2017 (1) TMI 1567 - HC - Income Tax

Unexplained share capital u/s 68 - discharge the primary onus casted upon it to prove the identify, genuineness and creditworthiness of the investors - Held that - In view of the judgment of the Hon ble Supreme Court in the case of Commissioner of Income Tax vs. Lovely Exports (P) Ltd.(2008 (1) TMI 575 - SUPREME COURT OF INDIA) as held 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 re-open their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. The issue is decided in favour of the assessee.

Summary

Issues: Challenge to Tribunal's order on unexplained share capital addition under Section 68 of the Act.

In this case, the appellant challenged the Tribunal's judgment partially allowing the appeal and modifying the Assessing Officer's order regarding the addition of ?85,00,000 on account of unexplained share capital under Section 68 of the Act. The main question of law framed by the Court was whether the Tribunal was justified in deleting the addition when the assessee failed to prove the identity, genuineness, and creditworthiness of the investors. However, the Court referred to the Supreme Court judgment in Commissioner of Income Tax vs. Lovely Exports (P) Ltd., which stated that if share application money is received from alleged bogus shareholders, the department can proceed to re-open their individual assessments. Based on this, the Court decided in favor of the assessee, dismissing the appeal and ruling against the department.