Addition u/s 68 is justified where the assessee discharges its initial onus?

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Addition u/s 68 is justified where the assessee discharges its initial onus?

INCOME TAX OFFICER vs. XO INFOTECH LTD.

DELHI TRIBUNAL

ISSUE

Whether addition u/s 68 is justified where the assessee discharges its initial onus?

Income—Bogus sale and purchase—Deletion of Addition—Assessee company filed return of its income—Notice u/s 143(2) of Act was issued to assessee but no compliance was made—Assessee submitted annual Report and other details before AO—AO noticed that assessee was listed company which during previous year increased its share capital—Increase was not through public issue but by way of investment in equity share directly through fully convertible warrants—AO noted that assessee was merely showing bogus sale and purchase, hence, addition was made u/s 68—CIT(A) Set aside AO’s order—Held, it was clear that assessee produced sufficient documentary evidences before A.O. at assessment as well as appellate proceedings to prove ingredients of sec 68—A.O however, did not make any further inquiry on documents filed by assessee—Thus, A.O. failed to conduct scrutiny of documents at assessment stage and merely suspected transaction between investor companies and assessee on irrelevant reasons which were disproved in findings of Ld. CIT(A)—Therefore, assessee discharged its initial onus to prove identity of investor companies, their creditworthiness and genuineness of transaction in matter—No material was produced to rebut finding of fact recorded by CIT(A)—Hence, no justification was found to interfere with order of Ld. CIT(A) in deleting addition—Revenue’s appeal dismissed.

Held

Considering the facts of the case in the light of material on record, it is clear that assessee produced sufficient documentary evidences before A.O. at the assessment as well as appellate proceedings to prove the ingredients of Section 68 of the I.T. Act. The A.O. however, did not make any further inquiry on the documents filed by the assessee. Thus, the A.O. failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between investor companies and the assessee on irrelevant reasons which were disproved in the findings of the Ld. CIT(A). Therefore, the totality of the facts and circumstances of the case, clearly prove that the assessee discharged its initial onus to prove the identity of the investor companies, their creditworthiness and genuineness of the transaction in the matter. No material is produced before us to rebut the finding of fact recorded by the Ld. CIT(A). We, therefore, did not find any justification to interfere with the order of the Ld. CIT(A) in deleting the addition. There is no merit in the Departmental Appeal and the same is dismissed.

Section 68 of Income Tax Act 1961 According to section 68 of Income Tax Act 1961, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of the same or the explanation offered by him is not satisfactory in the opinion of A.O., the sum so credited may be charged to income tax as the income of the assessee of that previous year.

Conclusion

Addition u/s 68 is not justified where assessee discharges its initial onus to prove the identity of the investor companies, their creditworthiness and genuineness of the transaction.

In favour of

Assessee


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