Facts of the Case

The assessee, MKC Traders Private Limited, filed its return of income for Assessment Year 2016-17 on 17.10.2016 declaring total income of ₹34,24,839. The Assessing Officer completed assessment under Section 143(3) on 17.12.2018 and assessed total income at ₹70,26,830 by making an addition of ₹36,01,990 under Section 68 on account of share application money received during the year. The Assessing Officer held that the assessee failed to establish the creditworthiness of the share applicants and the genuineness of the transactions.

The assessee preferred an appeal before the CIT(A), who dismissed the appeal and confirmed the addition after detailed discussion, relying upon various judicial precedents including decisions of the Supreme Court and High Courts dealing with accommodation entries, paper companies and the test of human probabilities. Aggrieved, the assessee filed a second appeal before the Tribunal.

Issues Involved

Whether the addition of ₹36,01,990 under Section 68 on account of share application money was justified, whether the assessee had discharged the onus of proving identity, creditworthiness and genuineness of the share applicants, whether the appeal could be entertained in the absence of representation and unresolved procedural defects, and whether the order of the CIT(A) required interference.

Petitioner’s Arguments

None appeared on behalf of the assessee before the Tribunal despite the appeal being fixed for hearing on numerous dates over several years. The assessee also failed to remove defects pointed out by the Registry, including incorrect payment of appeal fee under the wrong head.

Respondent’s Arguments

The Revenue, represented by the Departmental Representative, relied upon the orders of the Assessing Officer and the CIT(A). It was argued that detailed enquiries were conducted, investor companies were found to be lacking creditworthiness, and the transactions were not genuine. The Revenue further submitted that repeated non-appearance and defective filing warranted dismissal of the appeal.

Court Order / Findings

The ITAT Lucknow noted that the appeal was listed for hearing on multiple occasions over several years and that on none of the dates effective representation was made by the assessee. The Tribunal observed that no material was brought on record to controvert the detailed findings of the CIT(A), who had relied upon extensive judicial precedents including PCIT vs. NRA Iron & Steel Pvt. Ltd., NDR Promoters Pvt. Ltd., and Nova Promoters & Finlease Pvt. Ltd.

The Tribunal held that the assessee failed to establish the creditworthiness of the share applicants and the genuineness of the share application money, and therefore the addition under Section 68 was justified on merits. Additionally, the Tribunal noted that defects pointed out by the Registry, including incorrect payment of appeal fee, remained unresolved. In view of non-prosecution, defective filing, and absence of any infirmity in the order of the CIT(A), the Tribunal upheld the appellate order.

Important Clarification

The Tribunal clarified that mere filing of confirmations, PAN and bank statements is not sufficient to discharge the onus under Section 68 when surrounding circumstances and enquiries reveal lack of creditworthiness and genuineness. Repeated non-appearance and failure to comply with procedural requirements also disentitle an assessee from relief.

Final Outcome

The appeal filed by the assessee was dismissed. The order of the CIT(A) confirming the addition of ₹36,01,990 under Section 68 on account of share application money was upheld, and the appeal was also liable to be dismissed due to non-prosecution and unresolved procedural defects.

Link to Download Order

https://www.mytaxexpert.co.in/uploads/1769060256_MKCTRADERSPRIVATELIMITEDKANPURVS.DEPUTYCOMMISSIONEROFINCOMETAX6KANPUR.pdf

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