Addition of Share Premium and Share Capital u/s 68 of Income Tax Act can't be imposed by ignoring Evidences produced by Assessee: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the addition of share premium and share capital cannot be imposed by ignoring the evidence produced by the assessee.

The assessee company is engaged in the business of investments and trading. The assessee has filed the return of income disclosing a total income of Rs. Nil and the assessment was completed under Section 143(3) of the Income Tax Act, 1961 accepting the returned income of Rs. Nil.

The Assessing Officer has received the information from the Director General of Income Tax (Investigation) [DGIT] Mumbai that the assessee is engaged in obtaining the accommodation entries and is a beneficiary. The assessee has received the share application money from M/s Empower Industries Ltd which is engaged in providing accommodation entries.

The Assessing Officer found that the share application money and share premium do not satisfy the test of genuineness, creditworthiness, and identity as per the provisions under Section 68 of the Income Tax Act and treated as unexplained credit under Section 68 of the Income Tax Act Rs.1,55,00,000/- and the Assessing Officer has estimated brokerage/commission at 5% of the value of Rs. 7,75,000/- under Section 69C of the Income Tax Act and assessed the total income of Rs.1,62,75,000/-.

The Commissioner of Income Tax (Appeal) [CIT(A)] stated that the assessee has discharged its burden by submitting the information and the Assessing Officer has failed to make enquiries deleted the additions and granted relief to the assessee.

The Departmental Representative submitted that the CIT(A) has erred in deleting the addition of share application money and share premium and also commission expenditure irrespective of the facts that the assessee has failed to establish the identity, genuineness, and creditworthiness of the transaction and share premium charged is on higher side in comparison with net worth of the assessee company and relied on the judicial decisions.

The Authorized Representative supported the order of the CIT(A) and submitted that the assessee has cooperated in submitting the information in assessment proceedings, whereas the Assessing Officer has ignored the vital information and details and unilaterally made the addition of share premium and share capital and also estimated the commission expenditure under Section 69C of the Income Tax Act.

The Two-member bench comprising of Pavan Kumar Gadale (Judicial member) and S. Rifaur Rahman (Accountant member) held that the Assessing Officer had failed to make enquiries and relied only on the statement of the key person, which was retracted subsequently. The CIT(A) has dealt on the facts, provisions of law, and Judicial decisions applied the ratio of decisions to the present case, and deleted the additions.

The bench considering the facts, circumstances, and submissions of the assessee was of the view that the CIT(A) order is reasoned and conclusive. Therefore, the order of CIT(A) was upheld and the ground of the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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