By TIOL News Service

MUMBAI, JULY 18, 2017: THE ISSUE BEFORE THE COURT IS - Whether additions can be made u/s 68, merely on the ground that investors / creditors were not traceable at their given addresses Or they did not appeared before AO in person. NO is the verdict.

Facts of the case:

The Revenue preferred the present appeal challenging the order, whereby the ITAT had deleted the addition of Rs.95,00,000/- made u/s. 68 of the Act, relying only on the documentary evidence produced by the Assessee Company while ignoring the key factor that these entities were not traceable at their given addresses.

On appeal, the HC held that,

++ the AO added Rs.95 lakhs as income u/s 68 of Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the AO and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee.

(See 2017-TIOL-1318-HC-MUM-IT)