IT : Where Assessing Officer made addition in income of assessee-company under section 68 on plea that it could not prove that share applicants had enough money on date of purchase of its shares, since share applicants were identified and they had submitted their bank statements, cash extracts and returns filing receipts, impugned addition was not justified
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[2013] 35 taxmann.com 289 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax, Meerut
v.
Nav Bharat Duplex Ltd.*
R. K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO. 279 OF 2010†
JANUARY 4, 2013
Section 68 of the Income-tax Act, 1961 - Cash credits [Share application money] - Assessment year 2004-05 - During assessment proceedings, assessee-company submitted informations relating to share applicants, who had invested in its share capital - Assessing Officer held that assessee could not discharge its onus in proving that share applicants of amount of Rs. 25 lakhs had enough money in their bank accounts on date of purchase of shares - He, therefore, added said amount to income of assessee as unexplained cash credit under section 68 - Commissioner (Appeals) held that five companies subscribing equity shares amounting to Rs. 25 lakhs were identified and they had submitted their bank statements, cash extracts and returns filing receipts - He, therefore, deleted impugned addition made by Assessing Officer - Tribunal upheld order of Commissioner (Appeals) - Supreme Court while dealing with similar issue in various cases held that identity of shareholder alone is required to be proved in case of capital contributed by shareholders - Whether since five companies subscribing equity shares amounting to Rs. 25 lakhs were identified and they had submitted their bank statements, cash extracts and returns filing receipts, identity of share applicant companies and purchase of share had been proved by assessee - Held, yes -Whether, therefore, appellate authorities had rightly deleted impugned addition made by Assessing Officer - Held, yes [Para 6] [In favour of assessee]
CASE REVIEW
CIT v. Stellr Investments Ltd. [2001] 251 ITR 263/115 Taxman 99 (SC) (para 6) and CIT v. Lovely Exports [2008] 172 Taxman 44 (SC) (para 6)followed.
Ram Lal Agrawal v. CIT [2006] 280 ITR 547/[2005] 149 Taxman 342 (All.) (para 6) Dissent.
CASES REFERRED TO
CIT v. Lovely Export [2008] 172 Taxman 44 (SC) (para 4), Ram Lal Agrawal v. CIT [2006] 280 ITR 547/[2005] 149 Taxman 342 (All.) (para 5),CIT v. Steller Investment Ltd. [2001] 251 ITR 263/115 Taxman 99 (SC) (para 6).
Dhananjay Awasthi for the Petitioner. Rakesh Ranjan Agrawal and Suyash Agrawal for the Respondent.
JUDGMENT
Ram Surat Ram (Maurya), J. - Heard Sri Dhananjay Awasthi, Senior Standing Counsel for the appellant and Sri Rakesh Ranjan Agrawal, the counsel for the respondent.
2. This appeal has been filed, under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the Act) from the order of Income Tax Appellate Tribunal, Delhi Bench 'G', New Delhi (hereinafter referred to as the Tribunal) dated 05.10.2009, passed in Income Tax Appeal No. 3423/Del/2009 by which the appeal filed by the Revenue has been dismissed and the order of Commissioner Income -tax (Appeals), Meerut, allowing the appeal of the assessee, has been upheld. The appellant has proposed the following substantial questions of law, said to be involved in the appeal:-
| 1. | "1. Whether on the facts and in the circumstances of the case and in law, the Income Tax AppellateTribunal erred in deleting the addition of Rs. 25,00,000/- on account of bogus share application money, ignoring the facts that identity and creditworthiness of the alleged share applicants and genuineness of the transactions remained unproved as the assessee failed to give any information about alleged shareholders? | |
| 2. | Whether the ITAT was justified in ignoring the decision of Hon'ble Jurisdictional High Court in the case of Ram Lal Agrawal Vs. Commissioner of Income Tax (2006) 280 ITR 547 (Alld) whereas the decision was binding being of Jurisdictional High Court and the ratio was fully applicable to the case under consideration? | |
| 3. | Whether the ITAT was justified in relying on the obitor dicta of the Supreme Court in Lovely Exports, 172 Taxman 44, while ration of the same did not at all apply in the case of the assessee to exclusion of the Jurisdictional High Court's judgment reported in 280 ITR 547 (All.)? | |
