2014 (8) TMI 1157 - HC - Income Tax

Addition u/s 68 - discharge of onus with regard to share application money received from 5 different parties - Held that - Identity of the 5 parties investing in the share capital is not in doubt - They are body corporates and their complete addressees are on record. This is the very first assessment in the life of the assessee company. The amounts were deposited by these 5 corporates per account payee cheques. These parties were not shareholders of the assessee company at the time when the case was reopened u/s 147 or when the summons were issued to them. The assessee has filed before the A.O. copies of share application forms duly signed along with the complete addresses of the investors along with their I.T. file numbers account payee cheque numbers and the assessee s bank statements disclosing the deposits of these amounts. The assessee has discharged its initial onus to prove the identity of the investors as well as their creditworthiness. It is not the case of the Revenue that the investor parties did not exist or that the money was not invested by them through banking channels. Having found such the Tribunal had relied on the judgement in Hindusthan Tea Trading Co.Ltd. v. CIT (2003 (3) TMI 53 - CALCUTTA HIGH COURT) to uphold the order of the CIT. No substantial question of law arises

Summary

Issues:
1. Deletion of addition of Rs. 16,00,000 in total income of the assessee.
2. Justification of holding that the assessee has discharged the onus regarding share application money.
3. Validity of the Tribunal's finding that the share application money received was genuine.

Analysis:
1. The appellant/revenue filed an appeal under section 260A of the Income Tax Act 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 1995-96. The Tribunal had deleted the addition of Rs. 16,00,000 in the total income of the assessee. The High Court noted that the Tribunal confirmed the order of the CIT, who overturned the Assessing Officer's decision. The Tribunal found that the identity of the 5 parties investing in the share capital was not in doubt. These parties were body corporates, and their complete addresses were on record. The amounts were deposited through account payee cheques, and the parties were not shareholders of the assessee company when the case was reopened or when summons were issued. The assessee provided share application forms, addresses of investors, IT file numbers, cheque numbers, and bank statements, proving the deposits. The High Court held that the assessee had discharged its initial onus to prove the identity of investors and their creditworthiness.

2. The Tribunal's decision was based on the judgment in Hindusthan Tea Trading Co.Ltd. v. CIT (Cal): 263 ITR 289 (Cal), which supported the order of the CIT. The Tribunal's finding that the share application money was genuine was upheld by the High Court. It was observed that no substantial question of law arose from the findings noted. Therefore, the appeal and the application were dismissed. The High Court directed the urgent issuance of a certified copy of the order to the appearing parties on a priority basis.

This detailed analysis of the judgment from the Calcutta High Court provides insights into the issues raised, the arguments presented, and the court's reasoning leading to the final decision.