Appeal Dismissed: Confirmation of Rs. 79,00,000 Addition under Section 68.

The appeal was dismissed, and the addition of Rs. 79,00,000/- under section 68 of the Income Tax Act, 1961, was confirmed. The ITAT held that the assessee failed to substantiate the genuineness of the share application money received, and the Revenue's findings of shell companies and interconnected transactions were upheld.

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Issues Involved:
1. Addition of Rs. 79,00,000/- to the returned income of Rs. 2,29,830/-.
2. Addition of Rs. 79,00,000/- received as share application money under section 68 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Addition of Rs. 79,00,000/- to the Returned Income
The assessee, a closely held private limited company engaged in trading iron and steel, filed its income tax return declaring a total income of Rs. 2,29,830/-. The balance sheet showed issued share capital of Rs. 4,00,000/- and share application money of Rs. 85,00,000/- as on 31.03.2010. During assessment proceedings, the assessee was asked to furnish details of the share application money, including names, addresses, PANs, bank statements, balance sheets, and confirmations. Despite multiple opportunities, the assessee failed to provide convincing evidence to substantiate the genuineness of the transactions.

The Assessing Officer (AO) issued notices under section 133(6) of the Income Tax Act to the parties from whom the share application money was received. These notices were returned unserved, and local inquiries revealed that the companies were not found at the given addresses. The AO concluded that the companies were non-existent, and the transactions were not genuine. Consequently, an addition of Rs. 79,00,000/- was made to the returned income under section 68.

Issue 2: Addition of Rs. 79,00,000/- Received as Share Application Money under Section 68
The AO's investigation revealed that the companies from whom the share application money was received were shell companies. The assessee failed to provide current addresses or produce the principal officers of these companies, making it impossible to issue summons under section 131. The AO observed that the confirmations filed by the assessee were not signed by the managing directors, raising questions about their authenticity. The bank statements showed that the amounts were immediately credited before being transferred to the assessee, indicating a lack of genuine business activity.

The AO relied on various judgments, including CIT v. Durga Prasad More, to support the addition under section 68, emphasizing that the apparent must be considered real until proven otherwise. The ld. CIT (A) confirmed the AO's order, relying on judgments such as Empire Buildtech Pvt. Ltd. and Nova Promoters and Finlease Pvt. Ltd.

During the hearing before the ITAT, the assessee submitted various documents, including minutes of the extraordinary general meeting, ITRs of the share applicant companies, confirmations, ROC records, P&L statements, and balance sheets. The assessee argued that all necessary evidence was provided, but the authorities rejected them without due consideration. The Revenue, represented by the ld. DR, supported the lower authorities' orders, citing multiple judgments where similar additions under section 68 were upheld.

The ITAT found that the assessee failed to provide correct addresses of the applicant companies, and the documentation submitted could not be taken as sacrosanct against the concrete evidence collected by the Revenue. The interconnected nature of the companies and the rotation of funds among them to provide share application money were clearly established. The turnover and profits of the share applicant companies did not support the investments made. Thus, the ITAT confirmed the addition under section 68, concluding that the assessee failed to discharge the primary onus to prove the identity, creditworthiness, and genuineness of the transactions.

Conclusion
The appeal of the assessee was dismissed, and the addition of Rs. 79,00,000/- under section 68 of the Income Tax Act, 1961, was confirmed. The ITAT held that the assessee failed to substantiate the genuineness of the share application money received, and the Revenue's findings of shell companies and interconnected transactions were upheld.

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