Author: Khushi J Prajapati
The Chhattisgarh High Court ruled that the burden of proof rests on the assessee to demonstrate the identity of the creditors, their capacity to advance money, and the genuineness of the transaction under Section 68 of the Income Tax Act, 1961.
The court remarked that about the share application money obtained from M/s Eagle Commotrade Pvt. Ltd. as well as M/s Krishnakali Distributors Pvt. Ltd., the appellant, namely Sumit Global Pvt. Ltd., could not demonstrate its trustworthiness since they were found to be nonexistent entities. The initial duty rests upon the assessee to show that there is credible proof regarding the genuineness of such a transaction, the establishment of identity for the lender, and the ability to offer an investment.
The High Court supported the decision made by the Income Tax Appellate Tribunal (ITAT) of adding Rs. 1,87,00,000/- into the income of the appellant because it was stated that there was no sufficient evidence confirming this requirement from above. It was pointed out in court that submitting their documents alone does not imply anything about authenticity regarding debts or other financial transfers done with those same parties involved at all times throughout such history including documentation related thereto known before the trial commenced as well.
So since convincing evidence was not available with Sumit Global Pvt Limited hence appeal was rejected although tax liability stands imposed on such companies falling under its category In sum, this ruling reaffirms the position that any person being asked under Section 68 must offer unambiguous and convincing proof; otherwise, his income might be considered taxable income.
Facts
The case of M/s. Sumit Global Pvt. Ltd. v. The Income Tax Officer-1 Raigarh involved an appellant, Sumit Global Pvt. Ltd., who received share application money amounting to Rs. 1,87,00,000/- from two entities namely M/s Eagle Commotrade Pvt. Ltd. and M/s Krishnakali Distributors Pvt Ltd. The Income Tax Act allowed for the addition of this amount under section 68 since later it was discovered that these entities had ceased to exist. The addition made was upheld by both the Income Tax Appellate Tribunal (ITAT) as well as Chhattisgarh High Court observing that it was incumbent upon the taxpayer himself to establish the identity, capacity, and genuineness of such transactions.
Case Details
Case Name: M/s. Sumit Global Pvt. Ltd. v. The Income Tax Officer-1 Raigarh
Court: High Court of Chhattisgarh, Bilaspur
Case Number: TAXC No. 120 of 2024
Judges: Shri Justice Goutam Bhaduri & Smt. Justice Rajani Dubey
Date of Judgment: 21/06/2024
Appellant: M/s. Sumit Global Pvt. Ltd., represented by Shri Siddharth Dubey, Advocate
Respondent: The Income Tax Officer-1 Raigarh, represented by Ms. Naushina Afrin Ali and Shri Ajay Kumrani, Advocates