2024 (5) TMI 733 - AT - Income Tax

Assessee fails to prove identity and creditworthiness of share capital transaction under section 68

C.G. Iron Private Limited Versus Assistant Commissioner of Income Tax-1 (1), Aayakar Bhawan, Civil Lines, Raipur (C.G.)

The ITAT Raipur dismissed the assessee's appeal against addition under section 68 for unexplained cash credit relating to share capital/premium received. ... Addition u/s 68 - unexplained cash credit received - onus to prove - share capital/premium received by the appellant - failure of assessee to discharge its onus as mandated under the provisions of said section - HELD THAT:- AO is required to verify the identities of person applied for share capitals. To prevent misinformation during the assessment. This often involves providing government-issued identification documents. Proper documentation by assessee is also essential for genuine transactions. This includes, receipts, and any other relevant paperwork. The documentation which accurately reflect the terms and details of the transaction. Common payment methods include bank transfers, credit cards. Cash transactions should be properly recorded and reported as required by law. We find that the appellant has not discharged its onus by providing details of share capital money received and by not submitting documents for creditworthiness and genuineness. The documentary evidence of flow of money from Akash Kumar to the appellant, has not been submitted including sale deed. The action of the AO is thus confirmed and the grounds relating to addition u/s 68 are dismissed. - Decided against assessee. Issues Involved:1. Addition of Rs. 1,10,00,000/- u/s 68 on account of share capital/premium.2. Admission of additional evidence u/r 29 of ITAT Rules, 1963.3. Confirmation of addition by CIT(A) and the alleged failure to discharge the onus of proof by the assessee.Issue 1: Addition of Rs. 1,10,00,000/- u/s 68 on account of share capital/premiumThe assessee, a private limited company, filed its return declaring an income of Rs. 11,72,040/-. During scrutiny, it was noted that the assessee had received Rs. 1,10,00,000/- from Shri Ramchandra Agrawal as share capital/premium. The AO issued a notice u/s 133(6) to verify the investor's creditworthiness and the genuineness of the transaction. The investor provided certain documents but failed to submit evidence regarding the sale of land, which was claimed as the source of funds. Consequently, the AO treated the amount received as unexplained cash credit u/s 68, determining the taxable income at Rs. 1,21,72,040/-.Issue 2: Admission of additional evidence u/r 29 of ITAT Rules, 1963The assessee requested the admission of additional evidence, claiming that the explanation provided during the assessment was factually incorrect due to confusion and communication gaps. The assessee submitted a new breakdown of the source of funds and provided supporting documents. The Sr. DR opposed the admission of additional evidence, arguing that the assessee had ample opportunities to present this information earlier. The tribunal considered the rival submissions and noted that the new explanation was a significant shift from the previous submissions.Issue 3: Confirmation of addition by CIT(A) and the alleged failure to discharge the onus of proof by the assesseeThe CIT(A) confirmed the addition made by the AO, noting that the assessee failed to provide sufficient evidence to prove the creditworthiness of the investor and the genuineness of the transaction. The tribunal upheld this decision, emphasizing that the assessee had multiple opportunities to present its case but failed to do so. The tribunal also highlighted that the right to appeal u/s 253 requires a grievance arising from the order of the CIT(A), which was not evident in this case. The tribunal rejected the request to restore the matter to the CIT(A) and dismissed the appeal, finding no merit in the grounds raised by the assessee.ConclusionThe appeal was dismissed, and the addition of Rs. 1,10,00,000/- u/s 68 was upheld, as the assessee failed to discharge its onus of proving the creditworthiness of the investor and the genuineness of the transaction.