Taxpayer Has Duly Established Existence Of Subscriber Companies: Kolkata ITAT Deletes Addition Made Towards Share Premium U/s 68

The ITAT explained that when the nature and source of the amount so invested is known, it cannot be said to undisclosed income, so as to warrant addition on account of unexplained credit u/s 68.

The Bench of Sonjoy Sarma (Judicial Member) and Girish Agrawal (Accountant Member) observed that “assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions towards sum of Rs.2,05,00,000/- received during the impugned year”. (Para 10)

As per the brief facts of the case, assessee is in the business of manufacturing and trading of iron ores. During the year, assessee had raised fresh share capital including premium amounting to Rs.2,05,50,000/-. The assessee had duly filed all the relevant details along with supporting documents to prove identity, creditworthiness, and genuineness of the transaction. Notices u/s. 133(6) were issued to the share subscribing companies which were also duly complied by them by filing complete details in the investment made towards share capital of the assessee. The AO raised the issue of high premium at which the shares were issued by the assessee against which assessee submitted that it is a very old establishment with goodwill and brand value. It was also submitted that issue of shares at premium is always a commercial decision and it depends upon the outlook of the investors. The AO however concluded that amounts received by the assessee are not genuine but an arranged affair, camouflaged as share application money/share capital. He thus, concluded the assessment by making the addition towards the share capital including premium raised by the assessee during the year u/s 68 of the Act.

The Bench noted that AO without even going through and discussing the details submitted by the subscriber companies, insisted for personal appearance of the directors of the assessee to prove the identity, creditworthiness of the subscribers and the genuineness of the transactions.

The Bench observed that the AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office and also as to what further investigation was needed by him by way of recording of statement of the directors of the assessee.

The Bench reiterated that that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case.

Hence, noting that the AO has not bothered to discuss or point out any defect or deficiency in the documents of the share subscribing companies, furnished by the assessee, the ITAT answered in favour of the assessee.

Counsel for Appellant/ Assessee: Sunil Surana

Counsel for Respondent/ Revenue: P. P. Barman

Case Title: Sharda Ferro Works Pvt. Ltd. verses DCIT

Case Number: ITA No.954/Kol/2023

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