2018 (4) TMI 1714 - HC - Income Tax

Addition u/s 68 - Addition as identity of the applicants remained unverified and the assessee could not give reply in this regard - Amount received towards the share applications was by way of cheque - HELD THAT - All the details regarding applicants were furnished by the assessee and Department could have issued notices to such applicants. Hence there was no need for the Assessing Officer to make addition. It appears that before the CIT (Appeals) also such prayer could have been made by the Department for issuance of Notices upon share applicants. No such application was preferred before C.I.T. (Appeals) by this appellant. Hence we see no reason at this stage to remand the matter to the Assessing Officer for further verification of share applications. Similar type of cases are coming to this court often and most of the time sametype of error is committed by the Assessing Officers either deliberately or due to induced ignorance . This is not the first time such type of matter has been taken up by this Court Commissioner Income Tax to have orientation courses or induction courses conducted for the Assessing Officers to make them understand that whenever assessee receives any amount by cheque there is a need for the Assessing Officer to give notice to the drawers of those cheques. T here is no substance in this Tax Appeal as no error has been committed by the Income Tax Appellate Tribunal and the Commissioner of Income Tax - No substantial question of law involved in this Tax Appeal this Tax Appeal is hereby dismissed.

Summary

Issues:
- Whether the ITAT was justified in confirming the CIT (A) order deleting the addition despite the unidentified identity of share applicants and unverified transaction genuineness?
- Whether the ITAT was justified in not remanding the case to the AO for further investigation despite clear findings on unidentified share applicants and unverified transactions?
- Whether the ITAT's order is perverse?

Analysis:
1. The Tax Appeal under Section 206 A of the Income Tax Act, 1961 raised substantial questions of law regarding the deletion of an addition of ?95,15,000 for the Assessment Year 2005-06 due to unverified share applicants' identity and transaction genuineness.

2. The Assessing Officer made the addition due to unverified share applicants' identity. The appeal before the CIT (A) detailed the source of the received amount via cheques, suggesting a lack of follow-up by the Department on bank entries. The CIT (A) allowed the appeal, quashing the addition.

3. The Department appealed to the ITAT, which dismissed the appeal citing the Assessee's disclosure of shareholder particulars and cheque-based share application receipts. The ITAT referred to the Supreme Court's decision in Lovely Exports (Pvt.) Ltd. The ITAT's decision was based on the Assessee's provision of applicant details and cheque payments.

4. The High Court noted that all share application amounts were received via cheques and that the Department could have issued notices to the applicants based on the provided details. The Court found no justification for the Assessing Officer's addition of ?95,15,000.

5. The Court highlighted the recurring issue of Assessing Officers making errors in similar cases due to induced ignorance. It suggested orientation courses for Assessing Officers to understand the necessity of issuing notices when an Assessee receives amounts via cheques.

6. Considering the facts, the Court found no error in the ITAT's order or the CIT (A)'s decision. As no substantial question of law was identified, the Tax Appeal was dismissed.

In conclusion, the High Court dismissed the Tax Appeal, emphasizing the importance of verifying share applications and issuing notices based on cheque payments to prevent unwarranted additions by Assessing Officers.