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Monday, 04 February 2019 13:51


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We have heard counsel for the appellant-assessee in this appeal under Section 260A of the Income Tax Act, 1961 (‘Act’ for short) which pertains to the Assessment Year 2002-03 and arises from the order of the Income Tax Appellate Tribunal (‘ Tribunal’ for short) dated 31st August, 2018.

2. The appellant-assessee has challenged factual findings recorded by the Tribunal in affirming addition of Rs.5.27 crores on account of bogus share capital under Section 68 of the Income Tax Act, thereby affirming the order passed by the Assessing Officer and reversing the findings recorded by the Commissioner of Income Tax (Appeals).

3. The appellant-assessee was subjected to search and seizure operations under Section 132 of the Act on 10th November, 2004 and thereafter notice under Section 153A of the Act was issued. During the pendency of the said proceedings, the appellant-assessee also approached the Settlement Commission on disclosing the undisclosed income of Rs.17 lacs.

4. However, as the tax on the undisclosed income was not paid, settlement application was dismissed as not maintainable vide order dated 17th September, 2007.

5. The appellant-assessee does not dispute the issue on bogus share capital as per the details noticed by the assessing officer who held:-

“8. While scrutinizing the seized documents and register of share applications, the Assessing Officer noticed that the following persons applied for shares of the company on different dates:

9. The Managing Director/partners of all such companies/firms were examined on oath and all of them accepted that they were name lenders on commission basis. The statements of all such directors/partners were confronted to the assessee company. However, the assessee company chose not to reply. Accordingly, share application money to the tune of Rs. 1.55 cores was treated as bogus. In respect of remaining share applicants, the assessee could not furnish any detail within the parameters of the provisions of section 68 of the Act.

10. The assessee, in one of its replies, explained that the share application money was received by it in tranches, which was rotated again and again and, therefore, only peak of such credits should be added as undisclosed income of the assessee. The assessee explained the modus operandi by admitting that, to avail the loan from IDBI Bank, it inflated cost of land/building. It also inflated cost of plant and machinery. The explanation of the assessee did not find favour with the Assessing Officers who was of the firm belief that the entire share capital is bogus and benefit of peak credit cannot be allowed on the peculiar facts of the case. The Assessing Officer, accordingly, made addition of Rs. 5.72 crores on account of bogus share capital u/s 68 of the Act.

6. The contention of the appellant-assessee is that the amount received was rotated. It was submitted that addition of bogus share capital should be restricted to Rs.1.55 cores.

7. We do not find any reasons and ground to accept the said submission as it is accepted that the bogus share capital received on different days amounted to Rs. 5.72crores. The amount paid was not returned and refunded. This being the position, we are not inclined to accept the contention of the appellant-assessee that there was rotation of money and only bogus share capital of Rs.1.55 crore should have been added as undisclosed credit under Section 68 of the Act.

8. At this stage, learned counsel for the appellant-assessee states that Rs.62 lacs was added as undisclosed cash credit for Assessment Years 1999- 2000 to 2002-03. It is stated that the appellant-assessee has filed an application under Section 254(2) of the Act before the Tribunal on the said aspect.

9. We would on the said aspect give liberty to the appellant-assessee to file an appeal after disposal and decision of the application under Section 254(2) of the Act. This would not bar the appellant from filing an appeal against the decision of the aforesaid miscellaneous applications.

10. Recording the aforesaid, we dismiss the present appeal on the first aspect. On the second aspect, the issue is left open to be decided if required and necessary. The appeal is dismissed without any order as to costs.

Cases Referred to


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Additional Info

  • Order Date: Wednesday, 16 January 2019
  • Court: High Courts
  • Section: 260A, 68, 132, 153A, 254(2)
  • Favouring: Revenue
Read 110 times Last modified on Monday, 04 February 2019 14:03
Deepak Kumar

A Post Graduate and Chartered Accountant Deepak Sinha is a member of Taxpundit's core team. An analytical, result oriented professional with more than 10 years of combined experience in industry and consultancy.

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