Tribunal overturns additions under Section 68, deems transactions genuine. AO directed to grant relief.

The Tribunal allowed the assessee's appeals for both assessment years, overturning the additions made under Section 68 for share application money and the disallowance of commission payments. The Tribunal found the transactions genuine based on evidence provided, including confirmations, affidavits, and bank statements. It noted that the companies were registered with valid PANs and had the shares reflected in their balance sheets. The AO and CIT(A) were deemed unjustified in their decisions, and the Tribunal directed the AO to grant consequential relief to the assessee.

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Issues Involved:
1. Jurisdiction of AO.
2. Addition under Section 68 for share application money.
3. Disallowance of commission payment.

Issue-wise Detailed Analysis:

1. Jurisdiction of AO:
The jurisdiction of the Assessing Officer (AO) was challenged by the assessee in both appeals but was not pressed during the proceedings. Consequently, this ground was dismissed as not pressed for both assessment years.

2. Addition under Section 68 for Share Application Money:
For the assessment year 2005-06, the AO made an addition under Section 68 of Rs. 62.50 lakhs received as share application money from three companies: M/s Flex Mercantile India Ltd., M/s Micro Niryat Ltd., and M/s Antriksh Commerce (P) Ltd. Similarly, for the assessment year 2007-08, an addition of Rs. 50 lakhs was made for share application money received from M/s Talent Infoway Ltd. and M/s Buniyad Chemical Ltd.

The AO's basis for the addition was the non-genuineness of the transactions, supported by the fact that the companies were not traceable at the given addresses, and blank share transfer deeds and other documents were found during the search, indicating accommodation entries rather than genuine transactions. The Director of IT (Inv.), Mumbai, confirmed that the companies did not exist at the given addresses.

The CIT(A) upheld the AO's decision, emphasizing that the blank share transfer deeds and other documents found during the search indicated non-genuine transactions. The CIT(A) also noted that the companies were not traceable, and the affidavits and confirmations provided by the assessee were not sufficient to prove the genuineness of the transactions.

However, the Tribunal found that the payments were received through account payee cheques, and the companies were registered with the Registrar of Companies (RoC) and had valid PANs. The Tribunal referred to the Supreme Court's decision in CIT vs. Lovely Exports (P) Ltd., which held that if share application money is received from alleged bogus shareholders, the Department can reopen their assessments but cannot treat it as undisclosed income of the assessee company.

The Tribunal concluded that the AO and CIT(A) were not justified in making and confirming the additions under Section 68, as the assessee had provided sufficient evidence, including confirmations, affidavits, bank statements, and share certificates. The Tribunal also noted that the companies were showing the shares in their balance sheets, indicating genuine transactions.

3. Disallowance of Commission Payment:
For the assessment year 2005-06, the AO disallowed a commission payment of Rs. 9,375 related to the share application money. For the assessment year 2007-08, a disallowance of Rs. 7,500 was made for the commission paid on the share application money.

The CIT(A) upheld the disallowance of the commission payments, aligning with the findings on the non-genuineness of the share application money transactions.

The Tribunal, however, found that the disallowance of commission payments was not justified, given that the share application money transactions were found to be genuine. The Tribunal emphasized that the payments were made through account payee cheques, and the companies were registered and assessed to tax.

Conclusion:
The Tribunal allowed the appeals of the assessee for both assessment years, deleting the additions made under Section 68 and the disallowance of commission payments. The Tribunal directed the AO to allow consequential relief to the assessee.

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