2013 (4) TMI 754 - AT - Income Tax

Summary

Issues Involved:

1. Addition of share capital and share premium amounts u/s 68.
2. Disallowance of expenditure on gifts and compliments.

Summary:

1. Addition of Share Capital and Share Premium Amounts u/s 68:

The assessee, a private limited company engaged in the manufacturing and trading of gold jewellery, filed its return of income for the assessment year 2007-08. During the scrutiny assessment u/s 143(3), a survey was conducted u/s 133A, leading to the Assessing Officer (AO) questioning the genuineness of the share capital and premium collected by the assessee. The AO found that the shares were issued at a face value of Rs. 10 with a premium of Rs. 1,490 per share, totaling Rs. 21,96,60,000/-. The AO rejected the assessee's explanations regarding the identity and source of the funds, noting inconsistencies and the lack of appearance by most shareholders. The Commissioner of Income-tax (Appeals) [CIT(A)] accepted the assessee's contentions, finding that the transactions were properly accounted for and made through banking channels. However, the Tribunal reversed the CIT(A)'s decision, agreeing with the AO that the assessee failed to prove the genuineness of the transactions, and confirmed the additions totaling Rs. 21,96,60,000/- as unexplained income u/s 68.

2. Disallowance of Expenditure on Gifts and Compliments:

The AO disallowed Rs. 10,45,913/- claimed by the assessee as expenditure on gifts and compliments, citing lack of evidence. The CIT(A) upheld the AO's decision, noting that the assessee failed to produce supporting documents. The Tribunal also upheld the disallowance, stating that the assessee did not provide any documentary evidence to substantiate the expenditure, despite the reasonableness of the amount in relation to the turnover.

Conclusion:

The Tribunal allowed the Revenue's appeal, confirming the addition of Rs. 21,96,60,000/- as unexplained income u/s 68, and dismissed the assessee's appeal, upholding the disallowance of Rs. 10,45,913/- on gifts and compliments.