· In this case, assessee was subjected to re-assessment for A.Y. 2003-04. The re-assessment was based upon a statement made by one Mahesh Garg, who is said to have alleged that some of the companies which he dealt with were bogus.
· The AO concluded the assessment holding that the assessee had not discharged the initial burden placed upon it under Section 68 of the Act and had not established the identity, genuineness of transaction or the credibilities of parties who had invested.
· The AO’s conclusions were based upon his presumption that the share applicants were bogus entities, which he arrived at because of assessee’s omission to produce the Directors of such share applicants / companies, despite being called upon to do so. The CIT(A) reversed this addition and the order of CIT(A) was confirmed by the ITAT.
· The Hon’ble Court considered the orders of the CIT(A) as well as the ITAT and observed that both the authorities primarily went by the fact that the assessee had provided sufficient indication by way of PAN numbers to highlight the identity of the share applicants, as well as produced the affidavits of Directors. Furthermore, the bank details of the share applicants too had been provided.
· Therefore, referring to the decision of the Apex Court in the case of CIT v. Lovely Exports Pvt. Ltd. 216 CTR 195, it was held that the assessee had duly established the identity of the share applicants, the genuineness of transactions and their creditworthiness. Thus, the appeal of Revenue was held to be meritless and was consequently dismissed.
For further reading, refer the attachment.
Further Reading