Where the assessee company has established identity genuineness, AO cannot make addition to the income of the assessee

The Income Tax Appellate Tribunal ruled that if an assessee company can establish the identity and genuineness of its transactions, the Assessing Officer (AO) cannot arbitrarily add to the company's declared income. This decision came after the AO sought further details regarding share application money received by the company, which the assessee provided. However, the Tribunal's stance implies that sufficient proof of the subscribers' legitimacy should prevent further additions.

IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH ‘B ’, CHANDIGARH

BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
AND SHRI R.L. NEGI, JUDICIAL MEMBER

ITA No.917/Chd/2016
Assessment Year : 2012-13

Namdhari Industrial Traders
Pvt. Ltd.,
515/5, Industrial Area-B,
Ludhiana.
PAN NO: AACCN2429B
Appellant

Vs.

The A. C.I.T.,
Circle V
Ludjhiana.
Respondent

Assessee by : Shri S.K. Mukhi, Adv.
Revenue by : Shri Ashok Khanna, Addl.CIT

Date of Hearing : 18.03.2021
Date of Pronouncement: 14.06.2021
(Virtual Court)

Order

Per R.L. Negi , Judicial Member:

The captioned appeal has been preferred by the assessee against the order dated 17.06.2016 passed by the Learned Commissioner of Income Tax (Appeals)-2 [for short the CIT(A)], Ludhiana u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the assessment year 2012-13, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the assessment order passed under section 143(3) of the Act.

2. Brief facts of the case emanating from the record and pleadings of the parties are that the assessee company engaged in the business of manufacturing of pre-structured engineering goods, filed its return of income for the assessment year under consideration declaring total income of Rs. 31,50,165/- Since the case was selected for scrutiny, AO issued notices u/s 143(2) and 1442(1) of the Act. In response thereof, the authorized representative of the assessee appeared before the AO from time to time and submitted the details along with the written submissions. Since it was noticed that the assessee company had received a substantial amount towards application money during the previous year, the AO asked the assessee to furnish complete details of subscribers/introducers including their Bank account statements, ITRs, share certificates and contract notes. In compliance thereof, the assessee submitted the details of the companies from whom the assessee company had received application money during the previous year. Since the AO was not satisfied with the details and explanation furnished by the assessee in respect of three companies namely, M/s. Simplex Trading Ltd., Zinnia Sales Private Limited and Daisy Suppliers Private Ltd., from whom the assessee company had received Rs. 15,00,000/- each as share application money, AO made further enquiries and issues notice u/s 133(6) to M/s Simplex Trading and Agencies and sent letter u/s 131(1)(d) of the Act to the Kolkata Office to obtain information about the said companies to ascertain identity, genuineness and creditworthiness of the said companies.

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