2012 (10) TMI 602 - AT - Income Tax

Addition on account of cash credit u/s 68 Share application of money Assessee could not able to explain source of investment Held that - Following the decision in case of LOVELY EXPORTS (PVT) LTD (2008 (1) TMI 575 - SUPREME COURT OF INDIA) 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. Therefore the amount received by assessee as share application money cannot be regarded as undisclosed income of the assessee. Issue in favour of assessee

Summary

Issues:
1. Condonation of delay in filing appeals by the Revenue.
2. Addition of share application money and unsecured loans under section 68 of the Income Tax Act.
3. Challenge against orders of the Assessing Officer and CIT(A).
4. CIT(A) decision on the addition of share application money and unsecured loans.
5. Deletion of penalty under section 271(1)(c) by the CIT(A).
6. Appeal by the Revenue against CIT(A) orders.

Analysis:
1. The Revenue filed appeals with a delay of 13 days, supported by an affidavit for condonation of delay. The Tribunal condoned the delay, admitting the appeals for disposal on merits in the interest of justice.

2. The Assessing Officer added share application money and unsecured loans under section 68 of the Income Tax Act based on the admissions made by the assessee's Authorized Representative (A.R.). The CIT(A) partly allowed the appeal, deleting the addition of share application money but confirming the addition of unsecured loans.

3. The assessee challenged the orders of the Assessing Officer under section 143(3) and section 271(1)(c) before the CIT(A) through separate appeals, leading to the present appeals by the Revenue before the Tribunal.

4. The CIT(A) relied on the Supreme Court judgment in the case of CIT Vs. Lovely Exports (P) Ltd., partially allowing the appeal by deleting the addition of share application money but confirming the addition of unsecured loans. The CIT(A) also directed the deletion of the penalty levied under section 271(1)(c) by the Assessing Officer.

5. The Revenue contended that the CIT(A) erred in relying on the Supreme Court judgment regarding share application money and in deleting the penalty under section 271(1)(c). However, as no representation was made on behalf of the assessee, the Tribunal examined the orders and upheld the CIT(A) decision.

6. The Tribunal dismissed the Revenue's appeals, confirming the CIT(A) orders on both issues regarding the addition of share application money and unsecured loans under section 68, as well as the deletion of penalty under section 271(1)(c). The Tribunal emphasized that the Revenue could proceed against individuals/investors as per law if their investments were not confirmed.