2013 (11) TMI 1690 - AT - Income Tax

Summary

Issues Involved:
1. Relief of Rs. 2,50,000 out of the addition of Rs. 14,16,350 made on account of unexplained share application money.
2. Deletion of addition of Rs. 63,90,200 made on account of unexplained investment in purchase of land.

Summary:

Issue 1: Relief of Rs. 2,50,000 out of the addition of Rs. 14,16,350 made on account of unexplained share application money

The Department's grievance relates to the relief of Rs. 2,50,000 out of the addition made by the AO on account of unexplained share application money. The assessee, a private limited company in its first year of business, showed share capital of Rs. 42,17,250, with Rs. 25,00,000 contributed by 5 directors. The AO considered Rs. 14,16,350 as unexplained investment in shares and added it to the total income u/s 68 of the Act. The CIT(A) accepted the genuineness of Rs. 7,50,000 (Rs. 5,00,000 from Smt. Pushpa Devi Kothari and Rs. 2,50,000 from M/s Pankaj Stones (P) Ltd.). The Tribunal upheld the CIT(A)'s decision, noting that the share application money from M/s Pankaj Stones (P) Ltd. was received through banking channels and the company was assessed to tax, thus no addition was warranted.

Issue 2: Deletion of addition of Rs. 63,90,200 made on account of unexplained investment in purchase of land

The AO noticed a short stamp fee levied by the Registrar, indicating an understatement of consideration by Rs. 63,90,200. The CIT(A) observed that the assessee maintained audited books of accounts and disclosed the cost and source of assets. The CIT(A) also noted that the provisions of s. 50C of the Act were not applicable for the assessment year 2001-02 and that the burden of proof was on the Revenue to show that the assessee paid more than disclosed. The Tribunal agreed with the CIT(A), stating that the AO made the addition based solely on the stamp duty value without substantiating that the assessee paid more than the amount disclosed in the books of accounts. The Tribunal referenced the jurisdictional High Court's rulings, emphasizing that merely on the basis of fair market value, no addition can be made u/s 69B of the Act without sufficient material evidence.

Conclusion:

In the result, the appeal of the Department is dismissed, and the judgment is in favor of the assessee.