The Pune Bench of the Income Tax Appellate Tribunal ( ITAT ) invalidated the addition made by the assessing officer for share capital/premium due to the absence of incriminating evidence found during the search.
Marsh Fincom Pvt. Ltd., the assessee engaged in buying and selling shares, securities, and financing loans. The assessee company declared Rs. 60,87,010 as total income for the assessment year 2010-2011.
The search warrant and notice were issued on 21.08.2015 in the name of the assessee and its directors, Sandeep Jhaveri. In response, the assessee revised the income tax return on 30.10.2015 declaring Rs.4,02,87,010 as the total income including Rs.3,42,00,000 as undisclosed income.
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During the search, the company’s director, Sandeep Jhaveri’s statement was recorded where he agreed to Rs. 17,00,00,000 as additional/undisclosed income regarding receipts of share application money being non-genuine.
After cross-checking with materials, the assessing officer found only Rs.3,42,00,000 offered to tax for the year under consideration was not genuine. The AO completed the assessment by determining the income at Rs.7,23,95,845 as against the income returned by the assessee at Rs.4,02,87,010.
Aggrieved by the assessment order, the assessee appealed before the Commissioner of Income Tax (Appeals). The appeal of the assessee was allowed. The revenue appealed before the ITAT, Pune questioning the CIT(A) decision.
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The legal representative of the revenue, Sourabh Nayak, presented an argument supported by a comprehensive paper book. The revenue’s counsel requested that the order issued by the LD CIT(A) be set aside and that the additions made by the AO be upheld.
The assessee’s counsel submitted a factual paper book containing a copy of the written submission and requested dismissal of the revenue’s appeal.
The two-member bench comprising R.K. Panda (Vice President) and Vinay Bhamore (Judicial Member) referred to the judgment of the Supreme Court in the case of Abhisar Buildwell Pvt. Ltd., which held that additions related to an unabated assessment cannot be made if the assessment was not pending on the date of the search.
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The tribunal referred to Delhi High Court cases where it was ruled that a disclosure under Section 132(4) does not qualify as incriminating material. No incriminating material was found during the search regarding non-genuine share capital or share premium. Thus, the addition was not sustainable. The Revenue’s appeal was dismissed.
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