2010 (1) TMI 1296

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....43(3) r.w.s. 254 of the I.T. Act, 1961. 2. The brief facts of the case are that the assessee-company was in the process of establishing its production facilities during the relevant previous year. The return of income was filed on 03/12/1998 declaring total loss at Rs.4,665/-. The original assessment was completed on total income of Rs.33,47,790/- by making addition u/s.68 of the I.T. Act, 1961 of share application money of Rs.31,36,000/- and by disallowing interest expenditure on share application money of Rs.2,14,456/-. The assessee went in appeal before the Learned CIT(Appeals) who vide order No.CAS.1/160/01-02 dated 11/02/2002 dismissed the appeal of the assessee. In further appeal, the Hon'ble ITAT Ahmedabad Bench set aside the ....

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.... the hands of the promoters of the company but not in the hands of the company. 3. The Revenue challenges deletion of addition of rs.14,71,000/- being treated as unexplained cash credit u/s.68 of the I.T. Act, 1961, whereas assessee challenges disallowance of Rs.99,143/- being interest payable on the outstanding share application money being treated as unexplained cash credit. 4. The Learned Departmental Representative, Shri Kumar Harishikesh Sr.DR submitted that in the instant case, it is crystal clear that the assessee-company failed to prove the genuineness of share application money amounting to Rs.14,71,100/- in respect of 17 parties. During the course of set aside assessment proceedings, the Assessing Officer had granted adequat....

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....n stated that in view of the lapse of 8 years as well as dispute among the directors, these details are not available any more and these people are not traceable any more. The assessee filed a copy of the ITAT order to show that the Hon'ble ITAT has also observed that there was dispute amongst the directors and some of the directors were expelled by the other directors. The ld. counsel for the assessee further submitted that since this is pre- operative year in which no business activity was commenced, as decided in the following cases, no addition can be made in its hands as the amount of cash credit represents capital receipt: Sl .No(s) In the case of .... Reported in... 1. CIT vs. Bharat Engg. & Construction Co. 83 ....

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....ills (P) Ltd. vs. CIT 258 ITR 278 (Guj.), the presumption would lead to believe that since no income earning activity was carried on, the amount of share application money stated to have received by the assessee was not in the nature of unexplained income belonging to the assessee. The assessee originally filed confirmation letters. However, due to dispute between the then and the present Directors, the whereabouts of the earlier share applicants could not be located. However, this does not call for any addition u/s.68 of the I.T. Act, 1961 as the possibility revealed that the amount received by the assessee was towards share application only and not from any income earning activity. The share applications were received from the persons who....