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2017 (2) TMI 1302 - AT - Income TaxUnexplained credit u/s 68 - proof of identity, genuineness of the transaction and creditworthiness of the creditor of the four companies - Held that:- Whether investee companies have their own profit making apparatus and were involved in any tangible business activity or were they merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. Creditworthiness and genuineness of the transaction is therefore not proved by showing merely issue and receipt of a cheque or by furnishing a copy of statement of bank account of share subscriber, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment. In the present case, the Assessing Officer clearly harbours doubts about the legitimacy of share subscription in the assessee company and has gone about issuing notices under section 133(6), summons under section 131 and calling for the personal attendance of the directors of the investee companies. When the Assessing Officer sets about seeking explanation for the credit entries in the books of account of the assessee in terms of section 68, it is legitimately expected that the exercise would be taken to the logical end. Whilst it does appear that the time given to the assessee company for proving the identity and creditworthiness of the investee companies was too short, the whole exercise started at the fag end of assessment proceedings and further that it is probably not always possible for the assessee placed in such situation to be able to enforce the physical attendance of the Directors who are not in Jaipur, the curtains on such exercise at verification may not be drawn and adverse inferences reached only on the basis of returning undelivered of the summons under section 131. Conversely, with doubts as to the identity, creditworthiness and genuineness of transaction persisting in the minds of the Assessing officer, the initial burden on the assessee cannot be said to be have been discharged. We accordingly set aside the matter to the file of the AO to examine the matter a fresh taking into consideration the legal proposition. Appeal filed by the Revenue is allowed for statistical purposes.
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