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of <h1>Share capital and security premium receipts found genuine; no addition under section 68 and no 14A disallowance as no exempt income was earned</h1> Receipts of share capital and security premium were held genuine where the taxpayer demonstrated board authorization, furnished documentary evidence, and ... Additions as unexplained cash credit u/s 68 - share capital and security premium received from certain companies/ persons -Revenue authorities have alleged that the assessee has merely furnished the documentary evidences but the assessee failed to appear before the Revenue authorities for recording their statements - HELD THAT:- We find that the assessee carried out a genuine transactions of receiving share capital and share premium duly authorized by its Board of Directors and also proved the identity and creditworthiness and genuineness of the transaction carried out towards receiving share capital and share premium during the year and also has sufficiently proved that all the investing companies were having sufficient net worth to make the alleged investment, and are regularly assessed to tax and active companies carrying out business. Therefore, since the assessee has explained the nature and source of the alleged sum to our satisfaction no addition is called for u/s 68. Therefore, finding of ld. CIT(A) is set aside and ground raised by the assessee is allowed. Disallowance u/s 14A - If assessee has not earned any exempt income during the year - HELD THAT:- As relying on Cheminvest Ltd.[2009 (8) TMI 126 - ITAT DELHI-B], Era Infrastructure (India) Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT] no dividend income has been earned by the assessee during the year disallowance u/s 14A is uncalled for and accordingly, addition is deleted. Issues: (i) Whether the addition of Rs. 6,52,00,000/- made by the Assessing Officer as unexplained cash credit under Section 68 of the Income-tax Act, 1961 in respect of share capital and share premium was justified; (ii) Whether disallowance of Rs. 1,02,350/- under Section 14A of the Income-tax Act, 1961 was justified.Issue (i): Whether the addition under Section 68 of the Income-tax Act, 1961 in respect of share capital and share premium is sustainable where the assessee produced documents to establish identity, creditworthiness and genuineness of share applicants.Analysis: The Tribunal examined the documentary evidence (audited financial statements, bank statements, PAN, ROC records, share application forms, confirmations and related material) placed on record by the assessee demonstrating receipt of funds through banking channels and the net worth of investor companies. It reviewed precedents and principles that when an assessee discharges the primary onus under Section 68 by producing evidence on identity, creditworthiness and genuineness, the burden shifts to the revenue to undertake further enquiries and to point out specific defects; mere conjecture, non-appearance of some directors to summons or general allegations of rotation of funds without targeted investigation are insufficient to sustain additions.Conclusion: In favour of the Assessee.Issue (ii): Whether disallowance under Section 14A of the Income-tax Act, 1961 is called for where the assessee has not earned any exempt income during the relevant assessment year.Analysis: The Tribunal noted that both lower authorities did not controvert that the assessee did not earn any exempt (dividend) income during the year. Judicial authorities establish that Section 14A disallowance is not warranted for an assessment year where no exempt income was earned.Conclusion: In favour of the Assessee.Final Conclusion: The Tribunal allowed the substantive challenges by deleting the additions under Section 68 and the disallowance under Section 14A while rejecting or treating as infructuous procedural grounds; the appeal is therefore partly allowed on substantive grounds.Ratio Decidendi: Where an assessee furnishes credible documentary evidence establishing the identity, creditworthiness and genuineness of investors for amounts credited as share capital/premium, the initial onus under Section 68 shifts to the revenue to mount specific enquiries and disprove that evidence; absent such enquiries or specific contrary material, additions under Section 68 cannot be sustained, and where no exempt income is earned, disallowance under Section 14A is not warranted.
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