Assessee wins Section 68 bogus share capital case after providing complete documentation and transaction proof

ITAT Kolkata held in favor of the assessee regarding unexplained cash credit u/s 68 addition for bogus share capital. Revenue's sole contention was subscriber company director's non-appearance to summons u/s 131. The assessee furnished all required details and documents proving identity, creditworthiness, and genuineness of transactions. AO failed to identify discrepancies or conduct independent inquiry after assessee discharged initial burden. CIT(A) mechanically upheld AO's order without examining evidence or providing reasons, making it a non-speaking order. Addition was deleted following Supreme Court precedent requiring proper verification.

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Issues:
The appeal involves the addition of Rs. 2,06,00,000 towards Share Capital including premium as unexplained cash credit under section 68 of the Income Tax Act, 1961.

Details of Judgment:

Issue 1: Addition of Share Capital and Premium as Unexplained Cash Credit
The assessee contested the addition of Rs. 2,06,00,000 made by the Assessing Officer, arguing that it was the opening balance of the year and not pertaining to the year under consideration. The assessee provided detailed documentation regarding the share capital and premium received, including identity and creditworthiness of the creditor, genuineness of the transaction, and source of funds. The share subscriber, M/s Primerose Traders Pvt. Ltd., had undergone assessment and paid due taxes, which the Assessing Officer failed to consider. The Tribunal noted that the AO did not conduct any independent inquiry to verify the genuineness of the transactions, shifting the burden of proof back to the AO as per legal precedents.

Issue 2: Failure to Consider Director's Response
The lower authorities contended that the director of the subscriber company did not appear in response to the summons issued. However, the assessee argued that the director had responded and provided required details, and it was not under the assessee's control to compel personal presence. Legal precedents were cited to support the contention that once documentary evidence is produced to establish the existence of subscriber companies, the burden shifts to the revenue to prove otherwise.

Conclusion:
The Tribunal found that the lower authorities failed to justify the additions made, ordering them to be deleted. It was observed that the Assessing Officer did not conduct a proper inquiry, and the CIT(A) upheld the order in a mechanical manner without discussing material facts. The appeal of the assessee was allowed, and the impugned additions were ordered to be deleted.

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