Tribunal rules for assessee, deletes income tax additions under Section 68

The Tribunal ruled in favor of the assessee, directing the deletion of additions made by the Assessing Officer under Section 68 of the Income Tax Act for unexplained share application money and unaccounted income from the sale of flats in cooperative societies. The Tribunal found lack of tangible evidence and factual inaccuracies in the AO's statements, dismissing the revenue's appeal and allowing the assessee's appeal. The Stay Application was deemed redundant following the disposal of the appeals.

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Issues Involved:
1. Unexplained Share Application Money under Section 68 of the Income Tax Act, 1961.
2. Unaccounted Income from Sale of Flats in Cooperative Societies.

Issue-wise Detailed Analysis:

1. Unexplained Share Application Money under Section 68 of the Income Tax Act, 1961:

Background: A search and seizure operation was conducted on the GTM group of companies. The Assessing Officer (AO) observed that the share application money account showed &8377; 5,34,50,000/- received from various parties. The AO concluded that the money received was from entry operators and bogus parties, and added it as unexplained income under Section 68.

Assessee's Argument: The appellant argued that the money was arranged from M/s Arha Buildcon Pvt. Ltd., a regular assessee with the Department, for financing projects. It was submitted that the transactions were fully accounted for in the books with supporting documents. The appellant also contested the reliance on the statement of Shri Mahesh Garg, asserting that it was recorded behind their back without an opportunity for cross-examination.

Revenue's Argument: The revenue contended that the appellant failed to prove the genuineness and creditworthiness of the transactions. The departmental representative argued that the bonafides of M/s Arha Buildcon Pvt. Ltd. were not proven, and the entry operator's statement was undisputable.

Tribunal's Findings: The Tribunal noted that the appellant received and refunded amounts from various parties, and an agreement existed for booking 60 flats. The Tribunal found that the AO did not provide the appellant an opportunity to rebut the discrete enquiries conducted. The Tribunal observed that the statement of Shri Mahesh Garg was not sufficient to conclude that the amounts were accommodation entries. The Tribunal directed the deletion of the addition on this account, emphasizing the lack of tangible evidence and the factual inaccuracies in the AO's statements.

2. Unaccounted Income from Sale of Flats in Cooperative Societies:

Background: The AO made an addition of &8377; 1,92,00,000/- on the grounds that the GTM group controlled the Bhagwanti Cooperative Group Housing Society and received &8377; 4 lakhs per flat as undisclosed income. This conclusion was based on documents found during the search and statements recorded from society members and employees.

Assessee's Argument: The appellant denied any involvement in the management of the society and requested cross-examination of the individuals whose statements were recorded. The appellant contended that the society was an independent legal entity, and no payments were received from the society or its members.

Revenue's Argument: The revenue relied on the AO's findings and argued that the GTM group managed the society and received undisclosed income from the sale of flats.

Tribunal's Findings: The Tribunal found that the AO's addition was based on presumptions and lacked concrete evidence of any payment to the appellant. The Tribunal noted that the society confirmed the escalation of costs due to rising prices of materials, which was approved in the AGM. The Tribunal concluded that there was no evidence to support the claim that the appellant received &8377; 4 lakhs per flat. The addition made by the AO was deemed unsustainable, and the appeal of the revenue on this ground was dismissed.

Conclusion: The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, directing the deletion of the additions made by the AO. The Stay Application No. 186/Del/2020 was treated as redundant due to the disposal of the appeals.

Order Pronounced in the Open Court on 04/02/2021.

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