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2017 (10) TMI 1445 - AT - Income TaxAddition u/s 56(1) OR 68 - bogus share capital - Share premium received - scope of amendment to sec 56(2)(viib)and year of application - HELD THAT:- The provisions of sec 56(2)(viib) are applicable w.e.f. 1st April, 2013 and will accordingly apply in relation to AY 2013-14 and subsequent Assessment Years. The income as mentioned in section 56(2)(viib) is included in definition of section 2(24) w.e.f. 01-04-2013. Therefore, the provisions of these sections cannot be made applicable prior to that A.Y. 2013-14. It is pertinent to note that the CIT(A) had issued the show cause notice to the assessee to tax the share capital under section 68 of the I.T. Act, 1961 as against section 56(1) applied by the AO. AO has made whole addition by invoking section 56 hence the amended provision w.e.f. 01-04-2013 are applicable only on shares premium received on fair market value. In view of these facts, it is clear that share premium received cannot be considered as income for the year under consideration by invoking provisions of section 56(1) of the Act. Therefore, in our considered view, the ld. CIT(A) has rightly deleted the addition. Disallowance of expenses - assessee has not started the business activity, hence expenses have to be capitalized - HELD THAT:- CIT(A) held that the financial expenses, salary expenses, water & electricity expenses, repairs & maintenance expenses were in relation to building which was given on rent. Thus these expenses are direct bearing to the income of the year credited in P & L A/c. It is also noted that during search no incriminating document was found to show the suppression of income or inflation of expenses. In view of the above facts and circumstances of the case, we concur with the findings of the ld. CIT(A) on the issue in question. Thus the solitary ground of the Revenue is dismissed. Addition u/s 68 - non providing opportunity of cross examination of the materials gathered and statement recorded behind the assessee - HELD THAT:- As during the course of hearing of appeal before the ld. CIT(A), the assessee had requested for cross examination of Shri Sanbtosh Choubey Shri Ajit Sharma, Shri RajeshKumar Singh and other persons which was denied by the ld. CIT(A). The ITAT Coordinate Bench in the case of Prateek Kothari [2016 (12) TMI 1756 - ITAT JAIPUR] has given verdict that without providing opportunity of cross examination of the materials gathered and statement recorded behind the assessee cannot be used. However, we hold that Revenue is free to initiate proceedings in the hands of these concerns who have received the amount after deposit in cash/DD in respective bank A/cs. Thus Ground of the assessee is allowed.
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