Onus To Prove Identity, Creditworthiness And Genuineness Of Transaction Lies On Assessee: Pune ITAT

The Pune Bench of the Income Tax Appellate Tribunal (ITAT), consisting of Partha Artha Sarathi Chaudhury (Judicial Member) and Inturi Rama Rao (Accountant Member), has ruled that the onus to prove identity, creditworthiness, and genuineness of a transaction lies with the assessee. The assessing officer found that during the year under consideration, the share capital of the company was increased, showing an increase of Rs. 9,30,00,000/-. On being asked to explain, it was contended that the increase in share capital was contributed by ten shareholders in amounts ranging from Rs. 60,00,000 to Rs.1,25,00,000/-. Various enquiries have been conducted by the department, which have been detailed in the assessment order. All the ten shareholders who subscribed to the share capital of Rs.9,30,00,000 have received amounts from the concern M/s. Portal India. It was explained that the shares held by shareholders have been pledged to M/s. Portal India against the loans raised. In the course of assessment proceedings, the assessee furnished affidavits of the shareholders supporting the share capital and copies of bank accounts of the so-called shareholders to the assessee company. In the first round, the CIT (A) had observed that the shares owned by the shareholders had been pledged by the shareholders in favour of M/s. Portal India. It was M/s. Portal India that had acquired shares of the assessee company, and in turn it had sold a software portal to the assessee company. In the first round, the Tribunal directed the CIT(A) to re-verify the genuineness of the transaction of Rs.9,30,00,000/- which was credited in the books of account.The Tribunal has held that on the aspect of genuineness of transaction, there is no finding by the CIT (A). The CIT(A) erred in deleting the addition without first ascertaining the legitimacy of the transaction. Then, in the second round, the CIT (A) was directed by the Tribunal to examine the three elements of section 68 of the Act, i.e., identity, creditworthiness, and genuineness of the transaction in respect to the share capital introduced in the company. The CIT (A), in the second round, had issued notices to the assessee to file written submissions through speed post, which were returned as 'unclaimed'. Thereafter, the AO was directed to serve the notice. The AO, when he sent the notice through the Ward Inspector, could not find the premises at the given address. The CIT (A) had given a categorical finding that the assessee had not been able to prove the identity, credit worthiness of the shareholder nor the genuineness of the transaction. It was observed that in order to verify the transaction, the AO had issued summons to the ten shareholders. Only one shareholder appeared, who also denied the transaction. The court held that it is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Income Tax Act. In the absence of such proof, the ITO is entitled to treat it as taxable income. Case Title: VEL Software Limited Versus DCIT Citation: ITA No. 1173/PUN/2016 Dated: 18.05.2022 Counsel For Appellant: Naresh Kumar Counsel For Respondent: Sardar Singh Meena Click Here To read/Download Order

Onus To Prove Identity, Creditworthiness And Genuineness Of Transaction Lies On Assessee: Pune ITAT

Mariya Paliwala

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