The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT), held that the assessee has discharged the onus cast under Section 68 of the Income Tax Act, 1961 by Furnishing Identity and Creditworthiness of Parties and directed the Assessing Officer (AO) to delete the income tax addition.
The assessee company Yizumi Precision Machinery (India) Private Limited is subsidiary of M/s Guandong Yuzumi Precision Machinery Ltd Co of China, in which 10% shares also held by a person of Indian resident namely Ramesh Vardhan.
The AO invoked the provisions of section 68 of the Income Tax Act for the credit of share application money received from Ramesh Vardhan for Rs. 1,23,39,500.
The AO further found that the assessee was required to furnish ITR and computation of income for last 3 years, but the assessee only furnishes ITR for 2 years whereas no detail was furnished regarding genuineness of transaction.
The AO accordingly held that the assessee failed to discharge the onus cast under Section 68 of the Income Tax Act and made addition of Rs. 1,23,39,500/- under Section 68 of the Income Tax Act.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], directed the AO to recompute the addition made under Section 68 of the Income Tax Act on the basis of their findings, hence the AO framed final assessment order and made addition of Rs. 68,83,170.
The assessee filed an appeal before the ITAT, the Authorised Representative (AR) on behalf of assessee contended that the assessee has discharged the onus cast under Section 68 of the Income Tax Act by furnishing the identity and creditworthiness of the parties.
The Departmental Representative (DR) DR supported the order of the lower authorities.
The Bench comprising of Waseem Ahmed, Accountant Member and Siddhartha Nautiyal, Judicial Member observed that the provision of Section 68 of the Income Tax Act fastens the liability on the assessee to make proper and reasonable explanation regarding the nature and sources of sum credited in the books to the satisfaction AO.
It was noted that the assessee company has duly explained the sources of fund in the hand of Ramesh Vardhan, the revenue authority also accepted the partial amount but not accepted source of the other amount only based on surmises and conjecture.
Thus, the Tribunal held that the assessee has discharged the onus cast under Section 68 of the Income Tax Act with respect to receipt of share application money from Ramesh Vardhan. Therefore, we hereby direct the AO to delete the addition made by him.
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