Company fails to justify Rs. 40.34 crore share premium addition under Section 68 confirmed

The ITAT Ahmedabad upheld addition u/s 68 for bogus share capital of Rs. 40.34 crores. The assessee company, incorporated in 2012 with revenue of Rs. 43,700, issued shares at Rs. 9,990 premium per share but failed to establish identity, creditworthiness, and genuineness of the transaction with the investor company. The tribunal found no justifiable basis for the huge premium valuation given negligible operations. Banking channels and party confirmations were deemed insufficient without proving creditworthiness. The appeal was dismissed.

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Issues Involved:
1. Validity of the show-cause notice.
2. Legitimacy of the addition of Rs. 40,34,00,000 under Section 68 of the Income Tax Act.
3. Confirmation of the addition by the Commissioner of Income Tax (Appeals).

Summary of Judgment:

1. Validity of the Show-Cause Notice:
The assessee argued that the show-cause notice dated 19.12.2014 was invalid as it was affixed at the registered office instead of the correspondence address. However, the Tribunal observed that the notice was served at the address mentioned in the Permanent Account Number and the last correspondence with the Assessing Officer. Thus, there was no violation of natural justice, and the additional ground was dismissed.

2. Legitimacy of the Addition of Rs. 40,34,00,000 under Section 68:
The assessee received share capital and premium from M/s. Attentive Share Trading Pvt. Ltd. The Assessing Officer added Rs. 40,34,00,000 as unexplained cash credit under Section 68, noting the lack of genuine business operations and the inability to verify the identity and creditworthiness of the share applicant. The Tribunal upheld this addition, emphasizing that the assessee failed to justify the high share premium and establish the genuineness of the transaction and the creditworthiness of the investor.

3. Confirmation of the Addition by the Commissioner of Income Tax (Appeals):
The CIT(A) confirmed the addition, observing that the assessee could not establish the identity, genuineness, and creditworthiness of the transaction. The Tribunal supported this view, citing various judicial precedents that require the assessee to prove the identity, creditworthiness, and genuineness of the creditors. The Tribunal noted that merely furnishing confirmations or conducting transactions through banking channels does not suffice to prove genuineness.

Conclusion:
The Tribunal dismissed the appeal, affirming that the assessee failed to discharge the onus of proving the genuineness of the share capital and premium received. The principles of identity, creditworthiness, and genuineness were not satisfied, justifying the addition under Section 68.

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