ITAT Grants Relief in Rs.12.53 Crore Share Capital Addition Case

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) on 15 April held that an addition under Section 68 of the Income Tax Act, 1961 towards share capital and share premium cannot be sustained where the assessee had already furnished documentary evidence establishing the identity and genuineness of the transactions, and the issue stood covered by binding jurisdictional High Court precedents. A Bench comprising Accountant Member Rajesh Kumar and Judicial Member Pradip Kumar Choubey set aside the orders of the Assessing Officer and the Commissioner of Income Tax (Appeals), who had confirmed an addition of Rs.12.53 crore against Binapani Sales Private Limited. The Court held that “The Tribunal observed that the issue was squarely covered by the decisions of the jurisdictional Calcutta High Court and the addition made under Section 68 was unsustainable in law.”

The Assessing Officer (AO) had reopened the assessment for AY 2008-09 under Section 147 and treated the share capital and share premium received by the assessee company as unexplained cash credits under Section 68. The Revenue alleged that the investor companies were merely accommodation entry providers and that the transactions lacked genuineness. The Commissioner of Income Tax (Appeals) upheld the addition made by the AO.

Before the ITAT, Binapani Sales Private Limited contended that complete documentary evidence regarding the identity, creditworthiness and genuineness of the investors had already been furnished during the assessment proceedings. It was submitted that the transactions were routed through proper banking channels and supported by relevant financial records and statutory documents. The assessee further relied upon various judgments of the Calcutta High Court, including decisions in PCIT vs. Ambe Tex Fab and PCIT vs. Delta Dealers.

The Bench noted that the Revenue had failed to controvert the documentary evidence produced by the assessee or distinguish the binding precedents relied upon by it.

The Tribunal observed that the legal position regarding Section 68 additions in respect of share capital stood settled by the jurisdictional High Court. It held that once the assessee had discharged the initial onus by producing documentary evidence relating to the investors and banking transactions, the addition could not be sustained merely on suspicion or generalized allegations regarding accommodation entries.

Thus, the ITAT allowed the appeal of the assessee and directed the deletion of the addition of Rs 1.25 crore made under Section 68 of the Act.

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