The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) rules that Section 68 of Income Tax ACt, 1961 cannot be invoked for non-appearance before the Assessing Officer ( AO ) when genuineness is established through documents.
The revenue appellant appealed against the Commissioner of Income Tax (Appeals) [CIT(A)]’s order dated 05.07.2023 for AY 2012-13, challenging the deletion of ₹3,55,65,468 added as unexplained cash credit under Section 68 of the Act.In this case,Amodini Vyapar Pvt . Ltd,respondent-assessee, filed its return showing an income of ₹18,400, and the case was taken up for scrutiny under Computer Aided Scrutiny Selection ( CASS ).
The AO found that the company received ₹3,54,76,000 as share capital and premium during the year, despite low profits in earlier years. The assessee provided details of investors and stated that shares were issued at a premium of ₹490 with a ₹10 face value. However, since no shareholders responded to summons under Section 131, the AO treated the amount as unexplained and added it to the income in the order dated 17.03.2015.
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The respondent appealed to the CIT(A), and it found that the AO had added ₹3,54,76,000 under Section 68 without properly considering the evidence submitted, such as Permanent Account Number(PAN) details, confirmation letters, financial statements, and bank statements of shareholders. The CIT(A) noted that non-compliance with summons under Section 131 alone was insufficient to justify the addition, especially when key details were provided.
Regarding the disallowance of ₹88,648 under Section 14A, the CIT(A) observed that no exempt income was earned during the year, and the AO had made the disallowance without proper reasoning. Both additions were deleted, and the CIT(A) allowed the appeal.
The two member bench comprising Pradip Kumar Choubey ( Judicial Member ) and Rajesh Kumar ( Accountant Member ) considered the arguments and reviewed the evidence provided. It found that the assessee had submitted all required documents to the AO and CIT(A) about the share capital raised, including PAN cards, a list of directors and shareholders, ITRs, bank statements, and proof of the investors’ funds.
The assessee had issued shares at a premium of ₹490, raising ₹3,54,76,000. While the directors did not appear as requested, all necessary evidence was provided. The AO did not verify these documents or find any issues. Instead, the AO focused on the directors’ non-appearance and the high premium, overlooking that there was no restriction on issuing shares at a high premium in AY 2012-13
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The tribunal pointed out that rules requiring scrutiny of share premium only applied from AY 2013-14 onwards. It referred to legal precedents which stated that additions under Section 68 could not be made if proper evidence was provided, even if the summons were not complied with.
The appellate tribunal found the company had proven the identity and creditworthiness of investors, and the genuineness of the transactions. Since the AO did not dispute the evidence, it upheld the CIT(A)’s decision to delete the addition and dismissed the revenue’s appeal.
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