2004 (6) TMI 280 - AT - Income Tax

Summary

Issues:
- Appeal by Revenue against deletion of addition under s. 68 on account of unexplained share application money
- Identity of shareholder and genuineness of transaction in case of share capital investment by M/s Shri Balaji Portfolio (P) Ltd.
- Whether M/s SBPPL is a benami company of Shri KC Hazarika
- Assessment of evidence and legal precedents for lifting corporate veil in determining addition under s. 68
- Adverse inferences drawn without cross-examination and examination of directors/shareholders
- Compliance with legal requirements for proving identity of shareholder and genuineness of transaction

Analysis:

The case involved an appeal by the Revenue against the deletion of an addition under section 68 of the Income Tax Act related to unexplained share application money introduced by M/s Shri Balaji Portfolio (P) Ltd. The Revenue contended that M/s SBPPL was a benami company of Shri KC Hazarika, based on his statement admitting to managing benami companies and engaging in non-genuine transactions. The Assessing Officer (AO) rejected the assessee's plea, emphasizing the need to lift the corporate veil in specific circumstances. The AO concluded that the investment by SBPPL was unexplained and should be added to the assessee's income.

The assessee argued before the CIT(A) that the identity of the shareholder was established, citing legal precedents and compliance with legal requirements. The CIT(A) found the company to be duly incorporated and regularly assessed, holding that the onus on the assessee was discharged. The CIT(A) directed the AO to delete the addition under section 68, relying on the decision in CIT vs. Sofia Financial Ltd. The Revenue appealed this decision before the ITAT.

During the ITAT proceedings, the Departmental Representative highlighted Hazarika's statement and the non-genuineness of transactions, supporting the AO's decision to lift the corporate veil. The assessee's counsel reiterated compliance with legal standards and emphasized the lack of connection between Hazarika and the assessee-company. The ITAT considered the submissions and found that the assessee had proven the genuineness of the credit, as required by legal precedents. The ITAT upheld the CIT(A)'s decision, confirming the deletion of the addition under section 68.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the decision to delete the addition under section 68 based on the established identity of the shareholder and compliance with legal standards. The judgment emphasized the importance of fulfilling legal requirements in proving the genuineness of transactions and the identity of shareholders, as outlined in relevant legal precedents.