2008 (5) TMI 678 - AT - Income Tax

Tribunal Partially Allows Appeal, Rs. 44 Lacs Addition Deleted Under IT Act Section 68

Smart Capital Services Ltd. Versus Joint Commissioner of Income Tax

The Tribunal allowed the appeal in part, deleting the addition of Rs. 44 lacs under section 68 of the IT Act. The issues regarding the levy of interest ... - Issues Involved:1. Addition of Rs. 44 lacs u/s 68 of the IT Act.2. Levy of interest u/s 234B.3. Jurisdiction of the proceedings.Issue 1: Addition of Rs. 44 lacs u/s 68 of the IT ActThe original assessment was completed on 31st March 2000, under s. 143(3) of the IT Act, declaring an income of Rs. 5,39,265 against a loss of Rs. 25,13,258. The CIT found the assessment erroneous and prejudicial to the interests of the Revenue, particularly concerning Rs. 50 lacs received as share application money from various individuals, which was not properly examined by the AO. The CIT directed the AO to reassess the nature and source of this amount. The AO added Rs. 50 lacs to the income, citing the assessee's failure to establish the identity, creditworthiness, and genuineness of the transactions u/s 68. The assessee's appeal to the CIT(A) failed, leading to the present appeal.The Tribunal considered the identity and creditworthiness of the share applicants and the genuineness of the transactions. The assessee provided additional evidence, including the Stockinvest scheme details and relied on the judgment in CIT vs. Divine Leasing & Finance Ltd. The Tribunal found that the identity and creditworthiness of the share applicants were established through various documents, including the prospectus, share application register, and the appearance of Vivek Parti before the AO. The Tribunal also noted that the funds were received under the SEBI-authorized Stockinvest scheme, which guaranteed the genuineness of the transactions. Consequently, the Tribunal deleted the addition of Rs. 44 lacs out of the Rs. 50 lacs made u/s 68, noting that the addition of Rs. 6 lacs had become final in earlier proceedings.Issue 2: Levy of interest u/s 234BGround No. 3, which challenged the levy of interest u/s 234B, was not argued. However, the assessee would be eligible for consequential relief, if any.Issue 3: Jurisdiction of the proceedingsGround No. 4, which challenged the jurisdiction of the proceedings, was not argued and was dismissed.ConclusionThe appeal was partly allowed, with the deletion of the addition of Rs. 44 lacs u/s 68 of the IT Act. The issues concerning the levy of interest u/s 234B and the jurisdiction of the proceedings were not argued and thus dismissed. Ground No. 5 was general and required no decision.