February 2019

Section 68 - Mere non production of Director of Shareholder Company cannot justify adverse inference u/s. 68 of the Act.

Jagdish T. Punjabi | Devendra Jain | Tejaswini Ghag
Chartered Accountants

28.  (2018) 66 ITR (Trib.) 226 (Delhi) Gopal Forex Pvt. Ltd. vs. ITO ITA No.: 902/Del/2018 A.Y: 2008-09 Dated: 26th June, 2018

 

Section 68 - Mere non production of Director of Shareholder Company cannot justify adverse inference u/s. 68 of the Act.

 

FACTS

 

The assessee company filed its return of income. Subsequent to the processing of return of income, information was received from the investigation wing of Income tax about a search operation carried out in the case of Jain Brothers who were involved in providing accommodation entries and bogus share capital. The name of the assessee company was found in a list as one of the beneficiaries.

 

Reassessment proceedings were initiated and additions were made by the AO only on the basis of purported documents seized from the premises of Jain Brothers. In the assessee’s case addition was sustained merely because the director of shareholder company did not present himself physically before the AO.

 

Important question raised before CIT(A) was whether adverse inference u/s. 68 could be drawn by AO once assessee placed all the relevant documents in its possession before AO to establish its burden u/s. 68, without discharging secondary burden lying on the AO to point out defect in the assessee’s submission. 

 

HELD

 

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