2016 (1) TMI 1370 - AT - Income Tax

Addition u/s 69B - addition based on the value adopted by the stamp valuation authority - Held that - In order to invoke the provisions of section 69B the burden is on the revenue to prove that the assessee has invested in property over and above what is disclosed in its balance sheet. We find that there is nothing on record to show that the assessee had made any additional investment in addition to what has been stated in the books of accounts. We hold that no addition could be made in the hands of the purchaser on the basis of stamp duty charged by the sub-registrar. We also find the valuation adopted by stamp valuation authority is only for the purpose of capital gain as prescribed u/s 50C of the Act which has got very limited scope. This legal fiction has been created for computation of capital gain only in the case of seller of any asset. We hold that the same cannot be extended in the case of the purchaser to estimate the undisclosed investment. See INCOME TAX OFFICER VERSUS OPTEC DISC MANUFACTURING 2008 (6) TMI 607 - ITAT CHANDIGARH - no addition could be made in the hands of the assessee buyer - Decided in favour of assessee Addition towards share capital - Held that - Assessee had given the complete details about the share applicants clearly establishing their identity , creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee - decision of the Hon ble Apex Court in the case of CIT vs Lovely Exports (P) Ltd 2008 (1) TMI 575 - SUPREME COURT OF INDIA is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. - Decided against revenue Addition u/s 68 made in respect of allotment of shares to 20 individuals - Held that - We find from the details available on record that the share application monies from 20 individuals in the sum of ₹ 57,00,000/- has been received by the assessee during the financial year 2004-05 relevant to Asst Year 2005-06 and only the shares were allotted to them during the asst year under appeal. Admittedly no monies were received during the asst year under appeal and hence there is no scope for invoking the provisions of section 68 of the Act - decided against revenue

Summary

Issues Involved:
1. Addition under Section 69B of the Income Tax Act based on the value adopted by the stamp valuation authority.
2. Addition towards share capital under Section 68 of the Income Tax Act.
3. Addition under Section 68 of the Income Tax Act in respect of allotment of shares to 20 individuals.

Issue-wise Detailed Analysis:

1. Addition under Section 69B of the Income Tax Act:
The primary issue was whether an addition of Rs. 57,13,370/- under Section 69B could be made based on the value adopted by the stamp valuation authority. The assessee purchased immovable properties for Rs. 48,00,000/- but the stamp valuation authority determined the value to be Rs. 1,05,13,370/-. The Assessing Officer (AO) treated the difference as unexplained investment. The CIT(A) held that Section 50C, which pertains to the seller, was not applicable to the purchaser and thus, the addition was unwarranted. The tribunal upheld the CIT(A)'s decision, stating that the burden of proof lies on the revenue to show that the assessee invested more than what was disclosed. The tribunal relied on various judicial precedents, including ITO vs Satya Narayan Agarwal and CIT vs Chandni Bhuchar, to conclude that the stamp duty value cannot be used to make an addition under Section 69B in the hands of the purchaser.

2. Addition towards Share Capital under Section 68:
The next issue was whether an addition of Rs. 89,60,000/- towards share capital could be made. The assessee received Rs. 1,21,60,000/- towards share application money during the assessment year, and shares were allotted accordingly. The AO questioned the identity and creditworthiness of the shareholders and made an addition of Rs. 89,60,000/- as unexplained cash credit. The CIT(A) found that the assessee had provided sufficient details, including the name, address, PAN, and balance sheets of the shareholders, and that the AO did not exercise his authority under Section 131 to summon the shareholders. The tribunal upheld the CIT(A)'s decision, citing the Supreme Court's ruling in CIT vs Lovely Exports (P) Ltd, which states that the company receiving share application money only needs to prove the existence of the shareholders.

3. Addition under Section 68 in respect of Allotment of Shares to 20 Individuals:
The final issue was the addition of Rs. 57,00,000/- under Section 68 for share application money received from 20 individuals in the previous year. The AO doubted the creditworthiness of these shareholders and made an addition. The CIT(A) noted that the share application money was received in the previous year and shares were allotted during the assessment year under appeal. The CIT(A) held that no addition could be made under Section 68 as no money was received during the assessment year. The tribunal agreed with the CIT(A), stating that the provisions of Section 68 could not be invoked as the share application money was received in the previous year.

Conclusion:
The tribunal dismissed the revenue's appeal on all grounds, upholding the CIT(A)'s decisions. The tribunal found no basis for additions under Sections 69B and 68, as the assessee had provided sufficient evidence and the AO had not exercised his authority to verify the shareholders. The tribunal's decision was in line with various judicial precedents, including rulings from the Supreme Court and High Courts.