The court reinforced that under Section 68 of the Income Tax Act, the burden of proof rests on the assessee to establish the identity, creditworthiness, and genuineness of share capital transactions, emphasizing that superficial documentation alone cannot suffice.

JUDGMENT :

RAMESH SINHA, CJ.

1. Heard Mr. Ajay Kumrani, learned counsel for the appellant/Revenue as well as Mr. Siddharth Dubey, learned counsel, appearing for the respondent/Assessee.

2. The present appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’) has been filed by the appellant/Assistant Commissioner of Income Tax, Central Circle-II Raipur (C.G.) being aggrieved by the order dated 30.03.2023 (Annexure- A/1) passed by the Income Tax Appellate Tribunal, Raipur (for short ‘ITAT’) vide ITA No. 11/RPR/2020, arising out of order dated 27.11.2019 passed by the Commissioner of Income Tax (Appeals)-3 Bhopal (M.P.) (Annexure- A/2), for the assessment year 2014-15, which in turn arises out of order dated 28.12.2018 passed by the Assessing Officer (Annexure- A/3) (for short, ‘the AO’).

3. This appeal was admitted for hearing vide order dated 17.04.2025 by a Co-ordinate Bench, on the following substantial question of laws :

“Whether the ITAT is justified in setting aside the order of CIT (Appeals) by deleting addition of Rs. 6,40,50,000/- made by the AO by recording a finding which is perverse to the record ?”

4. The aforesaid substantial question of law has to be answered in the following factual backdrop: -

5. The respondent/assessee being a Pvt. Ltd. Company, derives income from business and profession. In this case, search and seizure operations were carried out under Section 132 of the Act at the factory and office premises of the respondent/assessee on 08.02.2017. Consequently, notice U/S 153A of the Act was issued on 21.02.2018 for AYs 2011-12 to 2016-17. The assessee, in reply, on 30.04.2018, filed returns of income for AYs 2011-12 to 2016-17. The brief details of returns of income filed for AY 2014-15 are as under:-

6. The AO made addition vide Assessment Order dated 28.12.2018 U/s 153A read with Section 143(3) of the IT Act of Rs.6,40,50,000/- in AY 2014-15 on account of bogus share capital/premium from shell companies by recording following finding:-

The investigation in the case of Satya Group has brought to light a clear modus operandi of introducing unaccounted income into the books of account in the guise of share capital and share premium. The so-called investor companies are nothing but shell/paper entities, mostly based in Kolkata, which, though possessing PAN and filing income tax returns, neither carried on any genuine business activities nor had any independent financial worth. These entities were created and controlled by entry operators and professionals for the sole purpose of providing accommodation entries in lieu of commission. The enquiries revealed that the funds, ostensibly shown as share application money, originated from the Satya Group itself. The trail of bank statements establishes that cash deposits or cheques issued by group concerns were routed through a series of layering transactions involving multiple intermediary accounts of entry operators, and ultimately returned to the assessee group in the garb of share application money and premium.

Survey action and independent verifications further confirmed that the alleged investor companies were not traceabl