2011 (1) TMI 29 - HC - Income Tax

Credit worthiness of depositors - additions u/s 68 - assessee is a public limited company and the deposits were invited by public notice and not privately. It is also important to note that total deposits in this year which was received were to the tune of Rs.2.61 crores and the Assessing Officer has raised dispute only qua 18 persons and whose total deposits are Rs.18.00 lakhs - Held that - By giving the information which was available with the assessee in the form received in the aforesaid application form filled by the depositors in the aforesaid circumstances discharged the initial onus. In a case where public company receives the deposit through public notice and not privately and various depositors make the deposits it is possible that at relevant time the assessing company is not in a position to take the confirmation from each and every depositor. The deposits of those eight persons are nominal in nature when compared to the total deposits received by the assessee. Moreover the information given in the application forms submitted by these depositors would have served the purpose and it cannot be said that the assessee did not discharge the onus. - Decided in favor of assessee.

Summary

Issues:
1. Condonation of delay in filing and refiling appeals.
2. Challenge to Tribunal's order regarding unexplained deposits.
3. Substantial questions of law admitted for both Revenue and Assessee appeals.
4. Analysis of evidence and legal reasoning for sustaining or deleting additions under Section 68 of the Income Tax Act.

Condonation of Delay:
The High Court allowed the condonation of delay in filing and refiling appeals subject to a payment of costs to the Delhi High Court Legal Services Committee within a specified time frame.

Challenge to Tribunal's Order on Unexplained Deposits:
The case involved an appeal by the assessee and the Revenue against the Tribunal's order regarding unexplained deposits. The Assessing Officer added deposits of Rs.18.00 lakhs under Section 68 of the Income Tax Act, citing lack of credit-worthiness for 18 depositors. The CIT (Appeal) deleted the entire amount, but the Tribunal sustained the addition for some depositors. The High Court admitted appeals from both parties on substantial questions of law.

Analysis of Evidence and Legal Reasoning:
The CIT (Appeal) found the assessee had satisfactorily discharged the onus by providing necessary documents and information to establish the identity of depositors. The Tribunal upheld the addition for some depositors, but the High Court noted that the assessee, a public limited company, had followed proper procedures for deposit acceptance. The Court emphasized that the onus shifted to the Assessing Officer to further investigate if unsatisfied, rather than solely relying on lack of tax assessments or PAN/GIR numbers. The High Court concluded that the assessee had fulfilled its initial burden by providing detailed application forms and other relevant information.

The High Court dismissed the Revenue's appeal, finding no merit in challenging the CIT (Appeal) decision. Regarding the sustained addition of Rs.5.20 lakhs, the Court reasoned that the assessee's submission of application forms sufficed to establish the legitimacy of deposits. The Court held that even for these eight depositors, the onus was discharged, and the CIT (Appeal) decision to delete the entire amount was justified. Consequently, the High Court ruled in favor of the assessee, setting aside the Tribunal's order and restoring the CIT (Appeal) decision.

In conclusion, both appeals were disposed of accordingly, with the High Court upholding the decisions based on the evidence presented and the legal principles governing unexplained deposits under Section 68 of the Income Tax Act.