Mere filing of documents as proof of Identity and Bank Statement shall not prove the Creditworthiness of the applicant company: SC
After Judgment from Delhi high Court in case of Bogus Share Capital/ Share Application, the following Judgment from Honorable Supreme Court, shall lead the Assessing officer to go into deep in all cases where there is Introduction of Share Capital or else.
The Honorable SC had categorically stated that mere filing of documents as proof of Identity and Bank Statement shall not prove the Creditworthiness of the applicant company but AO has to enquire and verify the credit worthiness and Assessee is duty bound to prove creditworthiness of the Shareholder as being attached to him,
Supreme Court reverses order of lower Authorities holding that where there was failure of assessee to establish credit worthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital / premium received by assessee company. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged
 103 taxmann.com 48 (SC), Principal Commissioner of Income-tax v. NRA Iron & Steel (P.) Ltd. UDAY UMESH LALIT AND INDU MALHOTRA, JJ. CIVIL APPEAL NO. 29855 OF 2018 ,MARCH 5, 2019
Issue before SC-
3.4 The issue before the Assessing Officer (hereinafter referred to as “AO”) was whether the amount of Rs. 17,60,00,000/-allegedly raised by the Respondent through share capital/premium were genuine transactions or not.
1.3 The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company – Assessee had filed all the primary evidence, the onus on the Assessee stood discharged.
The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company -Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility.
The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee.
14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee.
15. On the facts of the present case, clearly the Assessee Company – Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee’s income.
16 .The Appeal filed by the Appellant – Revenue is allowed. In the aforesaid facts and circumstances, and the law laid down above, the judgment of the High Court, the ITAT, and the CIT are hereby set-aside. The Order passed by the AO is restored.