Identity of Parties, Share Applicant, Vendor, Promoters and Genuineness of Transaction of Land is duly established: ITAT deletes addition of ₹3 Cr [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the addition of 3 crore Rupees, finding that the identity of the parties, share applicants, vendors, and promoters, as well as the genuineness of the land transaction, was duly established.

The assessee was in appeal against the confirmation of the addition of Rs. 3, 25, 08,000.00 respectively under the provisions of Section 68 of Income Tax Act, 1961, and unexplained Investment in the land.
Mr. Dhinal S.representing the assessee regarding the addition of ₹3, 25, 08,000, submitted that the payment was made through banking channels. He argued that merely because the cheques were cleared on a later date cannot be a ground for holding that the investment was made in cash by the assessee from unaccounted sources.
Mr. Sudhendu Das representing the revenue submitted that no prudent person shall transfer the land to the company against the shares at such a huge premium. As such, the share subscribers will acquire shareholding in the company disproportionate to the land transferred to the company which is not a normal practice. Further contended that there was an element of cash paid by the assessee against the transfer of land.

The bench observed that the assessee in support of share allotment on premium to these persons/promoters in lieu of purchase of land furnished copy of board resolution, minutes extra ordinary general meeting, transfer deed, copy of return of income and balance sheet of the promoters/vender. The promoters/vender in their return of income has declared capital gain on account of transfer of land to the assessee company.

It was further noted that, the identity of parties/share applicant/vender/promoters has been duly established by the assessee on strength of the above document. Credit worthiness was also not in doubt as these parties were regularly filing returns of income and showing substantial income. The onus regarding the genuineness of transaction was also discharged by the assessee by furnishing the board resolution, minutes of extraordinary general meeting, ROC filing.

Furthermore, the above parties have duly accounted for the transactions in their books on which offered capital gain. It is also pertinent to highlight that the transaction of land for which consideration was paid by allotting share at huge premium was between Assessee Company and its promoters/owner.

The two member bench of the tribunal comprising Madumitha Roy ( Judicial member ) and Waseem Ahemed ( Accountant member ) lifted the corporate veil and held that, ultimately, they were still the owners of the land transferred to the assessee.

Thus, in given facts and circumstances, the genuineness of the transaction was also duly established. Accordingly, the ground of appeal of the assessee for Rs. ₹3, 25, 08,000/- was hereby allowed.

To Read the full text of the Order CLICK HERE 

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