2024 (7) TMI 1015 - AT - Income Tax

Unexplained income u/s 68 - share application money Receipts - assessee has not produced any investor for examination before him - HELD THAT - No fresh share application money was received by the assessee during the year under consideration. The old loans were rounded off by way of share allotment to the respective creditors. Since no fresh amount either in cash or otherwise has been received by the assessee during the year and only the old loans were converted into the share allotment, therefore, the observation of AO that the assessee has introduced the unexplained money as share application money, is not correct. Additions made by the AO are not justified in this case and accordingly the same are ordered to the deleted. Appeal of the assessee stands allowed.

Summary

Issues Involved:
Appeal against addition of share application money as unexplained income under section 68 of the Income Tax Act.

Analysis:
The appellant contested the addition of Rs. 2,48,00,000 as unexplained income by the Assessing Officer, who treated share application money as unexplained income under section 68 of the Act. The appellant clarified that the share application money was received from group companies/related parties in discharge of old loan liabilities. However, the Assessing Officer did not consider this explanation and made the addition without verifying the details provided.

The CIT(A) upheld the Assessing Officer's decision, leading to the appeal before the ITAT Kolkata. The appellant presented various documents, including balance sheets and resolutions, to support their claim that the share application money was not fresh but a conversion of old loans into share allotments. The documents highlighted outstanding loans from the parties and the conversion details, proving that no new funds were introduced as share application money.

After reviewing the evidence presented, the ITAT concluded that no fresh share application money was received by the appellant during the relevant year. The conversion of old loans into share allotments was substantiated by the documents provided, indicating a legitimate transaction. Therefore, the Assessing Officer's addition of the amount as unexplained income was deemed unjustified, and the ITAT ordered the deletion of the additions.

In light of the above analysis, the ITAT allowed the appeal of the assessee, emphasizing the factual evidence presented to support the conversion of old loans into share application money. The judgment highlighted the importance of verifying details before making additions under section 68 of the Income Tax Act, ensuring a fair assessment of income sources.

This comprehensive analysis of the judgment showcases the meticulous consideration of facts and legal provisions by the ITAT Kolkata in resolving the issue of addition of share application money as unexplained income under section 68 of the Income Tax Act.