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2014 (11) TMI 1265 - HC - Income TaxAddition u/s 68 - funds in the form of share capital came from persons other than the company - HELD THAT - The issue No.1 is already answered by this Court in favour of the assessee and against the revenue in the decision rendered in 2010 (8) TMI 1135 - GUJARAT HIGH COURT as relied upon by the learned advocate for the appellant held that as having traced out the source of funds to specific persons who had invested the same in shares of the assessee company, it was open for the Assessing Officer to proceed against the said persons. The funds not having emanated from the assessee company, there was no warrant for making addition of the said amount as undisclosed income under section 68 of the Act in its hands. In the circumstances, the Tribunal was justified in deleting the addition.The issue No.1 is already answered by this Court in favour of the assessee and against the revenue. Charging of interest u/s 217 when the assessment under Section 143(3) read with Section 147 has to be treated as an original assessment - ITAT deleted the addition - HELD THAT - Issue concluded by the decision of the Punjab and Haryana High Court in the case of Darshan Lal Gulati 2008 (3) TMI 683 - PUNJAB AND HARYANA HIGH COURT wherein, it is held that in case an assessment had been framed in response to original return filed by assessee, first or initial assessment made by Assessing Officer would be treated as regular assessment and in that situation, assessment in pursuance to reassessment proceedings could not be termed as first assessment so as to come within the meaning of expression regular assessment and, accordingly interest under Section 217 could not have been charged. Thus, the question No.2 is also answered in favour of the assessee and against the revenue.
Issues:
1. Challenge to the order passed by the Income Tax Appellate Tribunal 2. Deletion of addition under Section 68 of the Act 3. Deletion of interest under Section 217 of the Act in the case of reassessment Analysis: Issue 1: Challenge to the order passed by the Income Tax Appellate Tribunal The Revenue challenged the order dated 21.07.2000 passed by the Income Tax Appellate Tribunal. The Court admitted the appeals and formulated substantial questions of law. The advocate for the appellant contended that previous decisions favored the assessee. After hearing both parties and examining the material on record, the Court found that the issue was already decided in favor of the assessee in previous cases, citing the decision in the case of Commissioner of Incometax v. Lovely Exports (P) Ltd. The Court upheld the Tribunal's decision to delete the addition made under Section 68 of the Act. Issue 2: Deletion of addition under Section 68 of the Act The Court analyzed the source of funds and specific persons involved in the case. It was established that the assessee company had not generated income of Rs.50 lakhs immediately after its incorporation. The Court referred to the decision in the case of Commissioner of Incometax v. Lovely Exports (P) Ltd. to emphasize that if share application money is received from alleged bogus shareholders, the Department can proceed against the said persons. As the source of funds was traced to specific investors, the addition made under section 68 of the Act was unjustified. Therefore, the Tribunal's decision to delete the addition was upheld. Issue 3: Deletion of interest under Section 217 of the Act in the case of reassessment The Court referred to the decision of the Punjab and Haryana High Court in the case of Darshan Lal Gulati to address this issue. It was held that if an assessment had been framed in response to the original return filed by the assessee, the assessment in pursuance of reassessment proceedings could not be termed as 'first assessment.' Therefore, interest under Section 217 could not have been charged. The Court answered this question in favor of the assessee and against the revenue. In conclusion, the Court dismissed both appeals, upholding the decisions in favor of the assessee on both issues.
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