Genuineness of Transaction needs to prove to invoke Tax Exemption under Income Tax: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune Bench comprising Shri Inturi Rama Rao, Accountant Member and Shri Partha Sarathi Chaudhury, Judicial Member has held that the onus to prove the genuineness of the transaction to an exemption from tax liability is on the assess. Genuineness of transaction needs to prove to invoke exemption on tax and upheld the order passed by CIT(A)on 08-03-2016 which confirmed the action of the AO in taxing the amount of Rs.9,30,00,000/- received by the appellant as share capital from various shareholders.

 The assessee was represented by Shri Naresh Kumar and Revenue was represented by Shri Sardar Singh Meena

The Assessing Officer found an increase of Rs.9,30,00,000/-.in share capital of the appellant company and added it for taxability. CIT(A) on appeal had observed that the shares owned by the shareholders have been pledged by the shareholders in favour of M/s. Portal India and the same show that  M/s Portal India acquired the share of Rs.9,30,00,000/- of the assessee company and in turn, sold a software portal to the assessee company for the same sum.

It was observed that the shareholders of the assessee company did not contribute any amount which was entirely loaned to them by M/s. Portal India and the source of funds stood proved, no addition was warranted u/s.68 of the Act.

The Tribunal on the first round of appeal had held that on the aspect of the genuineness of the transaction there is no finding by the CIT(A) and had erred in deleting the addition without being satisfied with the genuineness of the transaction.  It was directed by the Tribunal to examine the three elements of section 68 of the Act, i.e.(1) Identity, (2) Credit Worthiness and (3) Genuineness of the transaction with respect to the share capital introduced in the company. The assessee failed to prove the identity nor the assessee was able to prove the creditworthiness or the genuineness of the transaction.

 In light of the various precedents, the Tribunal held that the onus to prove the source and details of the transaction is with the appellant to invoke sec 68 of Income Tax Act 1961 and dismissed the appeal.

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