2016 (9) TMI 333 - HC - Income Tax

Addition u/s 68 - suspected investments and share application money - Held that - We are of the opinion that the CIT(A) s order which stands confirmed by the ITAT is both sound and unexceptionable having regard to the principle applicable to Section 68 and the circumstances under which investments and share application money is deemed suspect. In the present case, the share applicant s identity was disclosed and the source of his funds was also proved. That the AO did not deem it appropriate to probe further did not mean that the incomes were liable to be treated under Section 68. The appeal does not raise any substantial question of law

Summary

Issues involved:
1. Appeal against the order of the Income Tax Appellate Tribunal (ITAT) regarding the addition of share application money under Section 68 for Assessment Year 2005-06.

Analysis:
The High Court addressed the issue of the revenue's appeal against the ITAT order rejecting the addition of &8377; 1,44,85,000/- as share application money for Assessment Year 2005-06. The Assessing Officer (AO) had raised concerns about the genuineness of the share application money and the identity of the share applicant. However, the CIT(A) accepted the assessee's appeal, noting that for subsequent years, investments by the same individual had been established and accepted. The CIT(A) found that the share applicant's particulars were disclosed during the assessment proceedings, including address and NRI bank account details. The CIT(A) concluded that the appellant had discharged the initial onus of establishing the bonafides of the transaction, and the AO failed to provide evidence that the share capital money represented undisclosed income. The High Court agreed with the CIT(A) and ITAT, emphasizing that the share applicant's identity was disclosed, and the AO's lack of further investigation did not warrant treating the amount as undisclosed income under Section 68. The Court dismissed the appeal, stating that no substantial question of law was raised.

In summary, the High Court upheld the decisions of the lower authorities, emphasizing the importance of disclosing the share applicant's identity and funds' source to establish the genuineness of transactions. The Court found that the AO's failure to provide conclusive evidence did not justify treating the share application money as undisclosed income under Section 68. The judgment highlights the significance of meeting the initial burden of proof and the principle applicable to Section 68 in cases involving suspect investments and share application money.