ITAT Deletes Section 68 Additions Once Identity, Creditworthiness & Genuineness Are Proven

The Income Tax Appellate Tribunal (ITAT), Delhi, dismissed the appeals filed by the Income Tax Department, as the assessee had sufficiently submitted documents to substantiate the genuineness of the transactions.

The assessee, Gemco Energy Ltd., is engaged in the production of electricity from biomass, such as mustard husk, guar husk, cotton waste, rice husk, etc. For assessment years 2014-15 and 2015-16, the AO made several additions, as he was not satisfied with the genuineness of transactions, including the share capital and unsecured loans received by the assessee company.

The CIT(A) deleted the additions after reviewing the assessee’s documents, like the income tax returns of investors, bank statements, share valuation reports, etc. However, the Income Tax Department challenged this decision of CIT(A) by relying on the Supreme Court decision in Rupal Jain vs. CIT (2023).

The ITAT noted that the CIT(A) had called for a remand report from the AO regarding additional evidence. However, despite repeated reminders, the AO did not respond. Therefore, the CIT(A) offered relief to the assessee based on the additional evidence filed by the assessee.

The ITAT concluded that the assessee had sufficiently proved the genuineness of the transactions and had discharged the burden.

The ITAT also rejected the department’s reliance on the Supreme Court judgment in the Rupal Jain case, stating that the facts were different.

Therefore, the appeal filed by the revenue was dismissed.