Failure to establish Ingredients prescribed u/s 68 of Income Tax Act : ITAT upholds addition [Read Order]

The Kolkata   bench Income Tax Appellate Tribunal (ITAT)  while confirming the addition made by the assessing officer held that the assessee failed to establish the ingredients prescribed uner Section 68 of the Income Tax Act, 1961. 

 The assessee Invorex Trading Pvt. Ltd filed the  appeal against the addition made by the assessing officer towards the share capital including share premium amounting to Rs.2,05,00,000/- raised during the year from five share subscriber companies

During the adjudication no one appeared for the assessee. Hence the  bench proceeded to adjudicate the appeal on merits, ex-parte qua the assessee on merits, after hearing the  revenue.

Before the bench the counsel for revenue argued that merely filing paper documents cannot be treated as a compliance to explain the nature and source of the alleged sum.

Further the revenue counsel pointed out that no regular business activity carried out by the assessee company as well as by the share subscribers and the typical nature of flow of funds in the bank statement indicates that share subscribing companies are engaged in rotation of funds for providing accommodation entries and they are jamakharchi or shell/paper companies

The tribunal  observed that  assessee has firstly failed to appear in-person before the CIT(A) as well as before us. Secondly, the assessee has miserably failed to establish the three ingredients as prescribed under Section  68 of the Income Tax Act i.e., identity, creditworthiness of the share subscribers and genuineness of the transactions.

After analyzing the submission of both parties, the bench comprising  Sanjay Garg,(Judicial Member) and Dr. Manish Borad, (Accountant Member)upheld the addition made under Section 68 of Income Tax Act on account of failed to establish  identity, creditworthiness of the share subscribers and genuineness of the transactions.

To Read the full text of the Order CLICK HERE

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