2023 (10) TMI 1183 - AT - Income Tax

Share premium addition deleted when applicants respond to notices and provide documentary evidence under section 68

The ITAT Kolkata allowed the assessee's appeal and deleted the addition made under section 68 regarding unexplained share premium. The tribunal held that ... Addition u/s 68 - unexplained nature and source of the share premium and non discharge the onus of proving the genuineness of the transactions and identity and creditworthiness of the share applicants - assessee argued AO was satisfied with the share capital received from the alleged four share applicants and only added the share premium even though total amount of share capital and share premium were received from same share subscribers and same banking channel - HELD THAT:- Where the share applicants have duly responded to the notices u/s 133(6) of the Act and all documentary evidences have been filed by the assessee to discharge its primary onus explaining the nature and source of the alleged share premium and the ld. AO having failed to find any discrepancy in these details, the decisions of this Tribunal in the case of M/s. Mahalakshmi Vinimay (P) Ltd. [2023 (5) TMI 1264 - ITAT KOLKATA] holding in favour of the assessee observing that AO could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. Once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Thus we delete the addition made u/s 68 of the Act and allow all the effective grounds raised by the assessee. Issues Involved:1. Arbitrary, illegal, and bad in law order by the CIT(A).2. Addition of Rs. 72,00,000 under section 68 of the IT Act, 1961.3. Assessee's right to add, alter, or amend grounds of appeal.Summary:Issue 1: Arbitrary, Illegal, and Bad in Law Order by the CIT(A)The assessee contested that the order of the CIT(A) was arbitrary, illegal, and bad in law. The Tribunal noted that the CIT(A) had upheld the addition made by the Assessing Officer (AO) without appropriately considering the evidence provided by the assessee.Issue 2: Addition of Rs. 72,00,000 under Section 68 of the IT Act, 1961The primary grievance was the addition of Rs. 72,00,000 on account of share premium under section 68 of the Act. The AO had accepted the share capital of Rs. 2,00,000 but doubted the share premium of Rs. 72,00,000 due to insufficient compliance by the assessee in proving the identity, creditworthiness, and genuineness of the share applicants. The CIT(A) upheld this addition, referencing the Supreme Court judgment in Principal Commissioner of Income Tax (Central-1) vs. NRA Iron & Steel Pvt. Ltd.The Tribunal, however, found that the AO's acceptance of share capital while rejecting the share premium from the same applicants was contradictory. It was observed that the assessee had provided sufficient evidence, including responses to notices under section 133(6), financial statements, and bank statements, to prove the genuineness of the transactions and the creditworthiness of the share applicants. The Tribunal cited previous decisions, including M/s. Advent Commodities Pvt. Ltd. vs. ITO and ITO vs. M/s. Gateway Enclave Pvt. Ltd., which supported the assessee's position that once the identity and creditworthiness of share applicants are established, the share premium should not be doubted.The Tribunal also noted that the AO did not point out any discrepancies in the evidence provided by the assessee and failed to conduct an independent inquiry. The Tribunal concluded that the addition under section 68 was not justified and deleted the addition of Rs. 72,00,000.Issue 3: Assessee's Right to Add, Alter, or Amend Grounds of AppealThe Tribunal did not specifically address this issue as the primary contention was resolved in favor of the assessee.Conclusion:The Tribunal allowed the appeal of the assessee, reversing the CIT(A)'s order and deleting the addition of Rs. 72,00,000 under section 68 of the IT Act, 1961. The decision emphasized the need for the AO to conduct a thorough inquiry and not contradict themselves by accepting share capital while rejecting the share premium from the same applicants. The Tribunal's order was pronounced on 11th July, 2023.