The Nagpur bench of the Income Tax Appellate Tribunal ( ITAT ) quashed the addition of Rs. 6.58 crore for the previous year, finding the investment transactions of two out of seven companies to be genuine.
In this case, the revenue has appealed against the order of the Commissioner of Income Tax (Appeals) [ CIT ( A ) ] for the assessment year 2012–13.
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It was alleged by the Assessing Officer (AO) that the company obtained fictitious entries through a network controlled by one Shri Shirish Chandrakant Shah. The AO observed that the share premium received by the assessee from seven companies, including Aadhar Ventures, Prabhav Industries, Dhanus Technologies, and others, was unsubstantiated and should be taxed under Section 68 of the Income Tax Act, 1961, as unexplained income.
The assessee submitted documentation, including PAN details, agreements, bank statements, and confirmations from the companies involved. These documents showed that the funds were initially advanced for property bookings and later converted into equity shares after mutual agreement due to the cancellation of property deals.
Even after this, the AO made the additions based on the statement of Shri Shah recorded during a search operation without providing the assessee an opportunity for cross-examination.
It is to be noted that it was alleged that the company had received accommodation entries from seven entities, two of which had already been assessed for similar transactions in the previous financial year.
The CIT( A ) held that the additions made by the AO under Section 68 of the Income Tax Act were not sustainable.
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ITAT observed that since the amount was not received in the previous year relevant to AY 2012–13 as an advance against property, no addition for that year can arise.
The bench held that the share premiums were duly accounted for and made through proper banking channels, and thus the transactions were genuine.
The ITAT, comprising V. Durga Rao ( Judicial Member ) and K.M. Roy ( Accountant Member ) dismissed the revenue’s appeal.
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