The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that Under Section 68 of the Income Tax Act, 1961, the assessee is required to establish (a) identity (b) Genuineness of the transaction (c) Capacity of the lender /depositor. The initial burden is on the assessee. Hence it was incorrect on the part of the CIT(A) to say that the assessee has never produced the investors because the assessee was never asked to produce the investors.
The assessee filed its return of income on 28.09.2012 declaring Nil income. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
During the course of the scrutiny assessment proceedings the assessee was asked to explain why addition of Rs. 3 crores should not be made on account of accommodation entry taken from Himanshu Verma who has admitted in the statement that he was an entry operator.
In its reply the assessee stated that it has received share application money from 10 parties. Assessee submitted copies of ITR of the share applicant companies along with copies of certificates acknowledging receipt of the share certificates. Assessee also submitted copies of affidavit of these companies.
Discarding the evidences furnished by the assessee and without making any enquiry in respect of the documents submitted by the assessee the AO proceeded by relying upon the statement of Himanshu Verma and made the addition of Rs. 3 crores.
Assessee carried the matter before the CIT(A) but without any success. Aggrieved, the assessee appealed before the tribunal.
The tribunal held that Under section 68 of the Income Tax Act the assessee is required to establish (a) identity (b) Genuineness of the transaction (c) Capacity of the lender /depositor The initial burden is on the assessee.
The tribunal found that to discharge the initial burden the assessee has submitted copies of ITR, bank statements, confirmations and affidavits acknowledging receipt of share certificates from the 10 investors companies. The tribunal found that the AO has failed to probe / conduct scrutiny of the documents so furnished and could not point out any fault in the documentary evidences so furnished.
The two member bench consisting of Anubham Sharma (Judicial member) and N.K. Billaiya (Accountant member) held that it is incorrect on the part of the CIT(A) to say that the assessee has never produced the investors because the assessee was never asked to produce the investors. Considering the facts in totality the bench was of the considered view that the assessee has successfully discharged the onus cast upon it by the provisions of section 68 of the Income Tax Act and the AO has grossly failed in discharging the burden which shifted upon him. Thus the addition was deleted and the appeal was allowed.
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