The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the addition in respect of share capital and the share premium by treating the same as unexplained cannot be made under Section 68 of the Income Tax Act, 1961 before the amendment to the provision in the year 2013.
The assessee filed the return of income on 30.9.2009 declaring loss of Rs.5,08,32,964/- and the same was carried forward which was processed under section 143(1) of the Act on 16.3.2011. The assessment u/s 143(3) was also completed on 23.12.2011 assessing the same loss. Upon receiving information from the DGIT(Inv) Mumbai that the assessee is beneficiaries of accommodation entries of bogus share application money from concerns operated and controlled by Praveen Kumar Jain and the AO found that assessee has received share application money from five parties. After the investigation, the Assessing Officer confirmed the addition.
The Tribunal observed that the assessee has filed all the necessary evidence to prove identification, the genuineness of the transactions and creditworthiness of the investors in the assessment proceedings as well as appellate proceedings.
“The assessee has discharged the onus cast upon it whereas the AO has not done any further verification and investigation to disapprove the evidence filed by the assessee. The AO only harped on the statement of Shri Praveen Kumar Jain which has been retracted later on. Moreover out of five investors, two namely Javda India Impex Ltd and Kush Hindustan Entertainment Ltd were already considered by the coordinate bench of the tribunal Hyderabad in the case of M/S Komal Agrotech Pvt Ltd Vs ITO wherein the Tribunal held that addition made u/s 68 is bad in law. We also find merits in the arguments of the ld AR that the share capital and share premium cannot be added u/s 68 in view of the proviso to section 68 as that is effective and applicable from 1.4.2013,” the Tribunal said.
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