The Delhi Bench of Income Tax Appellate Tribunal has held that Section 68 has no application if share capital/premium/application money was not received in the relevant Financial Year.
A search and seizure operation under Section 132 of the Act was conducted at the premises of the assessee, M/s. Tirupati Udyog Ltd. Accordingly, notice under Section 153A of the Act was issued and the assessment was completed under Section 153A read with Section 143(3) and an addition of Rs.16,08,10,250/- on account of unexplained cash credit was made by AO under Section 68 of the Act alleging receipt of bogus share capital and share premium from non-existing bogus companies or concerns.
First Appellate Authority reversed the action of the Assessing Officer, against which revenue filed appeal before the ITAT. The counsel for the assessee Mr. H.K. Chaudhary, submitted before the Tribunal that in the absence of any credit in the books of account towards share capital/share premium during the year under consideration, Section 68 does not come into play at all and the Assessing Officer had wrongly invoked provisions of Section 68 and made unlawful addition which has been rightly reversed by the CIT(A).
The Tribunal by giving reliance to the decision of Supreme Court in CIT vs. P.K. Mohankala observed that Section 68 applies only to the credit/ receipts entered in the books during the Financial Year in question and its operation is not extended to other assessment years.
The Coram of Mr. Kul Bharat, Judicial Member and Mr. Pradip Kumar Kedia, Accountant Member has held that “in this factual and legal matrix, the CIT(A), in our view, has rightly concluded on inapplicability of Section 68 of the Act to the facts of the case. We thus see no error in the conclusion drawn by the CIT(A) in favour of the assessee. Hence, we decline to interfere”.
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