Appeals [CIT(A)] was of the opinion that, once the appellant company had established the identity of the share applicant companies no addition could be made in the hands of the assessee company even if the share applicants had been found persons of no means.
H. K. Choudhary appeared on behalf of the revenue.
The two-member Bench of N. K. Billaiya, (Accountant Member) and Astha Chandra, (Judicial Member) observed that the first appellate authority had grossly erred in deleting the addition solely on the ground that identities of the share applicant companies had been established by the assessee.
The Bench allowed the appeal filed by the revenue holding that the initial onus would be upon the assessee under Section 68 of the Income Tax Act and unless this initial onus had been discharged the AO would not be bound to make any enquiry. It would be only when the assessee had discharged the initial burden; the AO had to bring cogent material on record to demolish the submissions of the assessee.
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