2013 (10) TMI 156 - HC - Income Tax

Additions u/s 68 of the Income Tax Act - share application money received for the year under consideration - Held that - Reliance has been placed upon the judgment in the case of Lovely Export (P.) Ltd. 2008 (1) TMI 575 - SUPREME COURT OF INDIA - In the present case also, the respondent assessee has received share application money from different subscribers. It was found that large number of subscribers had responded to the letters issued by the Assessing Officer or summons issued by him and submitted their affidavits. In some cases such replies were not received through posts. Rs. 9 lacs represented those assessees who denied having made any investment altogether - Ratio of Hon ble Apex Court decision in the case of CIT v. Lovely Export Pvt. Ltd., is squarely applicable to the facts of this case except in the case of category-A of the share holders who have denied to have subscribed to the shares of the company, respectfully following the same, addition is to be restricted to that extent of Rs.9,00,000/- in respect of only those applicants of shares who have denied to have made any investment in the share of the company Decided against the Revenue.

Summary

Issues:
Addition of Rs.55 lacs under section 68 of the Income-tax Act, 1961 for the assessment year 2001-02 based on share application money received by the assessee company.

Analysis:

The primary issue in this case revolved around the addition of Rs.55 lacs made by the Assessing Officer under section 68 of the Income-tax Act, 1961. The assessee company had received share application money from various individuals. The Assessing Officer categorized the receipts and found discrepancies in confirmations from share applicants, leading to the additions. The Commissioner (Appeals) restricted the addition to Rs.13,00,100 after considering confirmations submitted by the appellant and discrepancies in different categories of share applicants.

The subsequent cross-appeals by both the assessee and the Revenue were disposed of by the Tribunal. The Tribunal partially allowed the assessee's appeal and rejected the Revenue's appeal. It further reduced the addition to Rs.9 lacs, deleting an additional Rs.4,00,100. The Tribunal relied on the decision of the Apex Court in CIT v. Lovely Export (P.) Ltd. [2010] 14 SCC 761, emphasizing the importance of subscriber identity in share application money cases. The Tribunal held that the addition should be restricted to Rs.9 lacs for share applicants who denied making any investment, in line with the Supreme Court's judgment.

The Tribunal's decision was challenged by the Revenue, arguing that the Tribunal erred in applying the principles of Lovely Export (P.) Ltd. case. However, the High Court upheld the Tribunal's decision, emphasizing that the identity of subscribers was established, and discrepancies were addressed through responses from share applicants. The High Court concluded that the issue fell within the scope of the Supreme Court's judgment in Lovely Exports (supra), and no legal error was found in the Tribunal's decision. As a result, the Tax Appeal was dismissed, affirming the Tribunal's decision and the principles established in the Lovely Export (P.) Ltd. case.