2022 (10) TMI 460 - HC - Income Tax

Addition u/s 68 - Unexplained share premium and share capital - bogus share capital or share premium - substantial question of law - HELD THAT - This Court is in agreement with the factual finding of the appellate authorities below that the identity, credit worthiness and genuineness of the transaction could not be doubted and that it cannot be said that the Assessee company had brought in its own unaccounted funds through these investor companies as bogus share capital or share premium. As Supreme Court in Ram Kumar Aggarwal Anr. vs. Thawar Das (through LRs), 1999 (8) TMI 1008 - SUPREME COURT has reiterated that under Section 100 of the Code of Civil Procedure the jurisdiction of the High Court to interfere with the orders passed by the Courts below is confined to hearing on substantial question of law and interference with finding of fact is not warranted if it involves re-appreciation of evidence. Supreme Court in State of Haryana Ors. vs. Khalsa Motor Limited Ors. 1990 (8) TMI 416 - SUPREME COURT has held that the High Court was not justified in law in reversing, in second appeal, the concurrent finding of the fact recorded by both the Courts below. The Supreme Court in Hero Vinoth (Minor) vs. Seshammal, 2006 (5) TMI 478 - SUPREME COURT has also held that in a case where from a given set of circumstances two inferences of fact are possible, the one drawn by the lower appellate court will not be interfered by the High Court in second appeal. Adopting any other approach is not permissible. It has also been held that there is a difference between a question of law and a substantial question of law . This Court is of the view that no substantial question of law arises for consideration in the present appeal

Summary

Issues:
Challenge to ITAT order on additions under Section 68 of the Income Tax Act, 1961 for unexplained share premium and share capital.

Analysis:
The High Court dealt with an Income Tax Appeal challenging the ITAT's order regarding additions under Section 68 of the Income Tax Act, 1961. The Appellant argued that the ITAT erred in deleting the additions of Rs.10,15,00,000/- as the essential ingredients of Section 68 were not established by the Assessee, specifically the identity, creditworthiness of shareholders, and genuineness of the transaction. The Appellant contended that the Assessee failed to produce controlling persons of share applicant companies during assessment proceedings, and investigations revealed discrepancies in the existence of these companies at given addresses.

The Appellant further argued that the ITAT incorrectly held that since it was the Assessee's first year of operation, it couldn't be assumed that unaccounted funds were brought in through investor companies as bogus share capital or premium. However, the appellate authorities found that eight out of nineteen investor companies were assessed under Section 143(3) in the same Assessment Year, and their investments were verified. The authorities noted that all amounts were received through legitimate means like account payee cheques or demand drafts. No evidence was presented by the Revenue to suggest that these orders were under further scrutiny.

The Court agreed with the lower authorities that the identity, creditworthiness, and genuineness of the transactions were not in question. It was concluded that the Assessee did not bring in unaccounted funds through investor companies as bogus share capital or premium. Referring to legal precedents, the Court emphasized that interference with findings of fact is not warranted unless involving re-appreciation of evidence. The Court found no substantial question of law to consider and dismissed the appeal and associated applications.