2011 (6) TMI 748 - AT - Income Tax

Tribunal rejects Revenue's appeal, holds share application money not undisclosed income

The Tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals) to delete the addition of Rs. 35 lacs made under section 68 of the IT ... - Issues involved: The issue raised is the deletion of an addition of Rs. 35,00,000/- made u/s 68 of the IT Act by the Ld. Commissioner of Income Tax (Appeals).Details of the Judgment:Issue 1: Addition u/s 68 of the IT ActThe Assessing Officer made the addition of Rs. 35 lacs regarding share application money received u/s 68 of the IT Act based on various reasons, including the involvement of entry operators, inability to explain the source of money, and cash deposits in bank accounts of share applicants. The Assessing Officer highlighted the modus operandi of entry operators to justify the addition.Issue 2: Appeal before Ld. Commissioner of Income Tax (Appeals)Upon appeal, the Ld. Commissioner of Income Tax (Appeals) noted that the assessee company had received share application money from several companies and provided detailed documentation for verification. The Ld. Commissioner observed that the Assessing Officer did not verify these details or dispute them, and the assessee had fulfilled the necessary conditions for verification. Referring to legal precedents, the Ld. Commissioner concluded that the assessee had provided essential details and deleted the addition of Rs. 35 lacs.Issue 3: Tribunal's DecisionThe Tribunal found that the assessee had provided necessary details to establish the identity of the share applicants, including PAN numbers, income tax returns, and other relevant documents. Citing legal precedents, the Tribunal upheld the Ld. Commissioner's decision, emphasizing that if share application money is received from alleged bogus shareholders, the Department can proceed to reopen individual assessments but cannot treat it as undisclosed income of the assessee.Conclusion:Based on the discussion and legal precedents, the Tribunal found no infirmity in the Ld. Commissioner's order and dismissed the appeal filed by the Revenue.This judgment highlights the importance of providing detailed documentation to support transactions and the burden of proof on the assessing authorities to verify such details before making additions u/s 68 of the IT Act.