The case of Thar Properties Pvt. Ltd. versus ITO Ward-25(2), Delhi revolves around additions made under section 68 of the Income Tax Act, which were attributed to share capital received from entities linked to an accommodation entry provider. This analysis covers the tribunal’s order and its implications for the appellant and broader tax compliance.
Thar Properties Pvt. Ltd., faced allegations of receiving share capital through non-genuine transactions facilitated by Praveen Kumar Jain, known for managing companies involved in providing accommodation entries. The additions were made after the assessee failed to substantiate the genuineness of the transactions and the creditworthiness of the contributors during the reassessment proceedings for the assessment year 2008-09.
The assessment was reopened based on information indicating that the funds received were not genuine. Despite several opportunities, Thar Properties failed to produce adequate evidence or the directors of the companies from which funds were received. This led to the Income Tax Officer (ITO) making an addition of INR 15 lakhs as income from undisclosed sources.
The Income Tax Appellate Tribunal, after reviewing the case, noted the assessee’s failure to provide necessary evidence at multiple stages. However, recognizing the need for a thorough examination, the Tribunal remanded the case back to the Assessing Officer with directions to allow the assessee one final opportunity to substantiate their claims concerning the share capital received.
This case highlights the rigorous standards applied by tax authorities in scrutinizing the genuineness of share capital transactions, especially those involving known accommodation entry providers. It underscores the necessity for taxpayers to maintain robust documentation and evidence of the genuineness of their financial transactions. The decision to remand the case also reflects the Tribunal’s approach to ensure fairness by providing another chance for the assessee to comply with procedural requirements.
Detailed Analysis of ITA No. 1214/DEL/2019: Thar Properties Pvt. Ltd. vs. ITO
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