| 4. | Whether on the facts and in the circumstances of the case and in law, the Income Tax AppellateTribunal has erred in ignoring the provisions of Section 68 of the IT Act, 1961 by upholding the order of CIT(A) despite of the fact that identity of the alleged shareholders, genuineness of the transaction and creditworthiness of the share applicants were not proved at all?" |
3. The facts giving rise to the present appeal are as follows:
The appeal relates to the assessment year 2004-05. M/s Nav Bharat Duplex Ltd. (the assessee) filed Income Tax Return on 25.10.2004, in capacity of company, showing total loss of Rs. 48,41,804/-. The Return was processed. Later on, the case was selected for scrutiny and notice under Section 143 (2) was issued and served upon the assessee on 26.05.2005. Thereafter notice under Section 142 (1) vide order sheet entry dated 28.08.2006 along with detailed questionnaire was issued and served upon the assessee. The assessee filed his reply on 12.10.2006, and submitted information relating to 18 parties, who had invested in the share capital of the assessee, of the amount of Rs. 1,12,50,000/-. No information has been submitted in respect of balance amount. Thereafter show cause notice dated 28.12.2006 was issued to the assessee who submitted it's reply on 29.12.2006.
4. However the Assessing Officer passed the assessment order dated 29.12.2006 in line of direction issued by Additional Commissioner of Income-tax, Range-2, Meerut. It has been held that the assessee could not discharge his onus in proving that the share applicants of the amount of Rs. 25,00,000/- had enough money in their bank accounts on the date of purchase of the share. Accordingly price of the shares of Rs. 25,00,000/- was added in the income of the assessee. The assessee preferred an appeal from the aforesaid order, before the Commissioner of Income Tax (Appeals), Meerut who by his order dated 26.05.2009 held that five companies subscribing the equity shares amounting to Rs. 25,00,000/- were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such relying upon the judgment of the Supreme Court in CIT v. Lovely Export [2008] 172 Taxman 44, it has been held that additions made by the Assessing Officer was illegal. However it was observed that the jurisdictional Assessing Officer may proceed against the aforesaid five share applicant companies. On these findings, the appeal was allowed and the addition was deleted. The Revenue, feeling aggrieved, filed an appeal before the Tribunal. The Tribunal by the impugned order dated 05.10.2009 dismissed the appeal of the Revenue and upheld the order of the CIT(A).
5. Sri Dhananjay Awasthi, Senior Standing Counsel, submitted that the creditworthiness of the alleged share applicants and genuineness of the transactions were not proved by the assessee. Merely disclosing the identity of the share applicant companies was not sufficient. In such circumstances, the Assessing Officer had rightly made addition in the income of the assessee under Section 68 of the Act. He further submitted that the CIT(A) has wrongly relied upon the obiter dicta of the judgment of Supreme Court in Lovely Export case (supra) and ignored the judgment of this Court in Ram Lal Agrawal v. CIT [2006] 280 ITR 547/[2005] 149 Taxman 342 (All.) which was fully applicable in this case.
6. We have considered the arguments of the counsel for the parties. CIT(A) found that five companies subscribing the equity shares amounting to Rs. 25,00,000/- were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity of the share applicant companies and purchase of share had been proved by the assessee. Supreme Court in the cases of CIT v. Steller Investments Ltd. [2001] 251 ITR 263/115 Taxman 99 and Lovely Exports case (supra), has held that the identity of the shareholder alone is required to be proved, in case of the capital contributed by the shareholders. In view of the authoritative pronouncement of the Supreme Court in the aforesaid cases, judgment of this Court in Ram Lal Agrawal case (supra) is no longer a good law. Accordingly CIT(A) and the Tribunal has not committed any illegality in allowing the appeal of the assessee. We do not find any illegality in the judgment of the CIT(A) and the Tribunal.
7. As a result of the aforesaid discussion the appeal has no force and is dismissed.
SKJRegards
Prarthana Jalan
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