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2024 Supreme(Online)(ITAT) 1295
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Ms. Madhumita Roy, J, Shri Naveen Chandra, ACJ
Heritage Hospitals Ltd – Appellant
Versus
The Dy CIT – Respondent
ITA No. 4090/DEL/2018 | A.Y. 2014-15
For the Appellants/Petitioners: Shri Anand Kumar Pandey, Adv
For the Respondents: Shri Sandeep Kumar Mishra, Sr. DR
The taxpayer must establish the identity, genuineness, and creditworthiness of investors under Section 68, and relying solely on documents is insufficient if evidence suggests otherwise.
Headnote:(A) Income Tax Act, 1961 - Section 68 - Addition of Rs. 1,23,90,000/- as income from undisclosed sources was upheld due to the failure of the assessee to establish the identity, genuineness of transactions, and creditworthiness of the subscribers. Merely producing primary documents was not sufficient, as the revenue established that investor companies lacked financial capacity and were found non-existent or dubious. The Assessing Officer conducted detailed inquiries, including scrutiny of financial records and corroborated evidence, that supported the conclusion that the transactions were bogus. (Paras 2, 40)
(B) Legal principles - The initial burden lies on the assessee to prove the identity and genuineness of share application money under Section 68. The taxpayer must establish the financial capacity of investors and cannot rely solely on documentary evidence like PAN or ROC filings when evidence indicates otherwise. The revenue is not required to trace the source of funds as the requirement under Section 68 has not been met by the assessee. (Paras 12, 26)
Facts of the case:
The case involves an appeal against the addition of share capital and share premium due to alleged bogus transactions of substantial amounts from various subscriber companies with negligible income and dubious existence. The Assessing Officer found that necessary documentary proof of the investors’ financial ability was inadequately substantiated. (Paras 4-6)
Findings of Court:
The Assessing Officer and CIT(A) both concluded that the assessee failed to prove the three limbs of Section 68. The transactions were characterized as pre-arranged and lacking any substantive credibility. (Paras 38-40)
Issues: Whether the assessee proved the identity, genuineness, and creditworthiness of the subscribers contributing to share capital. (Paras 10, 19)
Ratio Decidendi: The court reiterated that primary evidence must establish the genuine nature and financial capacity of the investor companies before any presumption of legitimacy can arise. Mere compliance with formal requirements is insufficient where the financial reality contradicts the assertions made by the taxpayer. (Paras 26, 28)
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. facts of the case regarding share capital. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. arguments of the assessee attempting to prove transaction authenticity. (Para 7 , 8 , 9 , 11 , 12) |
| 3. legal standards for proving transaction genuineness under section 68. (Para 14 , 15) |
| 4. court's analysis of evidence and transaction genuineness. (Para 18 , 19 , 21 , 22 , 23) |
| 5. conclusion on the appeal disallowance. (Para 41) |
ORDER
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the CIT(A) - 4, New Delhi dated 27.02.2018 pertaining to A.Y. 2014-15.
2. The sum and substance of the grievance of the assessee is that the ld. CIT(A) has erred in sustaining the addition of Rs. 1,23,90,000/- made by the Assessing Officer u/s 68 of the Income-tax Act, 1961 [the Act, for short] in his assessment order u/s 143(3) of the Act.
3. Briefly stated, the facts of the case are that the assessee company is engaged in the profession of healthcare activities. The assessee filed its return of income on 21.09.2014 declaring total income of Rs. 4,78,14,830/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 10.09.2015. Subsequently, another notice u/s 142(1) of the Act alongwith questionnaire was issued on 21.09.2016.
4. The Assessing Officer, in the course of assessment proceedings for the year under consideration, found that the assessee introduced share capital application money of Rs 1,23,00,000/- in the names of the following six companies hereinafter called subscriber/investor:
| Sr. no. | Name of Subscriber | No. of shares allotted | Amt of Share appl money received in FY 2013-14 (Rs) |
| 1. | M/s Kohinoor Credit Pvt Ltd | 69,750 | 27,90,000 |
| 2. | Chanakya Info Solutions Pvt Ltd | 60,000 | 24,00,000 |
| 3. | Taran Traders | 50,000 | 20,00,000 |
| 4. | M/s Progressive Udyog Ltd | 47,500 | 19,00,000 |
| 5 | M/s Utkarsh Vanijya Pvt Ltd | 32,500 | 13,00,000 |
| 6 | M/s Purvanchal Project & Consultant | 50,000 | 20,00,000 |
| Total | 1,23,00,000 | ||
5. The Assessing Officer after making enquiries and examination of materials before him concluded that the assessee failed to discharge the primary onus cast upon it prove the identity, genuineness of the transaction and credit worthiness of the subscribers even after being provided several opportunities. Accordingly, treating the share capital and share premium received by the assessee as non-genuine, made addition of Rs. 1,23,90,000/- u/s 68 of the Act.
6. Aggrieved, the assessee went in appeal before the ld. CIT(A) where the ld. CIT(A), after considering the facts and submissions, held that the Assessing Officer was justified in making addition of Rs. 1,23,90,000/- as income of the assessee from undisclosed sources.
7. The assessee is aggrieved and is before us. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. The ld AR of the assessee submitted that all necessary documents to prove the identity, genuineness of the transactions and credit worthiness of the subscribers were filed before the AO and the CIT(A). The assessee filed affidavits and cash flow statement of the subscriber/investors to justify the share application money received.
8. The ld AR argued that the source of subscriber/investor’s application money is their Reserve or unsecured loan. Before us, the ld. counsel for the assessee vehemently argued that the Assessing Officer is merely relying on the report of the Investigation Wing and the Assessing Officer has not disproved the affidavits filed by the directors of the subscriber company. The directors have appeared personally and the Assessing Officer is relying on the statement of the third party. As evidence, he stated that confirmation of accounts; Director’s affidavits and cash flow statement were filed of the four of the subscribers/investor as under:
| 1. | Taran Traders | 50,000 | 20,00,000 |
| 2. | M/s Progressive Udyog Ltd | 47,500 | 19,00,000 |
| 3. | M/s Utkarsh Vanijya Pvt Ltd | 32,500 | 13,00,000 |
| 4. | M/s Purvanchal Project & Consultant | 50,000 | 20,00,000 |
It was also submitted by the ld AR of the as
