The case number ITA 510/DEL/2019 involves Kasper Information Technology Pvt Ltd, New Delhi (the appellant) and Income Tax Officer, Ward-14(2), New Delhi (the respondent) for the assessment year 2013-14. The appeal was filed on January 24, 2019, and the final tribunal order was pronounced on March 18, 2021. The case primarily revolves around the addition of Rs. 16 crores made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961, which pertains to unexplained cash credits.
Kasper Information Technology Pvt Ltd is a private limited company that claimed to have received a share capital and premium amounting to Rs. 16 crores during the assessment year 2013-14. The AO made an addition under section 68, arguing that the appellant failed to prove the genuineness and creditworthiness of the transactions. This addition was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].
During the assessment proceedings, the AO issued notices under sections 133(6) and 131 to verify the identity, creditworthiness, and genuineness (ICG) of the investors. However, the notices either remained un-complied or were replied to in an incomplete manner. The AO observed several discrepancies:
Based on these observations, the AO concluded that the amount credited was not genuine and was liable to be added back to the income of the appellant under section 68.
The appellant argued that:
The CIT(A) observed that while the appellant provided necessary documentation, there were significant red flags indicating the transactions were not genuine:
The CIT(A) upheld the addition made by the AO but on a reduced scale, treating 2% of the total transaction amount (Rs. 32 lakhs) as the appellant’s undisclosed income for facilitating these entries.
The Income Tax Appellate Tribunal (ITAT) analyzed the case in detail, considering the arguments and evidence presented by both sides. The tribunal’s key observations were:
Based on these observations, the ITAT upheld the addition of Rs. 16 crores under section 68, reinforcing the CIT(A)’s finding that the transactions were not genuine. The tribunal dismissed the appeal by Kasper Information Technology Pvt Ltd.
This case highlights several critical aspects of the Income Tax Act, particularly section 68:
For taxpayers and professionals, this case underscores the importance of ensuring the genuineness of financial transactions and maintaining comprehensive documentation to substantiate the same. It also serves as a reminder that the substance of transactions will be scrutinized, and mere formal compliance will not suffice.
The case of Kasper Information Technology Pvt Ltd vs. ITO reiterates the necessity for taxpayers to be diligent in proving the identity, creditworthiness, and genuineness of their financial transactions. The decision by the ITAT to uphold the addition under section 68 serves as a precedent for similar cases and reinforces the principle that substance prevails over form in tax assessments.
Kasper Information Technology Pvt Ltd vs ITO: ITAT Case Analysis
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