Addition u/s 68 of Income Tax Act shall be made when Identity, Creditworthiness, and Genuineness of transactions are not satisfactorily explained by Assessee: ITAT [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the addition under Section 68 of the Income Tax Act, 1961 shall be made when the identity, creditworthiness, and genuineness of the transactions are not satisfactorily explained by the assessee.

The assessee filed its return reporting a total income of Rs.20,130/-. The case was selected for scrutiny through Computer-Assisted Scrutiny Selection (CASS) for which statutory notices were issued and served on the assessee.

In the course of assessment proceedings, the Assessing Officer noted that the assessee has received share capital and premium thereon amounting to Rs.7,99,86,000/-. To verify the genuineness of the said transactions and to verify the identity and creditworthiness of the share subscribers, the assessee was asked to produce the directors of all the share subscribers to whom shares were allotted.

The Assessing Officer submitted that there was no compliance either from the end of the assessee or from the end of the alleged subscriber companies. Therefore, the identity and creditworthiness of the share subscribers and the genuineness of the transactions were not satisfactorily explained and thus, made the addition to the total income under Section 68 of the Income Tax Act.

Nothing has been placed on record in support of the claim of the assessee to substantiate and demonstrate the identity and creditworthiness of the share subscribers and the genuineness of the transactions in respect of share capital raised by the assessee including share premium amounting to Rs.7,99,86,000/-.

The Two-member bench comprising of Rajpal Yadav (Vice-President) and Girish Agrawal (Accountant member) held that there was nothing in the order of Commissioner of Income Tax (Appeal) [CIT(A)] from where it is discernible as to how the assessee had made investments in various parties and to whom the shares have been issued at a premium. There was no material that verified the claim of the assessee so as to uphold the finding given by the CIT(A).

Therefore, the order of the CIT(A) was set aside and upheld the addition made by the Assessing Officer. Thus, the appeal of the revenue was allowed.

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