No Addition on Regular items which were Disclosed by Assessee in Regular Books of Account: ITAT [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that there cannot be any addition of the regular items which were disclosed by the assessee in regular books of account.

"The completed assessment cannot be disturbed in the absence of any incriminating material or documents, whereas the assessment or reassessment can be made for abated assessment years," the bench observed

The Revenue challenged that the CIT(A) had erred in deleting the protective addition made under Section 68 of the Income Tax Act for Rs. 5,74,50,000/- on account of bogus share capital and premium credited in the companies controlled by the assessee and erred in deleting the addition commission expenses of Rs. 3,44,700/- on such bogus share capital and premium. 

The assessee is a partner in several firms as well as a key person/promotor/director of the Globe group of companies. There was a search proceeding under section 132 of the Act carried out at the premises of the assessee dated 23rd January 2015. During the investigation and assessment, it was found that the four companies controlled or managed by the assessee received huge sums in the form of Share Capital and premium.

The AO treated the credit of share capital and the premium thereon as unexplained money under section 68 of the Act and added to the total income of the respondent-assessee on a protective basis whereas substantive additions were made in the hand of respective companies in whose books the sum was so credited.

It was found that the AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG.

The CIT (A) held that the AO was not justified in treating exempt long-term capital gains as income from unexplained sources and directed to treat the capital gain on the sale of shares of Rs. 58,08,455/- as long-term capital gain exempt under Section 10(38) of the Income Tax Act.

The ITAT viewed that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Income Tax Act.

The two-member bench of Madhumita Roy (Judicial) and Waseem Ahmed (Accountant) observed that in the absence of any material evidence that could support the case put forth by the Appellant, the additions cannot be sustained. The assessee cannot be held to be guilty, the Court observed and upheld the order of the CIT-A.

To Read the full text of the Order CLICK HERE

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