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Issues Involved:
The appeal under s. 260A of the IT Act, 1961 assails the concurrent findings of CIT(A) and the Tribunal regarding additions made in respect of share capital received from forty persons. Issue 1 - Share Capital Treatment: The AO failed to provide adequate details for making additions in respect of all shareholders who had confirmed the transaction. The Tribunal applied the ratio from CIT vs. Sophia Finance Ltd., stating that once shareholders are identified and have invested money for shares, no additions are justified. The Tribunal found the AO's treatment of share capital as unexplained cash credit based on surmises and conjectures, leading to the deletion of the additions by the CIT(A). Issue 2 - Legal Precedents: Referring to CIT vs. Divine Leasing & Finance Ltd., the Supreme Court affirmed that if share application money is received from alleged bogus shareholders, the Department can proceed to reopen individual assessments. The Court agreed with the Tribunal's concern over the AO's failure to provide specific comments on shareholders other than the nine from Bombay, noting the AO's reliance on surmises and conjectures rather than factual evidence. The judgment highlights the importance of establishing the source of share capital and the need for the AO to conduct thorough inquiries before treating transactions as unexplained cash credits. Legal precedents emphasize the role of evidence over suspicion in tax assessments, underscoring the burden of proof on the assessee and the authorities to substantiate their claims.
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