Tribunal upholds deletion of addition under section 68; Share application money not undisclosed income

The Tribunal upheld the CIT(Appeals) decision to delete the addition u/s 68 concerning the increase in equity share capital and share premium of the assessee. Relying on Supreme Court precedents, it was held that share application money from alleged bogus shareholders does not amount to undisclosed income. The Tribunal emphasized adherence to the Supreme Court's rulings nationwide and dismissed the Revenue's appeal for assessment year 2005-06.

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Issues involved: Appeal against CIT(Appeals) order for assessment year 2005-06.

The Appellate Tribunal ITAT MUMBAI heard an appeal filed by the Revenue against the order of the CIT(Appeals)-IV, Mumbai dated 01-04-2009 for assessment year 2005-06. Despite the absence of the assessee and lack of representation, the case was disposed of ex parte after hearing the learned DR. The assessee, engaged in trading of shares and hire charges, faced an addition in equity share capital and share premium. The AO doubted the creditworthiness of shareholders leading to an addition u/s 68, which was later deleted by CIT(Appeals) citing decisions of the Hon'ble Apex Court in Devine Leasing & Finance Ltd. and Lovely Exports Ltd. The Tribunal upheld the CIT(Appeals) findings and dismissed the Revenue's appeal.

The addition in question pertained to the increase in equity share capital and share premium of the assessee during the year. The AO raised concerns about the creditworthiness of shareholders, resulting in an addition u/s 68. However, the CIT(Appeals) referred to decisions of the Hon'ble Apex Court in Devine Leasing & Finance Ltd. and Lovely Exports Ltd., where it was held that share application money from alleged bogus shareholders cannot be regarded as undisclosed income of the assessee-company. The Tribunal concurred with the CIT(Appeals) decision, emphasizing the need to follow the Supreme Court's ruling throughout India.

The CIT(Appeals) based the decision to delete the addition on the Supreme Court's stance that share application money from alleged bogus shareholders does not constitute undisclosed income of the assessee-company. The Tribunal upheld this reasoning, stating that no addition can be made in the hands of the company even from bogus shareholders unless there is an amendment in the Income Tax Act. Consequently, the Tribunal dismissed the appeal of the Revenue, affirming the CIT(Appeals) order for assessment year 2005-06.

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