Delhi High Court
Commissioner Of Income Tax vs M/S. New Age Infosys Pvt. Ltd. on 27 September, 2010
Author: Manmohan
#12
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 1469/2010
COMMISSIONER OF INCOME TAX ..... Appellant
Through: Ms. Prem Lata Bansal, Advocate
versus
M/S. NEW AGE INFOSYS PVT. LTD. ..... Respondent
Through: None
% Date of Decision: 27th September, 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
CM No.16966/2010
This is an application for condonation of delay in refiling the
appeal.
For the reasons stated in the application, delay in refiling the
appeal is condoned.
Accordingly, the application stands disposed of.
ITA 1469/2010
1. The present appeal has been filed under Section 260A of Income
Tax Act, 1961 (for brevity "Act") challenging the order dated 20th July,
2009 passed by the Income Tax Appellate Tribunal (in short
"Tribunal") in ITA No. 1931/Del/2009, for the Assessment Year 2004-
2005.
2. Ms. Prem Lata Bansal, learned counsel for the Revenue
submitted that the Tribunal had erred in law in deleting the addition of
` 12,81,250/- made by the Assessing Officer (in short "AO") on
account of unexplained share application money under Section 68 of
Act. She further submitted that the Tribunal had deleted the said
addition even though the respondent-assessee had not discharged its
primary onus 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 Commissioner of Income Tax (Appeals) [in short
"CIT (A)"] and Tribunal on the ground that the two share applicants
were corporate entities who had filed documents like Permanent
Account numbers, copy of return of income, affidavit from Directors,
balance sheet, profit and loss account, bank statement, copy of the
resolution passed in Board meeting, copy of the share application and
copy of the share certificate thereby confirming the identity and
genuineness of the transaction. In fact, CIT (A) in its order has
observed as under:-
"In view of the factual position as well as the judicial
pronouncement on the subject, discussed above, I am of
the considered view that the appellant has discharged the
initial onus of establishing the bonafides of the
transactions and the AO was not justified in ignoring
various evidences provided to him by the appellant.
Nothing adverse has been brought on record by the AO to
establish that the amount of share application money of
Rs.12,50,000/- received by the appellant from the said two
companies represents its own undisclosed income.
If there was doubt about the source of investment of the
said company, then additions should have been made in
the case of that company and not in the hands of the
appellant company.
It is also seen that addition has been made by the A.O.
solely on the basis of the information received from the
Investigation Wing, without making any further
investigation on the issue. Moreover, details about the
investigation/enquiry conducted by him or the
Investigation Wing on the basis of which it was held that
the said company was involved in the business of providing
accommodation entry has neither been confronted by the
A.O. to the appellant during the course of assessment
proceedings, nor it has been mentioned in the Assessment
Order. The Hon'ble Delhi High Court in the case J.T.
(India) Exports and another Vs. UOI and another (2003)
262 ITR 269 (Del-FB) has held that the Assessing Officer
must pass a speaking order giving reasons for the
conclusions arrived at and opportunity of being heard
must be provided to the assessee, before passing any
adverse order. It has been further held that in the notice
issued by the A.O. specific requirement should be indicated
and reasonable opportunity must be granted. It was held
by the Hon'ble Delhi High Court that in absence of a
notice of the kind and such reasonable opportunity, the
order passed against the person in absentia becomes
wholly vitiated.
In the light of the above discussion, I am inclined to agree
with the arguments and evidences provided by the
appellant to substantiate that the transaction regarding
Share Application Money received by it were genuine
transactions and the same were not accommodation
entries, I also do not find any evidence collected by the
A.O. which could prove otherwise. Accordingly, the AO
was not justified in treating the amount of share
application money received by the appellant as its
undisclosed income.
In view of our aforesaid discussion, I delete the addition of
12,50,000/- made by the AO u/s 68 of the I.T. Act, 1961."
4. The Tribunal in its order has also observed as under:-
"3. The revenue has brought the issue in appeal before
the Appellate Tribunal. Ld. DR relied upon the
assessment order. However, in the light of decisions of
Hon'ble Supreme Court in the case of Stellar Investment
Ltd. 251 ITR 63(SC) and CIT Vs. Lovely Export 216 CTR
(SC) 195 and facts and circumstances of the case as
elaborately discussed by ld. CIT(A) in the impugned
order, we see no justification for interfering in the
impugned order. Transfer of share application money
from the bank account of the shareholders to the assessee
company is fully established and not in doubt. Therefore,
even if it is accepted that applicants had hawala entries in
their account, the revenue has to proceed against the
applicants and not against the company. This follows
from the decisions of their Lordships of Supreme Court in
the case of Lovely Export (supra) in which it is held as
under:
"The assessee had given details of the
subscribing share applicants. In case the
Department alleged that applicants were bogus,
it was free to proceed against the applicants.
The share application money received could not
be regarded as undisclosed income of the
assessee company."
3.1 We must hasten to add that it is not our finding
that share applicants in the present case are bogus.
Genuineness of the applicants and transfer of money
from them has been clearly established. In case source
of funds in the hands of applicants is doubted, which case
revenue is seeking to make at present, then revenue has
to proceed against the applicants in accordance with
law. Addition in the hands of the company u/s 68 of the
I.T. Act is not justified at all. On facts and circumstances
of the case, we see no error in the approach of the ld.
CIT(A) in deleting the addition disputed in the two
grounds of appeal by the revenue. These grounds of
appeal are accordingly rejected."
5. 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......"
6. Keeping in view the aforesaid mandate of law and the concurrent
findings of fact arrived at by the two authorities below, the share
application money cannot be regarded as undisclosed income of
assessee under Section 68 of the Act.
7. Accordingly, present appeal is dismissed in limine.
MANMOHAN, J
CHIEF JUSTICE
SEPTEMBER 27, 2010
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