The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the addition of Unexplained money under the Income Tax Act, 1961 as the amount was the old loan converted into share allotment.
Sachdev Steel Pvt. Ltd, the assessee challenged the confirmation of the addition of Rs.2,48,00,000/- made by the Assessing Officer treating the share application money received by the assessee as unexplained income of the assessee invoking provisions of section 68 of the Act.
It was submitted that the Assessing Officer during the assessment proceedings noted that the assessee had received share application/share allotment money from the three parties. On being asked to explain the identity and creditworthiness of the creditors and the genuineness of the transaction, the assessee furnished the necessary documents and explained that no fresh share application money was received from the above-noted share subscribers.
It was stated that there were old outstanding loans of these parties towards the assessee, which were converted into share application money and share were allotted to the assessee company in discharge of old loan liability. However, the Assessing Officer did not examine or consider the above submission and simply made the addition of the aforesaid amount observing that the assessee has not produced any investor for examination before him. The ld. CIT(A) confirmed the addition so made by the Assessing Officer.
A two-member bench of Shri Sanjay Garg, Judicial Member and Dr Manish Borad, Accountant Member observed that the documents referred by the Counsel for the assessee are enough to prove on record that no fresh share application money was received by the assessee during the year under consideration.
The Tribunal found that the old loans were rounded off by way of share allotment to the respective creditors. Since no fresh amount either in cash or otherwise has been received by the assessee during the year and only the old loans were converted into the share allotment, therefore, the observation of the Assessing Officer that the assessee has introduced the unexplained money as share application money is not correct.
While allowing the appeal, the ITAT deleted the additions made by the Assessing Officer. Shri Miraj D. Shah appeared on behalf of the appellant and Shri P. P. Barman appeared on behalf of the Respondent.
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