K. Raviraja Pandian, J.

1. This appeal is filed against the order of the Income Tax Appellate Tribunal dated 26.09.2008 made in ITA No.1374 of 2008. The appeal was admitted on the following substantial question of law:

"Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal is right in law in confirming the assessment of a sum of Rs.2, 74, 12,447/- as income?"

The appellant Ambika Cotton Mills Private Limited originally incorporated on 010. 1988 and later changed to Ambika Cotton Mills Limited on 06.09.1994. There were three group of promoters, viz., P.V. Chandran (the appellant herein), P.K. Ganeshwar, and M. Rathnaswamy. The appellant had 19% share holding in the company while the group of P.K. Ganeshwar and M. Rathnaswamy had 38% share holding. The business of the company was that of operating spinning mills. As of 2005, the company had the bank liability to the tune of approximately Rs.140.00 crores. In the said circumstances, the company proposed to increase the share capital. After negotiations with Unit Trust of India Investment Advisory Services, the appellant allotted to them 8, 75,000 equity shares of the face value of Rs.10 each and