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2013 (10) TMI 708 - HC - Income TaxAssessment of Share Application Money - Whether the ITAT was right in observing if the share application money was assessed in the hands of the share applicants, the same would not be assessed in the hands of the respondent-assessee Held that - Relying upon CIT Vs. Orissa Corporation (P) Ltd. 1986 (3) TMI 3 - SUPREME Court - Only clarification is required - The issue on merits has been remanded to the Assessing Officer - the observations made by the tribunal implies and means that the Assessing Officer should objectively examine the whole issue and in case he finds that the transactions are genuine and are fully recorded by the share applicants, then no addition shall be made in the hands of the respondent-assessee - the two conditions have to be satisfied - Firstly the transaction should be genuine, true and not a camouflage, and secondly the transaction should be duly recorded in the books of the share applicants - In case, any of the two conditions are not satisfied, then it will be open to the Assessing Officer to act in accordance with law and made appropriate additions if justified and mandated by the Statute - Decided in favour of Revenue.
Issues:
1. Interpretation of observations in the order of remand. 2. Taxability of share application money received by the respondent-assessee. 3. Assessment of commission paid by the respondent-assessee to procure entries. Issue 1 - Interpretation of observations in the order of remand: The High Court addressed the concern raised by the appellant regarding observations in the order of remand that could potentially restrict the Assessing Officer. The Court clarified that the Assessing Officer must objectively evaluate the genuineness of transactions and ensure they are properly recorded by the share applicants. If the transactions meet these criteria, no additions should be made in the hands of the respondent-assessee. However, if either condition is not met, the Assessing Officer has the authority to take appropriate action as per the law. Issue 2 - Taxability of share application money: In the case under consideration for the assessment year 2001-02, the respondent-assessee had received Rs.63,00,000 as share application money from 11 companies. The Assessing Officer alleged that these were accommodation entries and made additions to the respondent's income. However, the first appellate authority ruled in favor of the respondent, citing various documents provided as evidence. The Tribunal, after considering relevant precedents, set aside the order and remanded the matter to the Assessing Officer for fresh consideration. Issue 3 - Assessment of commission paid for entries procurement: Apart from the share application money, an additional Rs.31,500 was added as commission paid by the respondent to the companies for obtaining entries. The Tribunal's directions emphasized the need for a thorough examination of the facts and circumstances by the Assessing Officer, indicating that if the impugned amounts were assessed in the hands of the share applicants, they could not be taxed in the hands of the respondent-assessee. In conclusion, the High Court clarified the conditions under which additions could be made to the respondent's income, emphasizing the importance of genuine transactions and proper documentation by the share applicants. The judgment highlighted the need for a meticulous assessment by the Assessing Officer in such cases and upheld the Tribunal's decision to remand the matter for further consideration.
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