2013 (12) TMI 479 - AT - Income Tax

Share application money - Held that - The assessee has produced the bank accounts statement of the creditorsand the confirmation from the parties from which share application money was paid to the assessee - The transactions of payment of application money was through bank accounts - The Assessing Officer has not made any inquiry to prove that the evidence produced by the assessee is not correct or bogus - The assessee has furnished the complete details of the bank accounts including the amounts deposited in the bank accounts and sources of the said deposited, then the assessee has discharged its onus of proving the capacity and the sources of the application money - The assessee has refunded the entire share application money to the parties because allotment of shares could not be materialized which further strengthen the case of the assessee that the transaction is genuine - The assessee has discharged its onus of proving the identity and the capacity of the creditors as well as the genuineness of the transactions - The creditors didnot have any nexus or relation with the assessee except being investors by making payment of the application money - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition made u/s 68 of the Income-tax Act regarding unexplained cash credit.
2. Addition on account of compensation received on cancellation of gala booking.

Issue 1: Addition made u/s 68 of the Income-tax Act regarding unexplained cash credit:
The assessee appealed against the order of CIT(A) confirming additions made by the AO u/s 68 for the assessment year 2009-10. The AO treated share application money received from two parties as unexplained cash credit. The assessee argued that it had proven the genuineness of the share application money through various evidence, including bank statements, confirmation of accounts, and return of income of the parties. The AO added the entire sum as unexplained cash credit due to lack of certain details from one party. The assessee contended that the transaction was genuine and refunded the money when share allotment did not materialize. The AR cited various judicial precedents to support the case. The DR argued that creditworthiness and genuineness of the transactions were not established. The Tribunal noted that the assessee had provided relevant evidence, including bank statements and confirmations, to prove the transactions were through legitimate channels. The AO's emphasis on personal appearance of creditors was deemed unnecessary when relevant evidence was furnished. The Tribunal held that the assessee had discharged its onus by proving the identity and capacity of the creditors and genuineness of transactions. The additions made by the AO were deemed unjustified, and the appeal was partly allowed.

Issue 2: Addition on account of compensation received on cancellation of gala booking:
The assessee did not press ground no. 2 regarding the addition on compensation received on the cancellation of gala booking. The counsel for the assessee requested to dismiss this ground, which was not opposed by the DR. Consequently, ground no. 2 was dismissed as not pressed. The appeal by the assessee was partly allowed.

In conclusion, the Tribunal ruled in favor of the assessee regarding the addition made u/s 68 of the Income-tax Act, stating that the assessee had adequately proven the legitimacy of the transactions. The issue of compensation received on the cancellation of gala booking was dismissed as not pressed. The decision was pronounced on 4/12/2013.