Case Title: BALGOPAL MERCHANTS PRIVATE LIMITED VERSUS THE PRINCIPAL COMMISSIONER OF INCOME TAX -2
Case No: ITAT/232/2023 (IA NO: GA/1/2023)
Decided on: 13th May , 2024
Quorum: THE HON’BLE MR. CHIEF JUSTICE T.S. SIVAGNANAM AND THE HON’BLE MR. JUSTICE HIRANMAY BHATTACHARYYA
Facts of the case
Balgopal Merchants Private Limited was inspected for its income tax returns, which disclosed a total income of NIL. The company had been paid a substantial premium and share application money, but the assessing officer observed that there was no discernible commercial activity and doubted the validity of the transactions.
Issues
1. Whether is the validity of the revenue and where the investments from the share premium come from?
2. Whether that the companies involved didn’t appear to be conducting any business, were the transactions involving a sizable share application fee and a premium authentic?
3. Whether compliance with Section 68 of the Income Tax Act, has Balgopal Merchants Private Limited provided a satisfactory explanation for the credits in its books of accounts?
4. Whether is it possible to prove beyond a reasonable doubt the share application firms’ identity, sincerity, and creditworthiness? Does the entire transaction including the receipt of money for a share application lack substance and, as a result, not satisfy Section 68 requirements?
Legal Provisions
The Income Tax Act’s Section 68, which deals with mysterious cash credits in the books of accounts and requires the taxpayer to substantiate the validity of such credits, was at issue in this case.
Appellant’s Contentions
The appellant asserted that there was no discernible commercial activity throughout the year and neglected to provide the necessary evidence of the transactions’ veracity as mandated by Section 68.
Respondent’s Contentions
The Principal Commissioner of Income Tax -2, the respondent, said that the transaction lacked substance and that the identification, validity, and creditworthiness of the share applicant firms were not proved.
Court Analysis and Judgement
The Income Tax Appellate Tribunal’s ruling was maintained by the Calcutta High Court (ITAT). The court acknowledged that Balgopal Merchants Private Limited did not comply with Section 68’s fundamental requirements. Due to the inability to prove the transaction’s authenticity, the appellant received a negative ruling.While acknowledging that the assessee had not demonstrated the essential components Needed in accordance with Section 68, the Calcutta high Court maintained the ITAT’s ruling. The court stated that the tribunal had taken into account the documents’ effects and that it Was dissatisfied with the transaction’s authenticity.
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Judgement Analysis Written by – K.Immey Grace
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