The onus lies with the assessee to prove the genuineness of share capital and creditworthiness of subscribers under Section 68 of the Income Tax Act.

JUDGMENT

(Judgment of the Court was delivered by T.S. Sivagnanam, CJ.)

1. This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) challenging the order dated April 10, 2024 passed by the Income Tax Appellate Tribunal “A” bench, Kolkata (tribunal) in ITA No. 1276/Kol/2023 for the assessment year 2012-2013. The revenue has raised the following substantial questions of law for consideration:-

1) Whether the Learned Tribunal has committed substantial error in law in deleting the addition of Rs. 1,10,00,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 on account of share capital/premium as unexplained cash credit despite the respondent assesse failing to establish the genuineness of the transactions as well as identity and creditworthiness of the share subscribers?

2) Whether the Learned Tribunal has committed substantial error in law in deleting the addition made under Section 68 of the Income Tax Act, 1961 by ignoring the judicial precedents that the onus is on the assessee to explain and establish the source of funds which in the instant case, the assessee has failed to do?

3) Whether the Learned Tribunal has committed substantial error in law in deleting the addition made under Section 68 of the Income Tax Act, 1961 without giving due weightage to the unjustified receipt of high premium from seemingly unprospectively entities and ignoring the ration laid down in the case of Principal Commissioner of Income Tax (Central ) – I Kolkata Vs. NRA Iron and Steel (P) Ltd.reported in (2019) 103 taxmann.com 48 and in the case of PCIT (Central) – 2, Kolkata Vs. BST Infratech Ltd. In ITAT No. 67 of 2024 by the Jurisdictional High Court?

4) Whether in the facts and circumstances of the case, the Learned Tribunal has committed substantial error in law in deleting the addition made by the Assessing Officer in as much as the Learned Tribunal has ignored the facts that the creditwothiness of subscribing company and source of funds for investment were not established though the onus of proving the genuineness of transactions and the identity of the share subscribing company and its creditworthiness is on the assessee company?

2. We have heard Mr. Aryak Dutt, Learned Senior Standing Counsel along with Mr. Amit Sharma, Learned Standing Counsel for the appellant department and Mr. Abhratosh Majumder, learned Senior Advocate assisted by Mr. Avra Mazumder, Ms. Alisha Das, Mr. Soumen Bhowmik, Mr. Samrat Das, and Mr. Elina Dey learned advocates appearing for the respondent assessee

3. The assessee filed their return of income on 25.09.2012 showing income of Rs. 770/- which was processed under Section 143 (1) of the Act. The case was selected for scrutiny and notice under Section 143 (2) and Section 142 (1) were issued on 26.08.2013. In compliance with those notices, the assessee made certain submissions on 19.02.2014. Again, two notices were issued under Section 142 (1) dated 06.05.2014 and 30.06.2014 to which the assessee through their authorised representative appeared before the assessing officer and explained them their stand. The assessing officer while completing the assessment under Section 143 (3) by order dated 27.03.2015 noted that the assessee was incorporated on 22.03.2012 and during the financial year 2011-2012 relevant to the assessment year 2012- 2013 it raised share capital by Rs. 16,40,000/- against issue of 1,64,000 equity shares of face value of Rs. 10/- each. The assessing officer noted that 24000 shares were allotted with premium of Rs. 1,17,60,000/- at the rate of Rs. 419 per share to 9 subscribers. The total share capital including premium that was raised was Rs. 1,34,00,000/-. The assessing officer examined the financial stability of the share