ITAT deletes Addition on Proof of Identity and Creditworthiness of Shareholders and Genuineness of Transactions [Read Order]

A Division Bench of the Income Tax Appellate Tribunal (ITAT), Kolkata deleted addition on proof of identity and creditworthiness of shareholders and genuineness of transactions.

The assessee, M/s Sitka Mercantile filed return of income under Section 139(1) of the Income Tax Act and the return was processed under Section 143(1) of the Income Tax Act. Thereafter the case of the assessee was reopened by issuing notice u/s 148 of the Act stating that the income of the assessee has escaped assessment.

Thereafter during the course of reassessment proceedings, the AO called for various evidences substantiating/corroborating share application money received from share applicants thereby establishing identity and creditworthiness of the investors and genuineness of the transactions.

The AO issued notice u/s 142(1) of the Act calling upon the assessee to furnish evidences in respect of share subscription money received during the year. the assessee again furnished the correct addresses of the share applicants and notices u/s 133(6) of the Act were duly served and were duly responded by the shareholders. The share applicants proved the source of investment and even source of source was proved with documentary evidences.

The AO was not convinced and satisfied with the explanation of the assessee and made the addition on the ground that the share premium charged by the applicant was bogus and the director of the assessee company has failed to produce the shareholders and justify the reasons for issuing shares at a high premium and thus made the addition of Rs. 11 crores to the income of the assessee as unexplained cash credit u/s 68 of the Act.

The Bench of Rajesh Kumar, Accountant Member and Sonjoy Sarma, Judicial Member observed that “The assessee has furnished all the details/evidences qua the share applicants furnishing the names and addresses, PAN cards, share application forms, share allotment advices, confirmations, audited financial statements and also proof of source of source by furnishing necessary documents of the third parties.”

“We are of the view that the assessee has proved identity and creditworthiness of the shareholders and also the genuineness of the transactions” the Tribunal noted.

To Read the full text of the Order CLICK HERE

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