Case Note & Summary
The present appeal arises from a judgment of the Delhi High Court in an income tax appeal concerning the assessment year 2009-10. The respondent-assessee, NRA Iron & Steel Pvt. Ltd., had filed its return of income declaring a total income of Rs. 7,01,870. Subsequently, the Assessing Officer (AO) issued a notice under Section 148 of the Income Tax Act, 1961 to reopen the assessment on the ground that the assessee had received share capital/premium aggregating to Rs. 17,60,00,000 from various companies during the financial year 2009-10, and the genuineness of these transactions was suspect. The assessee submitted that the amounts were received through banking channels and provided documents such as income tax return acknowledgments. However, the AO issued summons to the investor companies, but no representative appeared; only written submissions were received through dak. The AO conducted field enquiries which revealed that some companies were non-existent at the given addresses, and others did not provide bank statements or reasons for paying a high premium of Rs. 190 per share against a face value of Rs. 10. The AO treated the entire amount as unexplained cash credit under Section 68 and added it to the assessee's income. The Commissioner of Income Tax (Appeals) confirmed the addition. The Income Tax Appellate Tribunal (ITAT) deleted the addition, holding that the assessee had discharged its initial burden. The High Court upheld the ITAT's order. The Revenue appealed to the Supreme Court. The Supreme Court framed the issue as whether the onus under Section 68 is on the assessee to prove the identity, creditworthiness, and genuineness of the transaction. The Court held that the initial burden is on the assessee, and in this case, the assessee failed to discharge it because the investor companies did not respond to summons, did not appear, and did not provide bank statements or reasons for the high premium. The Court set aside the High Court's order and restored the AO's addition.
Headnote
A) Income Tax - Section 68 - Unexplained Cash Credits - Onus of Proof - In a case where share capital/premium is credited in the books of account of the assessee company, the onus of proof is on the assessee to establish by cogent and reliable evidence the identity of the investor companies, the creditworthiness of the investors, and the genuineness of the transaction to the satisfaction of the Assessing Officer. (Paras 2, 11-12) B) Income Tax - Section 68 - Share Capital/Premium - Burden of Proof - The initial burden is on the assessee to prove the identity, creditworthiness, and genuineness of the transaction. If the assessee fails to discharge this burden, the amount can be treated as unexplained cash credit and added to the assessee's income. (Paras 11-12) C) Income Tax - Section 68 - Reassessment - Validity - The reassessment proceedings under Section 148 were validly initiated based on reasons recorded, and the assessee's objections were rejected after due consideration. (Paras 3.1-3.2)
Issue of Consideration
Whether the onus of proof under Section 68 of the Income Tax Act, 1961, in a case where share capital/premium is credited in the books of account of the assessee company, is on the assessee to establish by cogent and reliable evidence the identity of the investor companies, the creditworthiness of the investors, and the genuineness of the transaction.
Final Decision
Appeal allowed. Judgment of Delhi High Court dated 26.02.2018 set aside. Order of Assessing Officer adding Rs. 17,60,00,000 under Section 68 of the Income Tax Act, 1961 restored.
Law Points
- Section 68 of the Income Tax Act
- 1961
- Onus of proof
- Share capital
- Share premium
- Unexplained cash credits
- Identity of investor
- Creditworthiness
- Genuineness of transaction
