The appeal in question involves the assessment year 2013-14. Landsky Real Estates P.Ltd, the appellant, was assessed by the ITO, Ward-15(1), New Delhi. The primary issue under dispute was the addition of cash credits amounting to Rs. 16 crores under Section 68 of the Income Tax Act, which the appellant received as share capital and share premium.
The Assessing Officer (AO) observed that the appellant company had received Rs. 16 crores as share capital and premium from various entities. The AO issued notices under Section 133(6) to the subscribing entities, requesting them to furnish details to prove the identity, creditworthiness, and genuineness of the transactions. However, the responses were either non-compliant or indicated that the entities did not have sufficient creditworthiness to justify the transactions.
The AO noted that the appellant company did not have significant business operations and its major income comprised dividends and miscellaneous receipts. The AO concluded that the transactions were sham and added Rs. 16 crores to the appellant’s income as unexplained cash credits under Section 68.
The appellant contended that it had submitted all necessary documents, including confirmation letters, bank statements, and financial statements of the subscribing entities. The appellant argued that the transactions were genuine and that the AO had not conducted adequate investigations to substantiate the additions. The appellant also cited various judicial precedents to support its case, emphasizing that the source of the source of funds should not be the basis for additions under Section 68.
The Tribunal examined the evidence and submissions presented by both parties. It noted that although the appellant had provided documentary evidence, the subscribing entities did not have adequate financial capacity to justify the substantial investments. The Tribunal observed that the funds were routed through a web of companies, indicating a complex structure aimed at disguising the true nature of the transactions.
The Tribunal referred to the judgments of higher courts, including the Supreme Court, emphasizing that the onus to prove the identity, creditworthiness, and genuineness of transactions lies on the assessee. The Tribunal found that the appellant had failed to discharge this onus effectively.
The Tribunal upheld the AO’s addition of Rs. 16 crores as unexplained cash credits under Section 68. The appeal was dismissed, and the appellant’s contentions were not accepted due to the lack of credible evidence to prove the genuineness of the transactions.
This case reaffirms the principles laid down in earlier judicial precedents regarding the burden of proof under Section 68 of the Income Tax Act. The decision highlights the necessity for assessees to provide conclusive evidence to substantiate the identity, creditworthiness, and genuineness of transactions involving substantial amounts.
ITA 509/DEL/2019: Landsky Real Estates P.Ltd vs. ITO, Ward-15(1), New Delhi
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