This case review examines the appeal filed by the Income Tax Officer against Amu Leasing Pvt. Ltd. regarding share capital contributions alleged to be unverifiable under Section 68 of the Income-tax Act, 1961.
The dispute originated from an assessment where the ITO challenged the increase in share capital by Rs. 1,80,00,000, questioning the authenticity and source of the funds. The primary issue was the inability to conclusively prove the identity and financial capacity of the contributors during the initial proceedings.
The case progressed through scrutiny under the Computer Assisted Scrutiny Selection (CASS) system, where discrepancies in documentation raised suspicions about the genuineness of the transactions. Despite submissions by Amu Leasing Pvt. Ltd., the ITO added the entire amount as unexplained cash credit under Section 68 of the Act.
The Commissioner of Income Tax (Appeals) later received additional evidence, prompting a remand report from the ITO. The tribunal scrutinized this report along with submissions from both parties. Notably, the tribunal acknowledged that directors of the contributing companies and related parties had substantiated their contributions with adequate documentation during the remand proceedings.
The tribunal’s decision to dismiss the Revenue’s appeal highlighted the importance of comprehensive documentation and due diligence in substantiating financial transactions within corporate settings. This case serves as a significant precedent on the burden of proof in matters of unexplained cash credits and the rigorous standards required to establish the genuineness of financial contributions.
ITA 1064/DEL/2020: Challenge on the Credibility of Share Capital Contributions
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