TaxTMI 
TaxTMI 
2026 (2) TMI 321
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....ereinafter referred to as "the Act"), is directed against the order passed by the Income Tax Appellate Tribunal, "B" Bench, Kolkata, dated 29th November, 2023, in ITA No. 543/Kol/2023 for the Assessment Year 2012-13. By the said order, the learned Tribunal allowed the appeal filed by the assessee and deleted the addition of Rs. 6,22,00,000/- made by the Assessing Officer under Section 68 of the Act on account of unexplained share capital and share premium. The case brings into sharp focus the perennial conflict between the Revenue's reliance on the "Test of Human Probability" and the Assessee's reliance on "Cast Iron Documentary Evidence." 2. The Revenue, being aggrieved by the deletion, has proposed the following substantial questions o....
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....king Financial Company (NBFC) duly registered with the Reserve Bank of India. For the relevant Assessment Year, its return was selected for scrutiny specifically to examine the receipt of a large share premium. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had raised share capital and premium from fifteen corporate entities. 4. It is seen from the record that the assessee had placed before the AO a voluminous "Paper Book" containing all requisite documents, including PAN details, Income Tax Return acknowledgments, and audited financial statements of all fifteen subscriber companies. Notwithstanding the availability of this documentary evidence, the AO issued summons under Section 131 of the Act to ....
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.... to the notices issued by the AO under Section 133(6) of the Act. 9. We have carefully considered the rival submissions and perused the materials on record. It is a settled legal position that to discharge the initial onus under Section 68, the assessee must establish the identity of the creditor, their creditworthiness, and the genuineness of the transaction. In the instant case, the learned Tribunal conducted a meticulous factual inquiry and recorded a specific finding that the assessee provided a "Cast Iron" documentary foundation. The audited balance sheets of the subscribers demonstrated a substantial net worth, which was far in excess of the amounts invested. 10. Furthermore, we find that the AO's reliance on the non-appearance ....
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....s, and Bank Statements) through legitimate banking channels carries greater evidentiary weight than the subjective suspicion of an Assessing Officer. The "Test of Human Probability" cannot be invoked as a tool to disregard a verified and audited paper trail. We also conclude that the ratio in NRA Iron & Steel is applicable only to "phantom" or "non-existent" entities found to be non-traceable upon field inquiry. It cannot be extended to active, traceable taxpayers simply because their investment decisions appear commercially improbable to the Revenue. Equating "traceable investors" with "phantom entities" is a leap in logic that cannot be countenanced. Furthermore, the valuation of shares is a matter of commercial wisdom. Unless the Revenue....