2017 (3) TMI 1544 - AT - Income Tax

Tribunal affirms addition of share application money as unaccounted income under Section 68

Deepak Petrochem Ltd. Versus ACIT, Circle-1 (1), Baroda

The Tribunal upheld the addition of share application money under Section 68 of the Act in the case. Despite the assessee's contentions and evidence of ... Addition u/s 68 - share application money non genuine - Held that:- In the context of the preponderance of probabilities, the impugned share application money is not genuine and the assessee has grossly failed in discharging the initial burden cast upon it by the provisions of Section 68 of the Act. We, therefore, decline to interfere with the findings of the First Appellate Authority. The assessee has grossly failed to establish the identities of the share applicants. None of the share applicants were produced before the A.O. nor any notice could be served upon them as all the notices/summons returned unserved. Secondly, it is not the case of the ld. counsel that the share applicants for the year under consideration are the same shareholders which applied in the immediately preceding assessment year. - Decided against assessee. Issues:Addition of share application money u/s. 68 of the Act.Analysis:The appeal was against the order of the Ld. CIT(A)-I, Baroda for A.Y. 2002-03, regarding the addition of Rs. 1,46,98,600 under section 68 of the Act. The assessee, a public limited company in the business of manufacturing industrial oils, faced scrutiny for accepting share application money from 273 parties, mostly in cash. Despite requests for details, the A.O. found incomplete information and issued notices under section 133(6) which were returned unserved. The A.O. made the addition as the assessee failed to prove the credit of share application money as per Section 68.The assessee contended before the ld. CIT(A) that some amounts were received by cheques, providing photocopies of share application forms and claiming to have established the identities of the applicants. However, the A.O.'s remand report showed incomplete addresses on summons, leading the ld. CIT(A) to believe the assessee failed to prove the identities of the share applicants. The ld. CIT(A) noted cheques from the same series issued by different applicants in different villages, casting doubt on the genuineness of the transactions.The Tribunal considered the facts, noting the incomplete information provided by the assessee and the suspicious nature of the share application money. It was observed that the share application money might be unaccounted income brought into the books. The Tribunal found it improbable that agriculturists, as claimed by the assessee, would invest in an unlisted company without future benefits. Concluding that the assessee failed to discharge the burden under Section 68, the Tribunal upheld the addition.The ld. counsel for the assessee cited a previous decision by the ld. CIT(A) for A.Y. 1990-91 where similar additions were deleted. However, the Tribunal distinguished the cases, emphasizing the failure to establish identities of share applicants in the present case. As the share applicants were not produced, and notices were unserved, the Tribunal dismissed the appeal, upholding the addition of share application money.In summary, the Tribunal dismissed the appeal, confirming the addition of share application money under Section 68 of the Act, as the assessee failed to establish the genuineness of the transactions and the identities of the share applicants.