2010 (8) TMI 22 - HC - Income Tax

Genuineness of transaction unexplained share capital - ample evidence was led by the assessee to prove the identity and genuineness of the share applicants. Held that - , the identity of the creditors is known and hence the Assessing Officer can proceed against such creditors in accordance with law decided in favor of assessee

Summary

Issues: Challenge to ITAT order under Section 260A of Income Tax Act, 1961 regarding addition under Section 68 for unexplained share capital.

Analysis:
1. The appeal challenged the ITAT order dated 15th May, 2009, regarding the addition of Rupees Sixteen Lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 for the Assessment Year 2003-2004.

2. The counsel for Revenue argued that the ITAT erred in law by deleting the addition, stating that the assessee failed to prove the genuineness of transactions related to unexplained share capital as required under Section 68 of the Act.

3. However, upon review, it was found that the assessee presented ample evidence to establish the identity and genuineness of the share applicants.

4. The ITAT noted in its order that the shareholders were corporate entities with filed balance sheets, PAN, and registration details with ROC. Additionally, one of the Directors of a share applicant appeared before the Assessing Officer.

5. The ITAT's decision was based on the precedent set in Commissioner of Income Tax v. Lovely Exports (P) Ltd., where it was held that if share application money is received from alleged bogus shareholders, the Department can proceed to reopen their individual assessments. The ITAT's reliance on this decision was deemed justified.

6. The court agreed with the ITAT's reliance on the Lovely Exports (P) Ltd. case, emphasizing that the identity of the creditors was known, allowing the Assessing Officer to proceed against them in accordance with the law. The court also noted that arguments based on judgments from different High Courts were addressed in a separate judgment to avoid redundancy.

7. Ultimately, the court found no substantial question of law in the appeal and dismissed it in limine on August 2, 2010, as per the judgment delivered by Justice Manmohan and the Chief Justice.