Tribunal upholds deletion of Rs. 5.20 crores addition under Income Tax Act Section 68.

The Tribunal dismissed the Revenue's appeal and upheld the deletion of the addition of Rs. 5.20 crores under Section 68 of the Income Tax Act. The Tribunal found that the assessee had met the burden of proof by submitting necessary documents and responses to notices, and the creditworthiness of the companies issuing the shares could not be solely assessed based on cash deposits and nominal income levels. The lack of evidence showing the invested amount did not belong to the companies led to the decision to dismiss the appeal.

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Issues:
Appeal against deletion of addition under Section 68 of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the order of the Ld. CIT(A)-XVIII, New Delhi, where the addition of Rs. 5,20,00,000/- was deleted by applying the provisions of Section 68 of the I.T. Act, 1961 for allotment of shares. The Revenue raised two grounds challenging the deletion of the addition. The brief facts of the case reveal that the assessee, a Private Limited Company, had allotted shares to 17 share holders who were Private Limited Companies amounting to Rs. 5.20 crores. The AO raised concerns regarding the creditworthiness of the share applicants based on bank account deposits and nominal income shown in the companies' annual reports. The AO assessed the income at Rs. 14,58,068/- to Rs. 5,34,58,068/-, leading to the appeal.

The arguments presented by the Ld. DR emphasized the cash deposits in the shareholders' bank accounts before issuing cheques and their low income levels. On the other hand, the Ld. AR contended that the assessee had provided necessary documents, responses to notices u/s 133(6), and additional evidence during the appeal stage to establish creditworthiness. The AR argued that the AO's findings were adequately addressed through the evidence presented.

The Tribunal carefully examined the contentions of both parties and the orders of the revenue authorities. It was noted that the assessee had fulfilled the initial burden under Section 68 by submitting required documents and the shareholders had responded positively to the notices u/s 133(6). The Tribunal found no fault with the assessee for not producing the creditors as the burden of proof was discharged. The Tribunal also considered the Chart presented by the assessee showing the availability of funds with the companies and their assessment under section 143(3) of the I.T. Act. The Tribunal concluded that the creditworthiness of the companies could not be solely judged based on cash deposits before issuing cheques and nominal income levels. The absence of evidence indicating that the invested amount did not belong to the companies led to the dismissal of the Revenue's appeal.

In the final judgment, the Tribunal dismissed the appeal of the Revenue, upholding the decision to delete the addition of Rs. 5.20 crores with respect to the 17 companies to whom the shares were issued. The order was pronounced in the Open Court on 30/12/2016.

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