2019 (9) TMI 689 - ITAT MUMBAI

Addition on account of share capital money received u/s. 68 - as alleged assessee has failed to offer any explanation with regard to credit found in the nature of share capital - HELD THAT:- In the case of PCIT vs. Hi-Tech Residency Pvt. Ltd. [ 2018 (7) TMI 1347 - SC ORDER ] has considered identical issue and held that where an assessee company had discharged the onus of establishing identity, genuineness of transaction and creditworthiness of investors, no additions could be made u/s. 68.

We, further, noted that although the Apex Court has not expressed any opinion, because of dismissal of SLP filed by the assessee, the fact of the matter is that this issue has been considered in the case of CIT vs. Lovely Exports (P) Ltd [ 2008 (1) TMI 575 - SC ORDER ] where the issue has been thoroughly examined in the light of provisions of section 68 of the Act, and held that if the share application money is received by the assessee company from alleged bogus share holders, whose names are given to the AO, then the department is free to proceed to reopen their assessment in accordance with law, but sum received from share holders cannot be regarded as undisclosed income of the assessee.

Assessee has discharged its initial onus to prove identity, genuineness of transactions and creditworthiness of the parties by filing various documents. AO, without carrying out further inquiries in order to ascertain the claim of the assessee, jumped into conclusion on the basis of financial statements of the subscribers that none of them had enough source of income to establish creditworthiness. AO and the CIT(A) erred in making additions towards share capital received from seven subscribers u/s. 68 of the I.T. Act, 1961. Hence, we direct the AO to delete the additions made towards share capital u/s. 68

Addition towards non-existing liability u/s. 41(1) - HELD THAT:- AO erred in making addition towards creditors u/s. 41(1) of the Act, unless he brought out any material to the effect that such liability has been in fact ceased to exist during the relevant financial year. However, it is not clear whether the details with regard to payment of such liabilities /written back in subsequent years were before the AO or not. Therefore, for the limited purpose of verification of the facts with regard to payment of such liabilities and also written off such liabilities in subsequent financial year and offered to tax, we set aside the issue to the file of the AO and direct him to make necessary inquiries and allow relief in terms of our discussion hereinabove.