2016 (7) TMI 605 - AT - Income Tax

ITAT upholds AO's decision on non-genuine share capital under section 68

Aagam Shares and Commodities P Ltd. Versus The DCIT, Circle-1, Ahmedabad

The Appellate Tribunal ITAT Ahmedabad upheld the AO's decision to add Rs. 45,00,000 as non-genuine share capital under section 68, dismissing the ... Addition u/s.68 - non genuine share application by director - Held that:- It is not the case that the concession was about true legal position of law and not of facts. We further find that CIT(A) while upholding the addition has noted that the director of the applicant shareholder had admitted the share application made by them to be non genuine and it is not the case of the assessee that the statement was recorded at the back of the assessee and was not made available to the assessee. On the contrary, AO has noted that the after the statement of the director of the applicant was made available to the director of the assessee, the director of the assessee offered the amount of share capital as its income. Considering the totality of the facts, we are of the view that in the present case, no interference to the order of ld.CIT(A)is called for. - Decided against assessee. Issues Involved:1. Addition of Rs. 45,00,000 of Share Capital under section 68.2. Disallowance of administrative expenses of Rs. 8,625.Issue 1: Addition of Rs. 45,00,000 of Share Capital under section 68:The appellant, a company previously known as KGMS Financial services P Ltd., changed its name to Aagam Shares and commodities. The appellant declared a total income of Rs. 24,60,420 for the Assessment Year 2007-08, which was later determined at Rs. 69,69,045 by the Assessing Officer (AO). The AO observed that the appellant received fresh capital of Rs. 45 lacs against the allotment of 45000 equity shares at a premium of Rs. 90 per share. Further investigations revealed discrepancies in the share transactions, leading to the conclusion that the share capital introduced was non-genuine. The AO made an addition of Rs. 45 lacs under section 68 of the Income Tax Act. The CIT(A) upheld the AO's decision, considering the statements of involved parties and the appellant's admission that the share capital was bogus. The appellant contended that the admission was made under certain conditions, and no penalty should be levied. However, the Tribunal found the appellant's arguments unconvincing, stating that the concession was not about the legal position but the facts. As a result, the Tribunal dismissed the appeal, upholding the addition of Rs. 45 lacs as share capital.Issue 2: Disallowance of Administrative Expenses of Rs. 8,625:The appellant did not press Ground No. 2 concerning the disallowance of administrative expenses amounting to Rs. 8,625 due to the smallness of the amount. Consequently, Ground No. 2 was dismissed as not pressed. This issue was not further pursued or contested during the proceedings.In conclusion, the Appellate Tribunal ITAT Ahmedabad, in the judgment dated 07/07/2016, addressed the issues of addition of Rs. 45,00,000 of Share Capital under section 68 and the disallowance of administrative expenses of Rs. 8,625. The Tribunal upheld the AO's decision regarding the non-genuine nature of the share capital introduced by the appellant, dismissing the appeal. The issue of administrative expenses was dismissed as not pressed by the appellant.