2018 (2) TMI 1530 - HC - Income Tax

Addition of receipts as share premium and call in arrears - CIT and the ITAT were of the opinion that though the features of the case were unusual and the call arrears were liquidated after 10 years, equally the assessee was a public limited company and could not be expected to keep track of its individual shareholders and their details - Held that - While initially the addition based upon the Assessing Officer s assessment of the facts were premised upon the unusual feature of liquidation of the arrears after a substantial period, the fact equally remains that the assessee was placed under certain difficulties and therefore, unable to explain these transactions. Moreover, the assessee is a company with large shareholding. In these circumstances, the findings of fact concurrently made by the Appellate Authorities therefore, do not call for interference. Appeal is therefore, dismissed. - Decided against revenue

Summary

Issues involved: Appeal seeking deletion of sum brought to tax by Assessing Officer based on share premium and call in arrears reported by the assessee in a public issue made in 1994-95.

Analysis:
1. Assessment of Unusual Features: The Assessing Officer added the sum to tax under Section 68 as the assessee failed to explain the mode of receipts of money received as share premium and calls in arrears. The officer found it unusual that the amount stood outstanding for almost 10 years before being paid up suddenly. Despite multiple opportunities, the assessee could not provide full details of the receipts and names and addresses of the payers. The officer conducted a survey under Section 133(6) and concluded that the genuineness of the transactions was not proven, leading to the addition of the sum as cash credit.

2. Appellate Findings: Both the CIT and the ITAT acknowledged the unusual features of the case but also noted that the assessee, being a public limited company with over 50,000 shareholders, could not be expected to keep track of individual shareholders and their details. The ITAT upheld the CIT's decision to delete the addition, citing various precedents, including a decision of the Hon'ble jurisdictional High Court of Delhi. The ITAT reasoned that in the case of a public issue, the company cannot be expected to know every detail about its subscribers' identity and financial worth.

3. High Court Decision: The High Court observed that while the Assessing Officer initially based the addition on the unusual liquidation of arrears after a long period, the assessee faced genuine difficulties in explaining the transactions. Considering the large shareholding of the company, the High Court upheld the findings of the Appellate Authorities, stating that there was no need for interference. Consequently, the appeal seeking deletion of the sum brought to tax was dismissed.