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Issues Involved: Determination of the nature and source of share application money received by the assessee-company, addition of unaccounted commission, validity of proceedings u/s 147.
Nature and Source of Share Application Money: The assessee filed its return declaring a loss, but specific information revealed that share application money received by the company was bogus and represented income from undisclosed sources. The AO initiated action u/s 147 and issued a notice. Despite producing various documents, the assessee failed to produce directors of the subscribing companies or their books of account. The AO concluded that the subscribers were name lenders, adding the amount to income u/s 68 of the Act. Additionally, unaccounted commission was also added. CIT(Appeals) Decision: The CIT(Appeals) held that the assessee had discharged the initial onus u/s 68 by providing evidence of share subscription. Citing the decision in CIT Vs. Lovely Exports Ltd., it was concluded that the revenue could proceed against bogus shareholders but not against the company receiving share application money with proper documentation. Consequently, the addition made by the AO was deleted. Revenue's Appeal: The revenue appealed against the deletion of the addition of share application money and commission. The assessee also filed a cross objection challenging the validity of proceedings u/s 147. Tribunal's Decision: The Tribunal noted a confusion in the CIT(Appeals) order regarding the nature of the amounts received, clarifying that both were share application money. Referring to a similar case, it was observed that the AO had not provided substantial evidence to support the presumption made. Consequently, the addition of share application money was deemed unjustified, with a directive for the revenue to take appropriate action against the contributors. As the amount was deleted, the addition of unaccounted commission was deemed unnecessary. Conclusion: The appeal of the revenue and the cross objection of the assessee were dismissed, upholding the deletion of the addition of share application money and unaccounted commission. The order was pronounced on 18 February, 2011.
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