2007 (10) TMI 642 - HC - Income Tax

Additions on Unexplained Share application Money - Loss declared - financing and trading in shares - HELD THAT - We find that the findings of the CIT(A) as extracted hereinabove are sufficient to show that the additions made by the Assessing Officer were not justified. The reasoning and conclusions arrived at concurrently by the CIT(A) and the Tribunal suffer from no perversity and are consistent with the law as explained by this Court in CIT v. Divine Leasing Finance Ltd. 2006 (11) TMI 121 - DELHI HIGH COURT . We are of the view that no substantial question of law arises in these appeals. Accordingly, these appeals are dismissed.

Issues:
1. Addition on account of unexplained share application money.
2. Justification of additions made by the Assessing Officer.
3. Prima facie proof required under section 68 of the Income-tax Act.

Analysis:

Issue 1: Addition on account of unexplained share application money
The assessee companies were assessed at a positive income after additions on account of unexplained share application money. The Assessing Officer required the assessees to furnish details and documents, including bank statements to substantiate the money availability and prove the genuineness of the transactions. However, the Assessing Officer passed the assessment order without giving the assessees sufficient time to respond to the report of the Income-tax Inspector, which raised doubts about the existence of the applicants. The CIT(A) admitted additional evidence furnished by the assessees, and after examining the record, deleted the addition on account of unexplained share application money. The CIT(A) found that the applicants were identified, confirmed the payments, transactions were by cheques, and affidavits with bank account details were filed, indicating no grounds for disbelief. The CIT(A) also noted that proper enquiries could have revealed the true facts of the case, and the deposits were believable.

Issue 2: Justification of additions made by the Assessing Officer
In the appeal by the revenue, the Tribunal found that the facts of the case were similar to a group company's case where the Tribunal had deleted the addition on account of unexplained share application money. The Tribunal examined the documents and noted that they were available on the Assessing Officer's file. The Tribunal dismissed the revenue's appeals, stating that the findings of the CIT(A) showed that the additions made by the Assessing Officer were not justified. The reasoning and conclusions of the CIT(A) and the Tribunal were found to be consistent with the law as explained in previous judgments.

Issue 3: Prima facie proof required under section 68 of the Income-tax Act
The High Court emphasized the requirements under section 68 of the Income-tax Act, stating that the assessee must prove the identity of the creditor/subscriber, the genuineness of the transaction, the creditworthiness of the creditor/subscriber, and provide relevant details to the department. It was noted that adverse inferences should not be drawn solely based on the creditor/subscriber's failure to respond, and the Assessing Officer must investigate the creditworthiness, genuineness of the transaction, and the veracity of any repudiation.

In conclusion, the High Court found no substantial question of law in the appeals and dismissed them based on the consistent reasoning and conclusions of the CIT(A) and the Tribunal, along with the established legal principles under section 68 of the Income-tax Act.

← Previous Next →