Tribunal upholds deletion of undisclosed income addition in share application money case

The Tribunal dismissed the revenue's appeal against the ld. CIT(A)'s decision for A.Y. 2006-07, regarding the addition of share application money as undisclosed income u/s 68 of the Income Tax Act. The Tribunal found the share application money investments genuine, backed by evidence of transactions through account payee cheques and refunds through the same manner. The reliance on a third party's statement was deemed insufficient, lacking specific mention of the assessee-company and any evidence of unaccounted money flow. The appeal was thus dismissed, upholding the deletion of the addition.

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Issues Involved:
Appeal against order of ld. CIT(A) for A.Y. 2006-07 regarding addition of share application money as undisclosed income u/s 68 of the Act.

Analysis:
The case involved an appeal by the revenue against the order of the ld. CIT(A) for the assessment year 2006-07. The assessee, a newly formed company, received share application money during the relevant year. The revenue authorities treated this sum as the assessee's undisclosed income under section 68 of the Income Tax Act. The main contention was whether the share application money received was genuine or a bogus entry. The revenue authorities relied on the statement of a third party, Aseem Gupta, who allegedly provided bogus accommodation entries. The assessee, on the other hand, argued that the share application money was genuine and was received for a mining project. The ld. CIT(A) deleted the entire addition, leading to the revenue's appeal.

Upon hearing both parties' submissions, the Tribunal noted that the revenue authorities had made the addition based on suspicion and the statement of a third party, Aseem Gupta. However, it was found that the share application money of Rs. 50 lakhs was invested by a listed company, M/s. Moderate Credit Corporation Ltd., which was evident from the record. The investment was made through account payee cheques and was refunded in a similar manner when the project was canceled. The Tribunal emphasized that Aseem Gupta's statement, recorded without the assessee's presence, could not be relied upon, especially when it did not specifically mention the assessee-company. There was no evidence to suggest any flow of cash or unaccounted money between the parties. As the share applicant confirmed the deposit, the Tribunal held that the share application money could not be added to the assessee's income, following established legal principles.

Similarly, regarding another sum of Rs. 25 lakhs invested by SPG Finvest Pvt. Ltd., the Tribunal upheld the deletion of the addition. Consequently, the Tribunal dismissed the revenue's appeal, affirming the decision of the ld. CIT(A). The judgment was pronounced on 9th October 2014 by the Tribunal.

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