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2018 (12) TMI 1443 - AT - Income TaxUndisclosed share capital u/s 68 - identity of share capital - non issue of summons u/s 131 - Held that - The undisputed fact is that Shri Achchan Khan is an existing share holder of the appellant company. Therefore, his identity cannot be disputed. Moreover, the notice issued u/s 133(6) was duly served upon Shri Achchan Khan, who not only confirmed the transaction, but also furnished necessary details. AO has made addition only because Shri Achchan Khan could not be produced and he was a man of no means. I fail to understand what prevented the AO to issue summons u/s 131 on Shri Achchan Khan. Secondly, when the AO was fully aware that Shri Achchan Khan has made investment of ₹ 8.50 lakhs as share application money with the appellant company, nothing could have prevented the Assessing Officer to ask the source of investment from Shri Achchan Khan - if the source was not properly explained, addition could have been made in the hands of Shri Achchan Khan as unexplained income. By no stretch of imagination addition can be made u/s 68 in the hands of the appellant company since it has discharged the initial onus cast upon it by virtue of provisions of section 68. Addition is uncalled for and directed to be deleted. - Decided in favour of assessee.
Issues:
Appeal against order of CIT(A) - Addition of share application money u/s 68 of the Income-tax Act, 1961. Analysis: The appeal was filed against the order of the Commissioner of Income Tax [Appeals] regarding the addition of ?8,50,000 as share application money under section 68 of the Income-tax Act, 1961 for the assessment year 2012-13. The appeal was initially considered time-barred by 66 days, but the delay was condoned due to reasonable cause. The primary grievance of the assessee was the confirmation of the addition by the CIT(A). During the scrutiny assessment, the Assessing Officer observed that the assessee had shown share application money of ?8.50 lakhs and requested details along with confirmations and bank account copies of 34 persons who contributed. One of the contributors, Shri Achchan Khan, invested ?4.35 lakhs in FY 2009-10 and ?8.50 lakhs in FY 2011-12. Despite Shri Achchan Khan confirming the transactions, the Assessing Officer doubted his means and requested his presence. The assessee explained that Shri Achchan Khan withdrew the amount from his capital as a member of AOP M/s Ahmed Trader BSR and invested it as share application money. However, the Assessing Officer believed Shri Achchan Khan lacked the means to make such investments and added ?8.50 lakhs under section 68 of the Act. The matter was taken to the first appellate authority but was unsuccessful. Upon review, the Tribunal noted that Shri Achchan Khan's identity as a shareholder was established, and he confirmed the transactions with necessary details. The Tribunal questioned why the Assessing Officer did not issue summons under section 131 of the Act to Shri Achchan Khan or inquire about the source of his investment. It was opined that if the source was unexplained, the addition should have been made in Shri Achchan Khan's hands, not the company's, as the company had fulfilled its initial burden under section 68. Consequently, the addition of ?8.50 lakhs was deemed unwarranted and directed to be deleted. In conclusion, the Tribunal allowed the appeal, and the order was pronounced on 13.11.2018.
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