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Issues:
- Challenge to block assessment order - Addition of share application money - Invocation of section 68 of the IT Act - Onus of establishing genuineness of share capital - Legal precedents on share capital genuineness - Scope and limitations of block assessment Analysis: Challenge to Block Assessment Order: The appeal was filed against a block assessment order made by the Asstt. CIT for the block period from 1st April, 1986 to 19th April, 1996. The legality of the block assessment was initially challenged on various grounds, but only the addition of share application money was pressed before the tribunal. Addition of Share Application Money: The Assessing Officer (AO) made an addition of Rs. 1,38,000 on account of share application money in the books of the company. This addition was based on the lack of confirmation from two shareholders and doubts regarding the creditworthiness of another shareholder. The appellant contested this addition, arguing that all share capital was received through legitimate means and recorded in the books of account. Invocation of Section 68 of the IT Act: The AO invoked section 68 of the IT Act to treat the unconfirmed share application money as unexplained income. The appellant argued that the provisions of section 68 were not applicable as the genuineness of the share capital was established through audited books of account and legitimate transactions. Onus of Establishing Genuineness of Share Capital: The tribunal deliberated on the onus placed on the assessee to prove the genuineness of the share capital under section 68. The appellant contended that the burden was discharged through proper documentation and compliance with legal requirements. Legal Precedents on Share Capital Genuineness: The appellant relied on legal precedents, including judgments from the Delhi High Court and the Supreme Court, to support the argument that if shareholders are identified and investments are genuine, the share capital should not be treated as undisclosed income. These precedents emphasized the importance of establishing the legitimacy of transactions. Scope and Limitations of Block Assessment: The tribunal highlighted the distinction between block assessment and regular assessment, emphasizing that block assessment is based on evidence found during search operations. The tribunal clarified that the absence of supporting evidence from the search undermined the AO's basis for treating the share application money as undisclosed income. In conclusion, the tribunal ruled in favor of the appellant, deleting the addition of Rs. 1,38,000 made on account of share application money. The decision was based on the lack of concrete evidence found during the search to support the AO's conclusion of undisclosed income. The tribunal emphasized the need for proper documentation and adherence to legal requirements in assessing the genuineness of transactions during block assessments.
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