The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has set aside additions of ₹13,50,000 and ₹6,750 made under Sections 68 and 69C of the Income Tax Act, 1961, respectively. The Tribunal held that the assessee had discharged its burden by furnishing complete investor details, including PANs, bank statements, and ITRs, and the revenue failed to rebut the genuineness of transactions despite summons being responded to by subscriber companies.
Background & Facts
The Genesis of the Dispute
The assessee, Namrata Merchants Pvt. Ltd., filed its return of income for AY 2011-12 declaring nil income. The case was reopened under Section 147 of the Income Tax Act, 1961, by issuance of notice under Section 148 on 30.03.2018. The assessee complied with the notice and filed a revised return on 14.05.2018.
Key Facts
- The assessee issued 2,700 equity shares of face value ₹10 each at a premium of ₹490 during the year, aggregating to ₹13,50,000.
- The assessee furnished the following documents to the Assessing Officer (AO):
- PANs, names, and addresses of the share subscribers.
- Share application forms and Board resolutions.
- Bank statements confirming source of funds.
- Income Tax Returns (ITRs) and audited financial statements of the subscribers.
- Assessment orders in one subscriber's case.
- The AO issued summons under Section 131 to the subscribers, which were responded to by the subscriber companies despite no personal appearance.
- The AO made additions under Section 68 (unexplained cash credit) and Section 69C (estimated commission at 0.5% on share capital/premium), treating the subscriber companies as bogus and shell entities.
Procedural History
- 26.09.2011: Original return of income filed by the assessee.
- 30.03.2018: Notice under Section 148 issued for reopening the assessment.
- 14.05.2018: Revised return of income filed by the assessee.
- 26.02.2018: Assessment order framed under Section 148, adding ₹13,50,000 under Section 68 and ₹6,750 under Section 69C.
- 27.02.2026: Order passed by the National Faceless Appeal Centre (NFAC), confirming the additions.
- 06.07.2026: Appeal heard by the ITAT, Kolkata Bench.
- 16.07.2026: Order pronounced by the ITAT, setting aside the additions.
Relief Sought
The assessee sought deletion of the additions of ₹13,50,000 under Section 68 and ₹6,750 under Section 69C, arguing that the burden of proof had been discharged by furnishing complete investor details and that the revenue had failed to rebut the genuineness of the transactions.
The Legal Issue
The central question was whether the assessee had discharged its burden under Section 68 of the Income Tax Act, 1961, by furnishing investor details, and whether the revenue had successfully rebutted the genuineness of the transactions to justify the addition.
Arguments Presented
For the Appellant (Assessee)
The assessee contended that it had furnished all necessary documents to prove the identity, creditworthiness, and genuineness of the transactions, including PANs, bank statements, ITRs, and audited financials of the subscribers. The summons issued under Section 131 were responded to by the subscriber companies, confirming the investment. The assessee argued that the addition was unjustified as the revenue had not discharged its burden of proving the transactions as bogus.
For the Respondent (Revenue)
The revenue argued that the subscriber companies were non-existent at the given addresses and that the assessee had failed to establish the genuineness of the transactions. The revenue relied on the fact that no personal appearance of the subscribers was made before the AO, despite summons being issued.
The Court's Analysis
The ITAT examined the evidence on record and noted that the assessee had furnished complete details of the share subscribers, including their PANs, names, addresses, Board resolutions, bank statements, ITRs, and audited financials. The Tribunal observed that the summons issued under Section 131 were responded to by the subscriber companies, confirming the investment. The ITAT held that the addresses on which the inspector went for verification were incorrect, and the replies to the summons satisfied all conditions.
The Tribunal emphasized that the burden of proof under Section 68 shifts to the revenue once the assessee discharges its initial burden by furnishing the necessary details. The ITAT noted that the revenue had failed to rebut the genuineness of the transactions despite the summons being responded to by the subscriber companies. The Tribunal held that the addition could not be sustained on the ground that there was no personal appearance of the directors of the subscribers.
"Under these circumstances, I am of the considered view that the assessee has discharged its onus by filing all the evidences before the ld. AO and the ld. CIT (A) and now burden shift to the revenue which is not discharged."
The Verdict
The ITAT allowed the assessee's appeal. The Tribunal set aside the order of the National Faceless Appeal Centre dated 27.02.2026 and directed the AO to delete the addition of ₹13,50,000 under Section 68 and ₹6,750 under Section 69C. The Tribunal held that the assessee had discharged its burden, and the revenue had failed to rebut the genuineness of the transactions.
What This Means For Similar Cases
Burden of Proof Under Section 68
- The assessee must furnish complete investor details, including PANs, bank statements, ITRs, and audited financials, to discharge its initial burden.
- The burden shifts to the revenue to prove that the transactions are bogus or that the investors are non-existent.
- Summons responses from subscriber companies, even without personal appearance, can satisfy the genuineness requirement.
Address Verification and Inspector Reports
- Incorrect addresses provided to inspectors do not automatically invalidate the transactions.
- The revenue must rely on substantive evidence rather than procedural lapses to justify additions under Section 68.
Commission Under Section 69C
- Additions under Section 69C for estimated commission are consequential to the main issue and must be deleted if the primary addition is set aside.
