Details and evidence to prove the identity & creditworthiness of share subscribers were submitted by the assessee, the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) held that the addition under section 68 of the Income Tax Act,1961 is not permissible.
A notice u/s 143(2) of the Income Tax Act, 1961 (‘Act’) was issued by the Assessing Officer ( ‘AO’). In response to the above notices, Urmila Properties Pvt. Ltd, the assessee filed requisite details and documents and financial statements of accounts.
The assessing officer noted from the accounts of the assessee that the assessee during the year issued fresh shares to different private limited companies at a high premium and the funds collected through the issue of shares were further invested in other companies.
To verify the identity and creditworthiness of the shareholders and also the genuineness of the transaction, the assessing Officer issued summons u/s 131 of the Act to the directors of the assessee company and the directors of the share subscriber companies. Since in most of the cases, the summons was returned unnerved by the postal authorities, the AO treated investment as unexplained cash credits and added u/s 68 of the Income Tax Act.
It was contended that the Assesseehad reproduced documents and explained the identity, creditworthiness and financials etc. of each of the share subscriber companies individually. It was observed that in the assessment order that the AO has not even mentioned the names of the share subscriber companies and even has not mentioned a word as to which of the share subscriber company or the corresponding transaction thereof was not genuine and on what grounds.
A Coram of Shri Sanjay Garg, Judicial Member and Shri Rajesh Kumar, Accountant Member observed that even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, an adverse inference cannot be taken against the assessee solely on this ground as it is not under the control of the assessee to compel the personal presence of the directors.
As the assessee had duly submitted details and evidence to prove the identity and creditworthiness of each of the share subscribers separately and the AO has not brought any material or evidence on the file to show that these share applicants were fictitious persons, the impugned order passed by AO was deleted by the Tribunal. The appeal of the assesseewas allowed.
M. Surana, Advocate, appeared on behalf of the appellant and Smt. Ranu Biswas appeared on behalf of the Respondent.
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