AO Must Make Independent Enquiry To Verify Veracity Of Identity, Genuineness & Credit-Worthiness Of Lenders Before Making Addition U/s 68: Kolkata ITAT

Finding that the AO without examining any of the documents, simply made the addition u/s 68 on account of failure of assessee to produce share subscribers, the Kolkata ITAT held that AO cannot take adverse inference without pointing out discrepancies or insufficiency in the evidences and without examining statement of the directors of the subscriber companies.The Bench of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that “once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound to conduct an independent enquiry to verify the same”. (Para 7)As per the brief facts of the case, the assessee company had preferred the present appeal challenging the addition of Rs.3,58,00,000/- made by the Assessing Officer treating share capital and share premium received by the assessee as unexplained income of the assessee u/s 68 of the Act.The Bench found that the assessee had furnished audited accounts and tax audit report, books of account, bank statement, PAN, and recent addresses of the directors and further PAN and address of the companies holding more than 10% of the shares and details of the directors of the said companies. The assessee also produced details of the investments made by the assessee company, added the Bench. However, the Bench noted from a perusal of the assessment order that the Assessing Officer did not bother to examine a single document furnished by the assessee, and without stating any infirmity in the said documents for forming the belief that the assessee had introduced unaccounted money in the form of share capital, simply by way of a cryptic order, made the impugned additions.The Bench also observed that the AO has not pointed out in the Assessment Order as to what were the discrepancies in the documents furnished by the assessee and what further enquiries, he wanted to make from the directors of the subscribers to insist for their personal presence.The ITAT therefore concluded that the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the Assessing Officer to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee.Counsel for Appellant/ Assessee: Miraj D. Shah Counsel for Respondent/ Revenue: Abhijit Kundu Case Title: Brightstar Vincom Pvt Ltd verses ITOCase Number: I.T.A. No.176/Kol/2023 Click here to read/ download the Order

AO Must Make Independent Enquiry To Verify Veracity Of Identity, Genuineness & Credit-Worthiness Of Lenders Before Making Addition U/s 68: Kolkata ITAT

Pankaj Bajpai

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