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Issues involved: Appeal against deletion of addition of share application money u/s 68 of the Income Tax Act, 1961.
Summary: Issue 1: Addition of share application money u/s 68 of the Act The appeal was filed by the revenue against the deletion of the addition of Rs. 55,50,000 on account of alleged unexplained share application money u/s 68 of the Act for the A.Y. 2004-05. The assessee initially declared total income as Nil, but the AO later made an addition of Rs. 55,50,000 based on a notice u/s 148, alleging a sham transaction. The assessee contended that the actual amount received was Rs. 55,50,000 and not Rs. 1,11,50,000 as mentioned in the notice. The ld. CIT(A) found the assessee's explanation satisfactory, noting the documents provided, including confirmatory letters, bank statements, and incorporation details of the share applicants. Issue 2: Burden of proof for cash credit entries The ld. CIT(A) emphasized the requirements to prove cash credit entries, including the identity, creditworthiness, and genuineness of the transaction. The appellant successfully established the identity of the share applicants through various documents, such as confirmatory affidavits, PAN/GIR numbers, and bank statements. The genuineness of the transactions was supported by the routing of funds through banking channels, ensuring the credibility of the share application money. Issue 3: Legal precedents and judicial decisions Citing legal precedents and judicial decisions, the ld. CIT(A) concluded that once the identity of the share applicants is proven, no addition can be made to the appellant's income unless the revenue can prove otherwise. The absence of evidence to show the money's source or the lack of creditworthiness of the share applicants led to the deletion of the addition. The AO failed to disprove the authenticity of the documents provided by the appellant, resulting in the dismissal of the revenue's appeal. Conclusion: The ld. CIT(A) upheld the appellant's position, emphasizing the lack of evidence to challenge the authenticity of the documents submitted. The appeal filed by the revenue was dismissed, affirming the deletion of the addition of Rs. 55,50,000 on account of unexplained share application money u/s 68 of the Income Tax Act, 1961 for the relevant assessment year.
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