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2023 (9) TMI 263 - HC - Income TaxAddition u/s 68 - assessee has introduced unaccounted money in form of bogus share capital and share premium raised from paper companies / accommodation entries - HELD THAT - No question of law, much less any substantial question of law arises so far as question No. 1 is concerned, in view of the fact that the Tribunal has rightly held that the provisions of Sec. 68 of the Act cannot be invoked, more particularly when the addition is made on account of the share premium and the share application money by the investors whose identity, creditworthiness and genuineness is proved by the assessee before the authority. GP estimation - Tribunal justification in restricting the gross profit on URD purchases @0.24% holding that the estimation by the AO @6% on URD purchases was over and above the profit of 5.76% disclosed by the assessee - HELD THAT - In view of the finding of facts arrived at by the Tribunal confirming the order passed by the CIT(A) that the assessee has already declared gross profit as a whole including the purchases from registered parties @ 5.76%, and therefore, if any addition is to be made, it should be the difference between the profit determined by the AO on the URD purchases vis-a-vis the gross profit already declared by the assessee. No substantial question of law arises in appeal.
Issues involved:
The issues involved in the judgment are: 1. Whether the Tribunal erred in deleting the addition made under section 68 of the Income Tax Act without appreciating the unexplained capital introduction by the assessee? 2. Whether the Tribunal was justified in restricting the gross profit on purchases from unregistered dealers? Issue 1: Addition under section 68 of the Income Tax Act: The respondent- assessee, a private limited company, converted a proprietary concern into a private limited company by issuing shares to the former owner and other investors. The Assessing Officer found that share certificates were not issued to investors, leading to an addition under section 68 of the Act. The CIT (A) allowed the appeal by deleting the addition, but the revenue appealed to the Tribunal. The Tribunal dismissed the appeal, stating that the assessee proved the identity, creditworthiness, and genuineness of the transactions, as required under section 68 of the Act. The Tribunal emphasized the importance of proving the identity of parties and the genuineness of transactions, citing relevant case law. The Tribunal also noted that it was the first year of operation for the assessee company, which explained the non-declaration of dividends. The Tribunal held that no adverse inference could be drawn against the assessee. The High Court concurred with the Tribunal's findings, stating that no substantial question of law arose regarding the addition under section 68. Issue 2: Restriction on gross profit from URD purchases: The second issue pertained to the restriction placed by the CIT (A) on the addition made by the Assessing Officer on purchases from unregistered dealers. The Tribunal considered the lack of proper documentation for these purchases and the discrepancy in values reported by the assessee and the AO. The AO estimated the gross profit on unregistered purchases at 6%, leading to an addition. However, the CIT (A) determined that the assessee had already disclosed a gross profit of 5.76% on all purchases, including those from registered parties. The Tribunal agreed with the CIT (A) and dismissed the appeal, stating that any additional profit should be the difference between the profit determined by the AO and the gross profit already declared by the assessee. The High Court upheld the Tribunal's decision, stating that no substantial question of law arose regarding the restriction on gross profit from URD purchases. In conclusion, the High Court upheld the Tribunal's decision on both issues, finding no merit in the appeal and dismissing it accordingly.
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