Assessee wins appeal, additions under Section 68 deleted. Tribunal finds burden of proof met.

The Tribunal allowed both appeals filed by the assessee. The additions made under Section 68 on account of share application money, deposits by individuals, and bonus payment were deleted. The Tribunal held that the assessee had discharged its burden of proving the identity and receipt of payments from the shareholders and depositors, and no further inquiry was required.

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Issues Involved:
1. Sustenance of addition under Section 68 of the IT Act, 1961.
2. Sustenance of addition on account of deposits by individuals.
3. Sustenance of addition on account of bonus payment.

Issue-wise Detailed Analysis:

1. Sustenance of Addition under Section 68 of the IT Act, 1961:
The main issue revolves around the addition of Rs. 3,40,000 made by the AO under Section 68 of the IT Act, 1961, due to unexplained share application money. The AO found that the identity, capacity, and genuineness of the transactions were not established. The CIT(A) confirmed this addition after considering various judicial decisions and examining the circumstantial evidence.

The assessee contended that the identity of the creditors was established through confirmatory letters, affidavits, and IT returns. The assessee argued that it had discharged its primary burden by proving the identity and receipt of payments, and the Department was not justified in requiring further proof of the capacity of the investors and the genuineness of their transactions. The assessee relied on several judicial decisions, including CIT vs. Steller Investment Ltd. and Dy. CIT vs. Rohini Builders, to support its arguments.

The Tribunal observed that the CIT(A) had considered the relevant case law and concluded that the identity of the share applicant as a genuine investor had to be proved. However, the Tribunal noted that the CIT(A)'s interpretation was not consistent with the legal position established by the Hon'ble Supreme Court in the case of Steller Investment Ltd., where it was held that even if the subscribers to the capital were not genuine, the amount could not be regarded as undisclosed income of the company.

The Tribunal concluded that if the identity of the shareholder is established and the shareholder confirms the investment, no further inquiry should be made against the company for the purposes of making an addition under Section 68. The Tribunal found that the assessee had discharged its burden of proving the identity and receipt of payments from the shareholders. Therefore, the addition of Rs. 3,40,000 made by the AO and sustained by the CIT(A) was deleted.

2. Sustenance of Addition on Account of Deposits by Individuals:
The CIT(A) had confirmed the addition of Rs. 15,215 on account of a deposit by Shri S.N. Mishra and Rs. 14,939 on account of a deposit by Smt. Asha Devi. The assessee argued that it was not required to prove the source of the source and that the identity of the depositors was established.

The Tribunal found that the identity of Shri S.N. Mishra was not disputed, and considering the petty nature of the amount, the addition could not be upheld. Similarly, for Smt. Asha Devi, who was an income-tax assessee and had confirmed the deposit, the Tribunal held that no addition could be made under Section 68. Consequently, the additions of Rs. 15,215 and Rs. 14,939 were deleted.

3. Sustenance of Addition on Account of Bonus Payment:
The CIT(A) had sustained the addition of Rs. 14,394, representing the actual payment of bonus, on the ground that the liability to pay the amount was incurred in an earlier previous year and not in the relevant assessment year. The CIT(A) held that the benefit of the extended time-limit under the first proviso to Section 43B was not available in the relevant assessment year.

The assessee contended that the actual payment of Rs. 56,587 was made before the due date for filing the return and that the payment pertained to the liability of the assessee. The Tribunal accepted the assessee's contention and held that the CIT(A) was not justified in sustaining the disallowance. The addition of Rs. 14,394 was deleted.

Conclusion:
The Tribunal allowed both appeals filed by the assessee. The additions made under Section 68 on account of share application money, deposits by individuals, and bonus payment were deleted. The Tribunal held that the assessee had discharged its burden of proving the identity and receipt of payments from the shareholders and depositors, and no further inquiry was required.

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