Delhi High Court
Commissioner Of Income Tax vs Raghvi Finance Ltd. on 31 August, 2010
Author: Manmohan
#4
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 1264/2010
COMMISSIONER OF
INCOME TAX ..... Appellant
Through: Mrs. Prem Lata Bansal,
Advocate
versus
RAGHVI FINANCE LTD. ..... Respondent
Through: None
% Date of Decision: 31st 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 the
Income Tax Act, 1961 (hereinafter referred to as "Act, 1961")
challenging the order dated 3rd September, 2009 passed by the Income
Tax Appellate Tribunal (for brevity "Tribunal") in ITA No.
973/Del/2009 for the Assessment Year 2000-2001.
2. Ms. Prem Lata Bansal, learned counsel for the Revenue
submitted that the Tribunal had erred in law in deleting the addition of
` 25,05,000/- made by the Assessing Officer (in short "AO") on
account of unexplained share capital under Section 68 of Act, 1961.
She further submitted that the Tribunal had deleted the said addition
even though the respondent-assessee had not established the identity
and creditworthiness of the share applicants and genuineness of the
transactions.
3. However, upon a perusal of the file, we find that the said addition
was deleted by the Commissioner of Income Tax (Appeals) [for short
"CIT(A)] and the Tribunal on the ground that the respondent-assessee
had proved identity of the share applicants as well as payments had
been received through account payee cheques and the share applicants
were assessed to income tax. In fact, the Tribunal in its impugned order
has observed as under :-
"4. We have considered the contentions of learned DR and
carefully gone through the orders of the authorities below.
From the record we found that CIT(A) had deleted the
addition by recording a finding that the appellant company
has proved the identity of the share applicants and payment
has been received through account payee cheques and share
applicants are assessed to income tax. This finding has not
been controverted by learned DR. The issue with regard to
addition on account of share capital is no more res-integra in
view of the decision of Hon'ble Supreme Court in case of
Lovely Exports wherein SLP was dismissed vide order dated
11.1.2008 holding 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 the 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. In the instant case, shares have been
allotted to all the share applicants on 4/1/2004. Return of
allotment of shares in form No. 2 as per the Companies Act,
1956 was filed with Registrar of Companies Delhi and
Haryana. Copy of same was also filed with the AO.
Confirmations of the share applicants as desired by the AO
were filed during the course of assessment proceedings. All
the share applicants are the corporate assessee and assessed
to tax with the income tax department. Applying the
proposition of law as laid down by Hon'ble Supreme Court,
discussed hereinabove, to the facts of the instant case, we do
not find any reason to interfere in the order of CIT(A)
deleting the addition made on account of share capital."
4. In our considered opinion, the approach adopted by CIT(A) and
Tribunal 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......"
5. Keeping in view the aforesaid mandate of law, the share
application money cannot be regarded as undisclosed income of
assessee under Section 68 of Act, 1961. Accordingly, present appeal,
being bereft of merit, is dismissed in limine.
MANMOHAN, J
CHIEF JUSTICE
AUGUST 31, 2010
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