The Pune bench of Income Tax Appellate Tribunal ( ITAT ), while upholding the addition made under section 68 of the Income Tax Act, 1961 held that the assessee failed due to the absence of cogent material to prove the creditworthiness and genuineness of share application /subscription transaction.
The assessee Vilson Roofing Products Pvt. Ltd filed its return of income declaring NIL total income. Upon information from the investigating wing that assessee is the ultimate beneficiary of cash transaction arising to it in the form of share subscription. AO after recording reasons & obtaining prior approval from jurisdictional authority has reopened assessee’s case.
It was observed that Assessee’s failure to establish creditworthiness of the subscriber company and genuineness of issue of 2000 shares. Therefore the AO culminated the proceedings by bringing to tax full amount of share subscription of ₹3.00Crores in the hands of assessee as its unexplained cash credit u/s 68 of the Act and accordingly framed the assessment under Section 143(3) r.w.s 147 of the Income Tax Act.
Aggrieved, the assessee filed an appeal before the CIT(A), who dismissed the appeal. Thereafter the assesse filed another appeal before the tribunal.
Assesee representative, Sharad Vaze argued that AO has not conclusively proved the receipt of share application money as not genuine or bogus or sham.
M G Jasnani, the Department representative,opposed these submissions and argued that the assessee was failing to substantiate creditworthiness and genuineness of share application/subscription transaction due to absence of cogent material to prove.
Thus Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee.
It was observed that the assessee making bald claims and did place no cogent material on record to showcase the creditworthiness of companies based out of Kolhapur which subscribed alleged 2000 shares of face value of ₹1000/-each at a premium of ₹14000/-each in the appellant’s company.
Therefore the Assessee has failed to discharge casted onus of proving genuineness of share transaction with convincing material on record
The single-member bench of G. D. Padmahshali ( Accountant member ) upheld the addition made by the assessing officer and observed that the assessee has failed due to absence of cogent material to prove the creditworthiness and genuineness of share application /subscription transaction.
Therefore the bench dismissed the ground of appeal filed by the assessee.
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