2016 (6) TMI 965 - HC - Income Tax

Tribunal confirms addition of share capital under Income Tax Act

The Tribunal upheld the addition of share capital under Section 68 of the Income Tax Act, 1961, to the extent of &8377; 8,77,500/-, deeming the ... Addition u/s 68 - admitted liability - addition of share capital - Held that:- The Tribunal was justified in upholding the addition on account of alleged share capital to the extent of ₹ 8,77,500/- under Section 68. A sum of ₹ 6,62,000/- had earlier been admitted by the assessee during a disclosure as submitted by Mr. Khaitan. The share capital to the extent of Rs, 9,90,000/- was accepted both by the CIT(A) and the Tribunal. We are also of the opinion that the judgement of the learned Tribunal is neither perverse nor arbitrary nor unreasonable Issues:1. Addition of share capital under section 68 of the Income Tax Act, 1961 based on incomplete investigation.2. Justification of the Tribunal's decision regarding the addition of share capital.3. Assessment of the share capital amount and the explanation provided by the assessee.Issue 1: Addition of share capital under section 68 of the Income Tax Act, 1961 based on incomplete investigation.The case involved an appeal against the judgment and order passed by the Income Tax Appellate Tribunal pertaining to the assessment year 1983-84. The assessing officer added a sum of &8377; 18,67,500/- as share capital, alleging that the assessee introduced own money in the guise of share capital. The assessee failed to produce necessary documents such as books of accounts, bank accounts, and shareholder registers. The assessing officer issued notices to shareholders, but many did not respond, and some denied subscribing to the share capital. The CIT (A) and Tribunal directed the assessee to provide evidence to prove the legitimacy of the share capital. The CIT (A) concluded that only &8377; 9,90,000/- could be treated as explained share application money, leading to the confirmation of the balance amount as undisclosed income.Issue 2: Justification of the Tribunal's decision regarding the addition of share capital.The Tribunal upheld the addition of share capital to the extent of &8377; 8,77,500/- under Section 68 of the Income Tax Act, 1961. The Tribunal found that the assessee failed to fully explain the sum of &8377; 24,90,000/- received as share application money. While the CIT (A) accepted &8377; 9,90,000/- as explained share capital, the balance amount remained unexplained. The Tribunal's decision was based on the evidence presented by the assessee, and it concurred with the CIT (A)'s findings. The Tribunal's judgment was deemed neither perverse nor arbitrary, as the assessee could not provide sufficient evidence to justify the entire share capital amount.Issue 3: Assessment of the share capital amount and the explanation provided by the assessee.The assessing officer's addition of &8377; 18,67,500/- was based on the belief that the share capital introduced was the assessee's own money. The CIT (A) and Tribunal scrutinized the evidence provided by the assessee but found that only a portion of the share capital could be explained. The Tribunal, after considering all evidence, confirmed the addition of &8377; 8,77,500/- as share capital. The judgment highlighted that the assessee's failure to substantiate the entire share capital amount led to the confirmation of the addition. The appeal against the Tribunal's decision was dismissed, and the parties were directed to bear their own costs.This detailed analysis of the judgment addresses the issues raised in the case, focusing on the addition of share capital, the Tribunal's decision, and the assessment of the share capital amount based on the evidence provided by the assessee.