2023 (1) TMI 487 - HC - Income Tax

Addition u/s 68 - unexplained credits in the books of account - unexplained credits in the books of account concerned infusion of share capital money and money by way of share premium in the respondent/assessee company - triple test of creditworthiness identity and genuineness of the investment made proved or not? - ITAT deleted the addition - HELD THAT - In this case there was one investor i.e. Mr Taran Pal Singh Kandhari who had invested Rs.4, 87, 99, 855/-.This investment was made by way of purchase of equity stake in the respondent/assessee company. The said investor as per the findings of fact returned by the Tribunal had purchased 2, 63, 783 equity shares of a face value of Rs.10/- each at a premium of Rs.175/- per share. The source of funds was the investor s salary who is also a Director in the respondent / assessee company amounting to Rs 24 lakhs while the balance amount was secured by him via unsecured loans amounting to Rs 4, 78, 00, 000/-. The above extract from the Tribunal s order, lists out the eight companies from which unsecured loans were received. Clearly the respondent/assessee had furnished the documents to establish that it was a genuine transaction where the companies which provided unsecured loans to the investor i.e. source of source were identified insofar as the creditworthiness is concerned. Insofar as the valuation of shares was concerned the respondent/assessee had also produced the valuation report of the Chartered Accountant which indicated that as per the audited accounts of the respondent/assessee its shares were worth Rs.185 per share inclusive of premium. Not only were creditworthiness identity and genuineness established but also the valuation stood established. Pertinently nothing contrary to be valuation report produced by the respondent/assessee is available on record. No substantial question of law arises.

Summary

Issues:
Delay in re-filing the appeal seeking condonation of delay of 44 days.
Validity of addition under Section 68 of the Income Tax Act, 1961 concerning unexplained credits in the books of account.

Delay in re-filing the appeal:
An application was filed on behalf of the appellant seeking condonation of a 44-day delay in re-filing the appeal. The respondent did not oppose the request, and the delay was condoned. The application was disposed of accordingly.

Validity of addition under Section 68:
The appeal was directed against an order concerning Assessment Year 2015-16, focusing on whether the Assessing Officer was justified in making an addition under Section 68 of the Income Tax Act. The issue revolved around unexplained credits in the books of account related to share capital money infusion and share premium in the respondent company.
Both the First Appellate Authority and the Tribunal had concurred on the triple test criteria of creditworthiness, identity, and genuineness of the investment made, all of which were deemed satisfactory in this case.
The Tribunal's detailed findings highlighted the evidence presented by the assessee to substantiate the identity and creditworthiness of the investor, including various documents like bank statements, PAN card copies, and income tax returns. The source of funds for the investment was traced back to unsecured loans from multiple parties.
The Tribunal also noted that the valuation of shares was supported by a Chartered Accountant's report, confirming the worth of the shares inclusive of premium.
Based on the established facts and evidence, including the source of funds and valuation report, the Tribunal concluded that no substantial question of law arose for consideration, leading to the dismissal of the appeal.