ITAT Deletes Addition Made Towards Share Application Money Recorded in Books of Account on Unabated Assessment Year [Read Order]

The Income Tax Appellate Tribunal (ITAT) of Mumbai Bench deleted the addition made towards share application money recorded in books of account on unabated assessment year.

The assessee Morpan Merchant Private Limited belongs to Gauti Group. A search action conducted related to assessee  along with other group concerns/family members.  Consequently assessments were completed under section 143(3) read with section 153A of the Income Tax Act, 1961.

During the assessment proceeding, the AO added the share application money received by the assessee as income of the assessee under Section  68 of the Income Tax Act holding them to be accommodation entries.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax Appeal (CIT(A)), who dismissed the appeal of assessee. Thus, the assessee filed a second appeal before the tribunal.

During the hearing of appeal  Siddarth Agarwal, the counsel for assessee submitted  search proceedings that were conducted fall under the category of “unabated assessment years”.

In the case of unabated assessments, the Assessing Officer can make any addition only on the basis of any incriminating material found during the course of search. The additions made by the AO in these years are not based on any incriminating material found during the course of search.

Further, the counsel contended  that all the share application money received have been duly recorded in the books of accounts and no incriminating material was found during the course of search to show that they are bogus in nature.

Dr. Mahesh Akhade, the Counsel for Revenue supported the decision of lower authorities.

The tribunal later relied upon  the decision of PCIT vs. Abhisar Buildwell P Ltd observed that no addition could  be made in respect of completed assessments in absence of any incriminating material.

After reviewing the facts and submission, the two member bench of the tribunal comprising B.R. Baskaran (Accountant Member) and Rahul Chaudhary (Judicial Member) additions made by the Assessing Officer under section 68 of the Income Tax Act towards Share Application money received by the assessee are deleted, since they are not based on any incriminating material found during the course of search.

Thus, the bench allowed the appeal of the assessee.

To Read the full text of the Order CLICK HERE

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