The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has held that the addition based on non-production of company directors on the ground that identity of the subscribers were not proved would not be sustainable.
The appellant Atlantic Dealers Pvt. Ltd was a Private Limited Company engaged in the business of investing in shares and securities. The Income Tax Return for AY 2009-2010 was filled electronically. Thereafter, the appellant suo moto submitted that while filing return of income the appellant had not offered to tax the amount of service charges and extra charges.
Subsequently the Commissioner of Income Tax (CIT) exercising his revisional jurisdiction and examined the records and held that the assessment order was erroneous and prejudicial to the interest of the revenue on the ground of want of necessary verifications by the Assessing officer. To verify the identity and creditworthiness of the shareholders and also about the genuineness of the transaction, the assessing Officer issued notices.
Out of them, 13 letters issued to different shareholders had been returned back. Further, summonses were issued to the directors of the share subscriber companies. Since the said summons under Section 131 of the Income Tax Act was not complied with, the Assessing Officer had held that the assessee had failed to discharge the burden of proof to substantiate the identity and creditworthiness of the share subscribers and genuineness of the transaction.
Rakesh Joshi, on behalf of the assessee contended that the AO, instead of examining the relevant documents, insisted for the personal presence of the directors of the subscribers which was not in the hands of the assessee.
He further submitted that the AO could not point out any defect or discrepancy in the evidences/documents submitted by the assessee to prove the identity and creditworthiness of the subscribers and genuineness of the transaction.
Subhrajyoti Bhattacharjee, who appeared on behalf of the revenue, relied upon the observations made by the AO.
The two-member Bench of Sanjay Garg, (Judicial Member) and Manish Borad, (Accountant Member) allowed the appeal holding that, even if the directors of the subscriber companies had not come personally in response to the summons issued by the AO, adverse inference could not be taken against the assessee solely on this ground as it was not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO.
The Bench placed reliance upon the decision of Bombay High Court in Panji vs. Paradise Inland Shipping Pvt. Ltd., wherein it was held that once the assessee had produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
