The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) quashed a ₹2.62 crore addition under Section 68 oF Income Tax Act,1961, stating that the assessee had provided sufficient evidence to prove the genuineness of share capital.
Megapix Vanijya Pvt. Ltd,appellant-assessee, filed its income tax return on 26.09.2012, reporting a loss of ₹4,540/-. The case was scrutinized due to a large share premium of ₹2.62 crore received during the year.
The Assessing Officer ( AO ) issued notices for details, and while the assessee’s representative explained it was engaged in share trading, the officer questioned the genuineness of the share capital. Summons were sent to the director and share-subscribers.
Though the share-subscribers provided some documents, the director did not appear. Finding the responses insufficient, the AO added ₹2.62 crore to the company’s income under Section 68 of the Act.
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Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax ( Appeals )[CIT(A)]. However, the appeal was dismissed, and the submissions made by the company were not considered.Dissatisfied by the order the assessee appealed before the tribunal.
The Tribunal, after hearing the arguments and reviewing the materials on record, found that the lower authorities’ main concern was the non-appearance of the directors of the subscriber companies in response to summons issued under section 131 of the Act. The counsel for the assessee explained that while the directors could not appear in person, they had responded to the summons by providing the necessary details and evidence. The Assessing Officer did not specify any further inquiries that were needed to justify the directors’ personal appearance.
The appellate tribunal observed that the assessee had provided sufficient explanations regarding the identity, creditworthiness, and financial standing of the shareholders. It noted that the Assessing Officer could have raised concerns only if there were discrepancies in the evidence, but no such issues were pointed out in the assessment order.
It also referenced legal precedents, including the Supreme Court’s judgment in PCIT v. NRA Iron & Steel (P) Ltd., stating that once the assessee provided documents proving the identity and genuineness of the transaction, the burden shifted to the Assessing Officer to conduct an independent inquiry.
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The two member bench comprising Sonjoy Sarma ( Judicial Member ) and Manish Borad ( Accountant Member ) noted that the CIT(A) failed to address the material facts or the evidence provided by the assessee, merely upholding the AO’s order without any analysis. It held that the CIT(A)’s order was a non-speaking order and not sustainable.
It also concluded that the addition of ₹2,62,00,000 under section 68 was unjustified, as the assessee had sufficiently demonstrated the identity, creditworthiness, and genuineness of the share capital received and directed the AO to delete the addition
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