2013 (2) TMI 625 - HC - Income Tax

Addition u/s 68 - cash credit - capacity and credit worthiness - held that - in view of authoritative pronouncement of the Apex Court in ommissioner of Income Tax v. Lovely Exports (P) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA as also by the Division Bench in Jaya Securities Ltd. v. Commissioner of Income Tax 2007 (5) TMI 552 - HIGH COURT OF ALLAHABAD decided in favor of assessee.

Summary

Issues:
Appeal against Income Tax Appellate Tribunal's order for assessment year 1996-97.
1. Whether the ITAT was justified in holding that the assessee met the requirements of section 68 of the Income Tax Act by only providing the identity of persons for share application money without proving their capacity and creditworthiness.
2. Whether the ITAT was justified in ignoring the failure of the assessee to produce nine persons against whom outstanding amount was shown, thus not establishing their identity, capacity, and creditworthiness.

Analysis:
1. The first issue revolves around the ITAT's decision regarding the assessee's compliance with section 68 of the Income Tax Act. The appellant's counsel argued based on a Delhi High Court judgment, while the respondent's counsel cited Supreme Court decisions, including Commissioner of Income Tax v. Lovely Exports (P) Ltd. The High Court referred to a Division Bench ruling in Jaya Securities Ltd. v. Commissioner of Income Tax, disagreeing with the Delhi High Court's judgment. Consequently, the High Court found no substantial question of law, as the department's contention was refuted by the Apex Court's pronouncement and the Division Bench's decision.

2. The second issue questions the ITAT's dismissal of the assessee's failure to produce nine individuals related to the outstanding amount. The High Court's analysis considered the precedents cited by both counsels, emphasizing the Apex Court's confirmation of principles laid down by the Delhi High Court. As a result, the High Court concluded that the department's argument was conclusively rejected by the authoritative pronouncements, leading to the summary dismissal of the appeal against the ITAT's order for the assessment year 1996-97.