By TIOL News Service

KOLKATA, DECEMBER 04, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether transactions made through banking channels, is sufficient to establish satisfaction as to creditworthiness of the parties or genuineness of the transactions in question. NO IS THE ANSWER.

Facts of the case:

The assessee company filed its return declaring total income of Rs.21,436/-. During the course of assessment, the AO found that the assessee company had raised share capital including share premium amounting to Rs.15,76,50,000/- during the relevant F.Y and treated the same as assessee’s own unaccounted income introduced in its business in the disguise of share application money. Accordingly, he made an addition u/s 68. On appeal, the CIT(A) upheld the addition.

Tribunal held that,

++ it is seen that in the case of Sriram Tie Up Pvt. Ltd., the Tribunal has held that: "....the assessee had come up with some proof of identity of some of the entries in question. But, from this inference, or form the fact that the transactions were through banking channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT(A), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the FAA, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the fact of the allegations of the Revenue that the account statements reveal uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by assessee in response to the notice u/s 148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a 'further inquiry’ in exercise of the power u/s 250(4)...." The Kolkata Bench of the ITAT has passed similar order in many cases on the same issue of additions made u/s 68 of the share capital. Keeping in view the totality of the facts & circumstances of the case and also the orders of the Co-ordinate Bench in similar matters, this appeal is restored to the file of AO for fresh adjudication in accordance with law.

(See 2018-TIOL-2311-ITAT-KOL)