2010 (4) TMI 103 - HC - Income Tax

Search and seizure assessment u/s 158BC Block assessment cash credit addition u/s 68 share application money bogus shareholders held that - The Tribunal held that the amount of share capital received by the assessee cannot be regarded as undisclosed income of the assessee particularly when the identity and the creditworthiness of the applicants have been established. There is a finding in the order passed by the Commissioner of Income Tax (Appeals) that all the 16 parties, who had applied for the shares and had made the payments towards share capital, had been summoned by the Assessing Officer and that the said parties had confirmed their identify, creditworthiness and genuineness in respect of the said transactions. Decision in CIT v. Lovely Exports Private Limited (2008 -TMI - 3703 - DELHI HIGH COURT), followed by the ITAT - Tribunal has arrived at the correct conclusion decided in favor of assessee

Issues:
1. Whether the judgment should be reported in Digest?
2. Appeal against additions made by Assessing Officer to disclosed income.
3. Interpretation of Section 68 on cash credit representing share capital.
4. Application of Supreme Court decision in CIT v. Lovely Exports Private Limited.

Issue 1: Whether the judgment should be reported in Digest?
The judgment addresses the issue of whether it should be reported in a Digest. The court heard the counsel for the parties and disposed of the applications. The delay was condoned, and the appeals were dismissed by the judges.

Issue 2: Appeal against additions made by Assessing Officer to disclosed income
The appeals arose from a common order passed by the Income Tax Appellate Tribunal regarding the block period from 01.04.1990 to 25.05.2000. The Assessing Officer made additions to the disclosed income of a director and a company. The Commissioner of Income Tax (Appeals) deleted the additions, which included share application money and commission. The revenue appealed before the Tribunal, which ruled in favor of the assessee based on established identity and creditworthiness of the applicants.

Issue 3: Interpretation of Section 68 on cash credit representing share capital
The Tribunal focused on the addition made under Section 68 on cash credit representing share capital. It cited the Supreme Court decision in CIT v. Lovely Exports Private Limited, stating that share application money received from alleged bogus shareholders, with established identity and creditworthiness, cannot be treated as undisclosed income. The Tribunal upheld the Commissioner's findings, concluding that no substantial question of law arose for consideration.

Issue 4: Application of Supreme Court decision in CIT v. Lovely Exports Private Limited
The Tribunal applied the Supreme Court decision in CIT v. Lovely Exports Private Limited to the case at hand, emphasizing the importance of established identity and creditworthiness of shareholders. It affirmed that the share capital received by the assessee should not be considered undisclosed income when these factors are verified. The judges dismissed the appeals based on the Tribunal's correct conclusion and the established facts of the case.

This summary provides a detailed analysis of the judgment, covering the issues raised and the court's findings on each matter, preserving the legal terminology and key phrases from the original text.

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