2010 (9) TMI 140 - HC - Income Tax

Genuineness and creditworthiness of the transaction under Section 68 of the Act - assessee has duly established the identity of (HUF) it has also established the genuineness of the transaction with the help of evidence indicating the facts that amounts have been received through banking channel - share application money cannot be regarded as undisclosed income of assessee under Section 68 of Act Appeal is dismissed.

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act,1961 regarding addition made under Section 68 of the Act for Assessment Year 2006-2007.

Analysis:

1. Challenge to Addition under Section 68:
The appeal was filed challenging the order passed by the Income Tax Appellate Tribunal regarding the addition of 60,00,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961. The counsel for the Revenue argued that the Tribunal erred in law by deleting the addition without proving the genuineness and creditworthiness of the transaction by the respondent-assessee.

2. Decision of CIT(A) and Tribunal:
Upon review, it was found that the Commissioner of Income Tax (Appeals) and the Tribunal had both deleted the addition. The CIT(A) concluded that since the appellant company established the identity of the share applicant, no addition could be made in its hands. The Tribunal also noted the establishment of the identity of the share applicant and the genuineness of the transaction through evidence of amounts received via banking channels. They emphasized that once the identity of share applicants is established, the amount of share capital cannot be added unless concrete evidence suggests otherwise.

3. Legal Precedent and Conclusion:
The High Court referenced the decision of the Supreme Court in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd., where it was held that share application money cannot be regarded as undisclosed income under Section 68 of the Act. The Court agreed with the approach of the CIT(A) and Tribunal, dismissing the appeal and upholding the decision that the share application money was not undisclosed income. The Court found no infirmity with the impugned judgment and dismissed the appeal accordingly.

In conclusion, the High Court upheld the decisions of the lower authorities, emphasizing the importance of establishing the identity of share applicants and the genuineness of transactions when dealing with additions under Section 68 of the Income Tax Act, 1961.