share application money

Querist : Anonymous (Querist) 02 February 2010 This query is : Resolved
Dear Sir,
The company received share application money in cash from the company employers during the year and company authorised capital was less than receivable application money.so company deside to return back the application money to the employees in the next year.But income tax as giving assesment order for that this a cash credit in the grab of share application and added back to income.so sir we had filled this case in C.I.T appeal for that i need some help form you so that i can perpare the case to fight in C.I.T appeal.

Further sir at the time of assessment all the employees were persent in fromt of officer.

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A V Vishal (Expert) 02 February 2010
In a recent case it is held by supreme court that Share application money received or paid back in cash attracted the provisions of S.269SS & 269T.

Vineet (Expert) 02 February 2010
In addition to what Vishal has rightly pointed out, the applicability of section 68 in your case depends on how satisfactorily you are able to explain the genuineness of this transaction as prima facie the same goes against you. You may prove identity of employees and they may also prove their creditworthiness, but still the genuineness of the entire transaction remains assailable as the application money was claimed to be received in cash from employees without any corresponding increase in the authorised capital. The transaction becomes all the more suspicious and an accomodation entry in view of the refund of money in next year without any further action by the company on these applications.

You can fight this case on facts only. All the best.

Raj Kumar Makkad (Expert) 02 February 2010
I do agree with Vishal and Vineet.

soumitra basu (Expert) 03 February 2010
I do not agree. My advise shall be you have to file an appeal before CIT(A. You have to argue on the point that since all the share application money are received from employees question of identification already proved. Since all the employees appeared before the A.O. and confirmed the transaction. You have to proved the credit worthiness of the respective employee by submitting their individual balance sheet. It may be argued that if some addition has to be made that should be made in the hands of the employee.
In my opinion you have good case to win, if not in CIT lavel but in Tribunal.

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