ITAT Deletes Income Tax Addition Of Rs.2.30 Crores As AO Failed To Mention Investment Outside The Books Of Accounts

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the income tax addition of Rs. 2.30 crores as the Assessing Officer (AO) did not mention any investment outside the books of accounts.

The bench of Astha Chandra (Judicial Member) and N. K. Billaiya (Accountant Member) has observed that the assessee has explained the investment duly reflected in its bank statement, and such reflection in the bank statements has not been doubted by the AO; therefore, it cannot be said that the investments have been made outside the books of accounts.

During the course of the scrutiny assessment proceedings, the AO noticed that the assessee or respondent had received a share premium of Rs. 2,034,000. The assessee was asked to justify the share premium received by it. In its reply, the assessee claimed that the issue of shares at a premium is a prerogative of the directors of the company who decide the premium, and it is the wisdom of the shareholder whether he wants to subscribe to the shares at a premium or not.

The AO concluded that the assessee has failed to explain the source of credit entries in its books in the form of share capital of Rs. 22.60 lakhs and share premium of Rs. 2.03 crores credited in its books of accounts. The AO completed the assessment by making an addition of Rs. 2,30,22,000.

The assessee brought the matter before the CIT (A). The assessee stated that all the credit entries have been explained, but the AO has not considered the explanation from their true perspective. The assessee explained that each applicant had filed confirmations, bank statements, and other documentary evidence and confirmed the transaction.

On the basis of the confirmation from each and every director of the share applicant company, the CIT (A) deleted the addition made under Section 68 of the Income Tax Act.

The tribunal held that CIT(A) examined each and every director before deleting the addition, and the revenue could not point out any error or infirmity in the findings of CIT(A). Therefore, there is no reason to interfere with the findings of the CIT (A) that the addition of Rs. 2,30,22,000 stands deleted.

Counsel For Appellant: Vivek Kumar Upadhyay

Counsel For Respondent: Ved Jain

Case Title: ITO Versus Direct Trading Co. P. Ld.

Case No.: ITA No.5220/Del/2017

Click Here To Read The Order