Mere providing identity of the investors without proving the creditworthiness and genuineness would result into addition U/S 68: Calcutta HC
The Principal Commissioner Of Income Tax, (Central) -2, Kolkata Versus M/S. BST Infratech Limited
Case No.: ITAT/67/2024
Facts:
- The assessing officer (A.O.) while completing the assessment, noted that the assessee issued shares to five companies. He also noted that the assessee company entered into a share transaction with the investor to introduce the unaccounted income in the form of a share application or allocation.
- The AO alleged that the assessee did not have any regular business transactions or regular acquaintances with the investors. The investors had no reason to invest such a huge amount in the business of the assessee, and the entire transaction was done to circumvent the provisions of the Act.
- It was observed that there is no business in the investor companies other than investment in shares of companies at a very high premium. Further there is no logic or reason provided by any of these companies, as to, on what basis they arrived at the premium on the shares. Also these companies used to receive funds from some companies and then immediately transfer the funds to buy shares of other companies.
- The entire share application/allotment money was added back under Section 68 of the Income Tax Act as undisclosed cash credit, since the onus of establishing the identity, creditworthiness, and genuineness of the share transaction was not discharged by the assessee.
Hon Calcutta HC held as below:
- Merely proving the identity of the investors does not discharge the onus on the assessee if the capacity or credit worthiness has not been established.
- The assessee has not established the capacity of the investors to advance money for the purchase of the shares at a high premium. The credit worthiness of those investors’ companies is questionable, and the explanation offered by the assessee, at any stretch of imagination, cannot be construed to be a satisfactory explanation of the nature of the source.
- Thus the appeal by the department is hereby allowed.
The copy of the order is as under:
bst-infratech-limited-535809
