IT: Where assessee-company received from shareholders certain amount on account of share application money, it was required to prove only identity of shareholder and not genuineness of transactions and creditworthiness of shareholders
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[2013] 35 taxmann.com 470 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax, Meerut
v.
Kamna Medical Centre (P.) Ltd.*
R.K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO. 455 OF 2009†
NOVEMBER 8, 2012
Section 68 of the Income-tax Act, 1961 - Cash credit [Share application money] - Assessment year 2005-06 - During year assessee-company received from shareholders certain amount on account of share application money - Assessing Officer added said amount to income of assessee on ground that it had failed to prove genuineness of transactions and creditworthiness of shareholders - Commissioner (Appeals) relying upon decision of Supreme Court rendered in case of CIT v. Steller Investment Ltd. [2001] 115 Taxman 99 deleted impugned addition made by Assessing Officer - He held that in case of capital contributed by a shareholder, identity of shareholder was only required to be proved - Tribunal upheld order of Commissioner (Appeals) - Whether instant case was squarely covered by decision of Supreme Court in case of Steller Investment Ltd. (supra) - Held, yes [Para 3][In favour of assessee]
CASES REFERRED TO
CIT v. Steller Investment Ltd. [2001] 251 ITR 263/115 Taxman 99 (SC) (para 2) and CIT v. Lovely Exports (P.) Ltd. [2008] 172 Taxman 44 (Mag.) (para 1).
Dhananjay Awasthi for the Petitioner.
JUDGMENT
1. The present appeal has been filed under Section 260 (A) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') against the order dated 30.4.2009 passed by the Income Tax Appellate Tribunal, New Delhi (hereinafter referred to as the 'Tribunal'). The Commissioner of Income Tax, Meerut had proposed the following substantial question of law said to be arising out of the order of the Tribunal: -
| "(I) | Whether the bogus shareholders in whose hand only agricultural income has been shown can be accepted as 'person' under the IT Act and the share capital introduced by such persons under the garb of share capital money can be accepted? | |
| (II) | Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal has erred in ignoring the provisions of section 68 of the I.T. Act, 1961 by upholding the order of CIT(A) despite the fact that identity of the alleged shareholders, genuineness of the transaction and creditworthiness of share applications were not proved at all? | |
| (III) | Whether the Ld. ITAT was justified in ignoring the decision of Hon'ble Jurisdictional High Court in the case of Ram Lal Agarwal v. CIT[2006] 280 ITR 547 (All.), whereas the decision was binding being of jurisdictional High Court and the ratio was fully applicable to the case under consideration? | |
| (IV) | Whether the ITAT was justified in relying on the obitor dicta of the Supreme Court in Lovely Exports 172 Taxman 44 (Mag.) while the ratio of the same did not at all apply in case of the assessee to exclusion of the jurisdictional High Court's judgment reported in 280 ITR 547 (All) | |
| (V) | Whether the ITAT was justified in relying on the Supreme Court judgment in the case of CIT v. Lovely Exports 172 Taxman 44 in which it was clearly held that the department was free to proceed to reopen the assessment of alleged shareholders whereas in the present case the alleged share holders were agriculturist, not existing in the income tax records, hence, the question of reopening the individual assessment did not arise?" |
2. Briefly stated, the facts giving rise to the appeal are as follows:-
The appeal relates to the Assessment Year 2005-06. During the assessment year in question, an addition of Rs. 19,00,000/- on account of share application money received from the shareholders has been made by the Assessing Authority on the ground that the respondent assessee has failed to prove genuineness of transactions and creditworthiness of the shareholders. The Assessing Officer has found that the shareholders have shown low income in the income tax returns which was much less compared to investment in share capital.
In Appeal, the CIT deleted the observation that in case of capital contributed by a shareholder, the identity of the shareholder is only required to be proved. While holding so, the Commissioner of Income Tax relied upon decision of Hon'ble Supreme Court in the case of CIT v. Steller Investment Ltd. [2001] 251 ITR 263/115 Taxman 99 and also CIT v. Lovely Exports (P.) Ltd. [2008] 172 Taxman 44 (Mag.). The appeal preferred by the Revenue before the Tribunal failed.
3. We have heard Sri Dhananjay Awasthi, learned Senior Standing Counsel for the appellant and have perused the three orders passed by the authorities, including that by the Tribunal and find that the matter is squarely covered by the decision of Hon'ble Supreme Court in the case of Steller Investment Ltd. (supra). That being the position, we are of the considered opinion that the order passed by the Tribunal does not suffer from any legal infirmity.
4. The appeal fails and is dismissed.
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