Treating Share Subscription by One Party as Unexplained Cash Credit: ITAT deletes Income Tax Addition [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Kolkata Bench consisting of Sanjay Garg, Judicial Member and Dr. Manish Borad, Accountant Member deleted addition as there was treating share subscription by one party as unexplained cash credit.

The Assessing Officer during the assessment proceedings called for the various details of the assessee, A.G. Ferro Cast P Ltd as well as share subscribers to verify the identity and creditworthiness of the share subscribers and genuineness of the transaction. Apart from that the Assessing Officer also summoned the share subscribers under Section 131 of the Income Tax Act who statements were also recorded.

The Assessing Officer accepted the share subscription by all the share subscribers except in the case of Lagan Vincom Pvt Ltd and made the impugned addition in case of the aforesaid one party only by way of short and cryptic order. The CIT(A) also confirmed the addition so made by the Assessing Officer.

The Assessing Officer is short and cryptic wherein no reasoning has been given as to why the Assessing Officer has treated the share application/share premium received from one party M/s Lagan Vincom PvtLtd. as unexplained cash credit, whereas, the share subscription from other parties were accepted.

The assessee, in this case, has furnished all the details and evidences proving the identity and creditworthiness of the share subscriber as well as financials of the share subscriber and other documents to prove the genuineness of the transaction.

The Bench observed that “The Assessing Officer without pointing out any defect or infirmity in the evidences or details furnished by the assessee or any contradiction in the statement recorded u/s 131 of theAct has made the impugned addition only in the case of one party and having accepted the share subscription/share premium in the case of other parties. As observed above, the Assessing Officer even has not given any reasoning in the impugned assessment order for making the impugned addition.”

“In view of this, the impugned addition made by the Assessing Officer and further confirmed by the CIT(A) is not sustainable in the eyes of law and the same is accordingly hereby ordered to be deleted” the Tribunal noted.

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