2010 (9) TMI 143 - HC - Income Tax

Undisclosed income under sec. 68 of IT Act, 1961 Tribunal deleted additions made by Ao - company proved the establishment of the identity of the share appellants Held that - no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law - Special Leave Petition is dismissed.

Summary

Issues:
Challenge to the deletion of addition under Section 68 of the Income Tax Act, 1961 for Assessment Year 2004-05.

Analysis:
The appeal challenged the order of the Income Tax Appellate Tribunal (ITAT) deleting the addition of Rs. 49,00,000 made by the Assessing Officer under Section 68 of the Income Tax Act, 1961. The Revenue contended that the Tribunal erred in law by deleting the addition. However, it was noted that the Commissioner of Income Tax (Appeals) and the Tribunal had both deleted the addition on the grounds that the identity of the shareholders was established beyond doubt. The CIT(A) had considered substantial evidence provided by the appellant, including confirmations from share subscribers, bank statements, PAN numbers, and income tax returns, which proved the identity of the shareholders. The Tribunal upheld this decision, emphasizing that no material was presented by the revenue to refute the established identity of the share applicants.

In the impugned order, the Tribunal reiterated that the appellant had provided the necessary evidence to establish the identity of share applicants, and no material was presented by the revenue to challenge this. Referring to legal precedents, including the case of CIT Vs. Lovely Exports (P) Ltd., the Tribunal affirmed that if share application money is received from alleged bogus shareholders, the revenue can proceed to reopen the individual assessments of such shareholders. Therefore, the Tribunal found no infirmity in the order of the CIT(A) deleting the addition, as the share application money could not be treated as undisclosed income under Section 68 of the Act.

Considering the legal mandate and the concurrent findings of fact by the authorities below, the High Court upheld the decision to dismiss the appeal. Citing the case of Commissioner of Income Tax Vs. Lovely Exports (P) Ltd., it was concluded that the share application money in question could not be considered as undisclosed income of the assessee under Section 68 of the Act. Therefore, the appeal lacked merit and was dismissed accordingly.