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2023 (10) TMI 326 - AT - Income TaxAddition u/s 68 - Assessee invested cash towards purchase of share capital /premium of the closely held company directors of which were their relatives - CIT(A) deleted the said addition on the ground that the assessee had filed confirmation from investor companies to show that the entire amount had been paid through normal banking channels and hence discharged initial onus under section 68 for establishing creditability and identity of share holders - HELD THAT:- We are inclined to agree that the legislative intent has always been that in the case of closely held companies like that of the assessee before us heavier obligation is cast upon it to prove the receipt of share application money/premium etc. to the satisfaction of the AO. It may be stated that law has to be applied to the facts of the given case. In our humble opinion, the legal propositions and case laws in support of them canvassed by AR before us are inapplicable to the facts of the assessee’s case available on the records. On Revenue’s petition before the Hon’ble Supreme Court in their decision in Principal CIT vs. NRA Iron & Steel (P) Ltd.[2019 (3) TMI 323 - SUPREME COURT] their Lordships held that the assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors and creditworthiness of the investors who should have financial capacity to make the investment in question to the satisfaction of the AO, so as to discharge the primary onus. AO is duty bound to investigate into the creditworthiness of the creditor/subscriber, verify the identity of the subscribers and ascertain whether the transaction is genuine or those are bogus entries of name-lenders. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack creditworthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by section 68. It may be reiterated that in the case before us, despite the availability of banking facilities to the two investors, they invested cash towards purchase of share capital /premium of the closely held company directors of which were their relatives. On the facts and in the circumstances of the case and following the decision in NRA Iron & Steel (P) Ltd. (supra) of the Hon’ble Supreme Court we uphold the impugned order of the Ld. CIT(A) and reject ground of the assessee.
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