By TIOL News Service:

NEW DELHI, DEC 12, 2016: THE ISSUE IS - Whether addition u/s 68 can be made where assessee has duly discharged its onus by submitting necessary evidence available to establish the bona fide of the transactions. NO IS THE VERDICT.

Facts of the case:

The assessee which engages itself in investment business with capital markets received notice u/s 153C pursuant to search initiated on J Group and Associates. The assessee filed its returns declaring income during the block period pursuant to which notices u/s 143(2) and 142(1) together with a detailed questionnaire were issued. The assessee complied with the requisite information. A survey u/s 133(6) was apparently carried out by the revenue on the date of search. Based upon these materials and the responses received from the assessee during the proceedings, the AO added the amount u/s 68 determining that the genuineness of the identity of the share applicants, genuineness of the transactions and the investors' credit worthiness had not been established. CIT(A) deleted the addition.

On appeal, the HC held that,

++ The materials clearly pointed to the share applicants' possessing substantial means to invest in the assessee's company. The AO seized certain material to say that minimal or insubstantial amounts was paid as tax by such share applicants and did not carry out a deeper analysis or rather chose to ignore it. In these circumstances, the inferences drawn by the CIT (A) are not only factual but facially accurate.

(See 2016-TIOL-2988-HC-DEL-IT)