Alleged Shell Company Transactions: ITAT deletes ₹15 Lakh Addition u/s 68 [Read Order]
The Tribunal relied on the principle that the initial burden lies with the Assessing Officer to establish a nexus between the assessee and the alleged shell company before making an addition under Section 68
The bench of the Income Tax Appellate Tribunal, Kolkata, set aside the addition of ₹15,00,000 made under Section 68 of the Income Tax Act, 1961, holding that the Assessing Officer (AO) failed to discharge the initial burden of proving the alleged unexplained credit and that the reassessment proceedings were invalid.
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The Appellant, Winner Tradecom Pvt. Limited, a private limited company, filed its return of income for Assessment Year (A.Y) 2018-19 declaring ₹78,750. On the basis of information from the Investigation Wing, the AO alleged that the assessee had received ₹15,00,000 as accommodation entry from M/s Sankalp Vincom Pvt. Limited, described as a shell concern.
The case was reopened under Section 147, and a notice under Section 148 was issued on 6 April 2022. The assessee denied any such transaction, yet the AO proceeded to add ₹15,00,000 under Section 68 of the Act. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [CIT(A)], confirmed the addition.
Aggrieved by this the assessee challenged the said addition before the Tribunal.
Represented by S.K. Tulsian, the Appellant argued that the reopening under Section 147 was invalid as no evidence was provided to establish the alleged transaction. It was submitted that no document or bank detail was furnished by the AO, nor was the assessee given an opportunity to confront any material allegedly obtained from the Investigation Wing.
It was contended that it never had any dealings with M/s Sankalp Vincom Pvt. Limited and that the conditions required for invoking Section 68 were not satisfied.
Represented by Manoj Kumar Pati, the Revenue contended that the assessee had failed to prove the source of the alleged credit of ₹15,00,000. It was submitted that since the assessee could not explain the transaction, the A rightly made the addition under Section 68 of the Income Tax Act, and the CIT(A) was correct in upholding the same.
The Bench of Vice-President (KZ), Duvvuru RL Reddy, held that the AO had not discharged the initial burden of establishing the existence of the transaction between the assessee and M/s Sankalp Vincom Pvt. Limited. NO supporting material was provided to substantiate the allegation.
The Tribunal observed that the assessee had denied the transaction, and in such circumstances, the Revenue could not compel the assessee to prove a negative fact. In the absence of evidence, the addition under Section 68 of the Income Tax Act had no legal foundation.
Accordingly, the addition of ₹15,00,000 was set aside.
Thus, the appeal of the assessee was allowed.
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