By TIOL News Service

CHANDIGARH, JULY 19, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether minimal insufficiency of evidence in respect of some shareholders, will not justify addition u/s 68, if almost maximum share capital receipts has been cross checked by AO through banks. YES IS THE ANSWER.

Facts of the case:

The AO during the course of assessment proceedings noted that there was increase in the share capital of assessee company during the year by a sum of Rs. 47,65,600/-. Further, the ‘Securities Premium Account' had been shown at Rs. 6,67,18,400/- against nil amount during the preceding year. He, therefore, asked the assessee to furnish details of share capital account and the security premium account. The assessee furnished the required details and stated that 476560 numbers of shares of the face value of Rs. 10 each were allotted during the year under consideration at a premium of Rs. 140/- per share. The AO considered the details and confirmations received from the shareholders and asked to assessee to produce the persons involved. The assessee produced some of the persons on random basis from whom confirmations were received, and their statements were recorded. The AO however, noted that though the confirmations were received in most of the cases, however, no reply was received in some of the cases. Accordingly, he added a sum of Rs. 37,09,950/- on account of unexplained share capital u/s 68 and also initiated penalty proceedings u/s 271(1)(c).

On appeal, the CIT(A) deleted the penalty so levied by AO by observing that no case of concealment was made out simply because addition u/s 68 had not been challenged and, therefore, penalty u/s 271(1)(c) was not leviable.

Tribunal held that,

++ the counsel for assessee has submitted that assessee had furnished all the details regarding share capital receipt which was cross checked by the AO and the assessee had been able to prove the source of deposits of about 95% of the amount. The assessee, however, could not provide confirmation only of 5% of the share allocation money received during the year. He submitted that the facts show that the assessee discharged the primary burden of proving the source of deposits / share application money. It was also explained to the AO that the assessee was public limited company with large number of shareholders and the share capital was received through banking channels. There was possibility that some of the letters sent to these persons for confirmations might not have reached to them because of numerous reasons such as shifting of their establishment, non-availability on a certain date etc. and that it was not a case of furnishing of inaccurate particulars of income or concealment of income but just a case of insufficiency of evidence in respect of some of the shareholders. Therefore, there is no reason to interfere in the order of the CIT(A) on this issue.

(See 2018-TIOL-1109-ITAT-CHD)