2017 (11) TMI 1927 - AT - Income Tax

Addition u/s 56(1) OR 68 - bogus share capital - Share premium received - assets of the assessee company don’t commensurate to premium charged - neither any business activity was performed nor any business income has been shown by the assessee - HELD THAT:- As decided in own case [2017 (10) TMI 1445 - ITAT JAIPUR] 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) . - Decided against revenue.

Addition u/s 68 - amount received the amount after deposit in cash/DD in respective bank A/cs - HELD THAT:- Not only the identity of the creditor has been proved but from the facts which have been culled out, the assessee has been able to prove the genuineness also.

The fact that the explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purposes of rejecting the explanation furnished by the assessee and make additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 unless it can be shown by the Department that source of such money comes from the assessee himself or such source could be traced to the assessee itself. See KANHAIALAL JANGID VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [2007 (1) TMI 496 - HIGH COURT OF RAJASTHAN] - Also decided in ARAVALI TRADING CO. VERSUS INCOME-TAX OFFICER [2007 (1) TMI 567 - RAJASTHAN HIGH COURT] - The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source. - CIT(A) is not justified in confirming the addition - 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 - Decided in favour of assessee.