2016 (5) TMI 1599 - AT - Income Tax

Addition u/s 68 - unexplained share application money and undisclosed cash deposit - HELD THAT - Assessee has received share application money through account payee cheques and through normal banking channels. It is not the case of the revenue that the share application was not made from the bank account of the applicant companies and the share applicants were also produced before the AO. As it is not the case of the revenue that the shares were allotted to the subscribers are matter of records of ROC and confirmed by annual return and return of allotment as filed with ROC but the AO has not made any verification with respect to bank vis-a-vis respective companies nor has been called for any records of the respective companies. AO has accepted the genuineness of these companies and receipt of share application money as well as share premium. This is a genuine share application money and CIT(A) has rightly deleted the addition basing his decision on remand report of the AO. Undisclosed cash deposit - We find that the assessee has co-related the withdrawals made with that of cash deposit and also cash sales made during the period 02.04.2005 to 28.05.2005. Assessee has filed complete summary of cash withdrawals and cash deposit and cash sales which is co-related to the cash deposit with the bank account and/or treated as undisclosed. CIT(A) has deleted the addition based on the remand report of the AO who admitted that these cash deposits are explained by the assessee in remand proceedings. Decided against revenue.

Summary

Issues Involved:
1. Addition of share application money as unexplained cash credit.
2. Addition of undisclosed cash deposit.

Issue-wise Detailed Analysis:

1. Addition of Share Application Money as Unexplained Cash Credit:

The primary issue in this appeal by the revenue was the deletion by the CIT(A) of the addition made by the AO on account of share application money amounting to Rs.1,49,40,000/-. The AO had added Rs.63.40 lacs as share capital and Rs.96,00,000/- as share premium received by the assessee from different share applicants as unexplained cash credit under section 68 of the Income Tax Act, 1961. The assessee had issued 634000 equity shares of Rs.10/- each at a premium of Rs.15/- each, resulting in an increase in share capital and share premium. During the assessment proceedings, the assessee provided details of the share applicants, including their identities, PAN, and jurisdiction details, and confirmed that the share application money was received through account payee cheques. The AO, in his remand report, verified these details and confirmed their correctness after physical verification of the share applicants' existence and business activities. The CIT(A) deleted the addition based on the AO's remand report, which stated that the share application money appeared to be correct. The Tribunal confirmed the CIT(A)'s order, noting that the share application money was received through normal banking channels, and the AO had accepted the genuineness of the companies and the receipt of the share application money and premium.

2. Addition of Undisclosed Cash Deposit:

The second issue was the addition of Rs.75,05,400/- as undisclosed cash deposit. The AO noted that the assessee had deposited cash into the bank on various dates, which he considered undisclosed income. The assessee explained that it was engaged in the business of trading in iron and steel, with total sales amounting to Rs.13,09,98,510/-, out of which cash sales were Rs.24,22,505/-. The assessee claimed that the cash deposits were from cash sales and withdrawals from the bank. The AO, in his remand report, verified the cash sales and withdrawals and found them to be genuine. The CIT(A) deleted the addition based on the AO's remand report, which confirmed the source of the cash deposits. The Tribunal upheld the CIT(A)'s order, noting that the assessee had correlated the withdrawals with the cash deposits and cash sales.

Conclusion:

The Tribunal dismissed both the revenue's appeal and the assessee's cross-objection, confirming that the CIT(A) had rightly deleted the additions based on the factual remand reports of the AO. The order was pronounced in the open court on 04.05.2016.