Delhi High Court
Commissioner Of Income Tax vs Hlt Finance (P) Ltd. on 16 August, 2010
Author: Manmohan
8
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 1133/2010
COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Advocate
versus
HLT FINANCE (P) LTD. ..... Respondent
Through: None
% Date of Decision: 16th August, 2010
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment? No
2. To be referred to the Reporter or not? No
3. Whether the judgment should be reported in the Digest? No
MANMOHAN, J
1. The present appeal has been filed under Section 260A of Income
Tax Act, 1961 (for brevity "Act, 1961") challenging the order dated
23rd June, 2009 passed by the Income Tax Appellate Tribunal (in short
"ITAT") in ITA No. 2041/Del/2006, for the Assessment Year 1998-
1999.
2. Ms. Prem Lata Bansal, learned counsel for the Revenue
submitted that ITAT had erred in law in deleting the addition of
Rs.18,00,000/- made by the Assessing Officer (in short „AO‟) on
ITA 1133/2010 Page 1 of 4
account of unexplained share application money under Section 68 of
Act, 1961. She further submitted that ITAT had deleted the said
addition even though the primary onus had not been discharged by the
respondent-assessee with regard to the identity, creditworthiness and
genuineness of the transaction.
3. However, upon a perusal of the file, we find that the said addition
was deleted by the ITAT on the ground that the share applicants were
identified and the revenue was at liberty to reopen the assessment of all
such bogus shareholders. In fact, ITAT in the impugned order has
observed as under:-
"3. It was argued by the learned AR that all the primary
information with regard to shareholders was furnished before
the lower authorities. Our attention was drawn to Annexure I
wherein with respect to each and every shareholder the
assessee has furnished status of person, relationship with the
company and the documents filed before the lower
authorities. From this statement, we found that assessee has
filed confirmation in respect of Shri N.R. Suri and Mrs.
Harvinder Kaur. In respect of Shri M.P. Khanna and Shri
J.P. Khanna, the assessee has filed capital account in the firm
from where withdrawal for this investment was made and
these two are the directors of the assessee company. The
assessee has also filed copies of ledger account. In respect of
three private limited companies, the assessee has filed copy of
ledger account and in case of Hallmark Healthcare Limited,
the assessee has also filed affidavit for advancing the money
on account of share capital. In respect of all these three
companies, the AO has directly obtained the bank statement
from where relevant cheques on account of share capital
were issued. On the basis of these certificates as narrated by
the AO and CIT(A) we can safely conclude that identity of the
shareholders was established and the only grievance of the
CIT(A) was with regard to creditworthiness of these
shareholders and genuineness of transaction. Hon'ble
Supreme Court in the case of Divine Leasing and Finance
Limited dismissed the SLP filed by the Revenue against the
order of Hon'ble Jurisdictional High Court, with speaking
order. In case of Value Capital Service (P) Ltd. in ITA
No.348/08, vide order dated 25.4.2008, Hon'ble Delhi High
ITA 1133/2010 Page 2 of 4
Court held that it is very difficult for the assessee to show the
creditworthiness of strangers and if the Revenue had any
doubt with regard to ability to make the investment, their
returns may be reopened by the department. Hon'ble
Supreme Court in the case of Lovely exports while rejecting
the department's SLP No. 11993/07 dated 11.1.2008, held
that when the share application money is received by the
assessee company from alleged bogus shareholders whose
names are given to the AO, then the department is free to
proceed to reopen their individual assessments in accordance
with law. Similar was the finding of Hon'ble Supreme Court
in the case of Shipra Retailers (P) Ltd. In SLP No. 451/08
dated 21.1.2008 as also in the case of Divine Leasing &
Finance Ltd. In SLP No. 375/08 dated 21/1/2008.
4. The various judgments relied on by the learned AR and
placed on record clearly lay down the ratio to the effect that
in respect of money introduced by way of share capital, and
the assessee company furnished the names and particulars of
shareholders for establishing their identity, the department
may proceed to reopen the assessments of all such alleged
bogus shareholders whose investment in the share capital is
found to be unexplained
.
5. In view of the above, we allow the appeal of the assessee with
the similar direction to the effect that department is at liberty
to reopen the individual assessment as alleged shareholders,
as per provisions of law."
6. In our considered opinion, the approach adopted by CIT(A) and
ITAT is in consonance with the decision of Supreme Court in
Commissioner of Income Tax Vs. Lovely Exports (P) Ltd., 216 CTR
195 (SC) wherein it has been held as under :-
"2. Can the amount of share money be regarded as
undisclosed income under s. 68 of IT Act, 1961? We find no
merit in this Special Leave Petition for the simple reason that
if the share application money is received by the assessee
company from alleged bogus shareholders, whose names are
given to the AO, then the Department is free to proceed to
reopen their individual assessments in accordance with law.
Hence, we find no infirmity with the impugned judgment......"
7. Keeping in view the aforesaid mandate of law, the share
application money of Rs.18,00,000/- cannot be regarded as undisclosed
income of assessee under Section 68 of Act, 1961. Accordingly,
present appeal is dismissed in limine.
MANMOHAN, J
CHIEF JUSTICE
AUGUST 16, 2010
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