2023 (5) TMI 221 - AT - Income Tax

Addition u/s 68 - unexplained share capital and share premium - primary onus to prove - HELD THAT:- Equity shares have been allotted by both the assessee companies to four share subscribers of which two namely Dreamz Pbc Web Length Pvt. Ltd. and Dreamz Wealth & Consultancy Pvt. Ltd. which prima facie seems to be group companies

CIT(A) has deleted the additions considering the replies filed by the assessee. Before moving further, since Rs. 9 lakh each has been received by M/s. Dreamz Life Care Nursing & Diagnostic Centre Pvt. Ltd. from its two sister concerns we find no justification in the action of ld. AO making the said addition since they are group companies and the investments have been made at the face value of Rs. 10/- without paying any premium and transactions carried out through banking channel and it can be safely concluded that the assessee has been able to explain the said sum of Rs. 18 lakh received from its two sister concerns for the business purposes which, thus, do not call for any addition u/s 68 of the Act and to this extent, we confirm the finding of ld. CIT(A).

Addition made u/s 68 of the Act regarding share capital and share premium received from received from two concerns namely M/s. Blossom Vinimay Pvt. Ltd. and M/s. Baliraja Distributors Pvt. Ltd. - As we notice that sufficient opportunities were granted to the assessee and except filing the financial statement, he was unable to discharge its onus to explain the nature and source of the alleged sum received against issue of equity shares

Section 68 of the Act is invoked if any sum is found credited in the books of an assessee for which the assessee either does not offer any explanation about the nature and source thereof or the explanation offered by him is not found to be satisfactory in the opinion of the AO. In the given case, though the assessee has given the explanation by filing the financial statements of the share applicants but they are in itself not sufficient to satisfy ld. AO as well as ld. CIT(A) and even we are also not satisfied with the nature and source of the alleged credit.

Before us the assessee has even not filed the audited financial statement of the assessee company. Merely proving the identity of the share subscribers and to some extent creditworthiness by making the investment from accumulated reserve and surplus cannot suffice the purpose.

To cross the hurdle of provisions of Section 68 which requires that the explanation if any filed by the assessee regarding nature and source should be sufficient to satisfy ld. AO and since the Tribunal is the last fact-finding body, the assessee had sufficient opportunity to place the facts and also to explain the nature and source of alleged share capital and share premium by placing material evidence on record. However, the assessee miserably failed on this count.

We, thus, find merit in the exhaustive working of ld. AO who after having provided sufficient opportunity to the assessee came to a conclusion that the assessee companies failed to discharge the primary onus casted upon it to prove the genuineness of the transaction of equity share capital and share premium received from two share subscribers who are not having any regular business, having meagre income and failing to prove the genuineness of the said transaction.

We, partly reverse the finding of ld. CIT(A) and confirm the addition made u/s 68 in the case of the assessee. Decided against assessee partly.