Madras High Court
Commissioner Of Income Tax vs M/S. Electro Polychem Ltd on 21 June, 2007
Author: P.P.S.Janarthana Raja
Bench: P.D.Dinakaran, P.P.S.Janarthana Raja
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.6.2007 CORAM THE HON'BLE MR.JUSTICE P.D.DINAKARAN AND THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.(A) Nos.782 & 783 of 2007 Commissioner of Income Tax Appellant in Chennai. .. both appeals Vs. M/s. Electro Polychem Ltd. No.702, Shivalaya A Block 7th Floor, 192, Ethiraj Salai Respondent in Chennai 600 008. .. both appeals ----- Appeals under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench dated 24.3.2006 in ITA Nos.1182 & 1714/Mds/2002, for the assessment years 1998-1999 & 1999-2000 respectively. ----- For Appellant : Mr.J.Narayanasamy, Jr.S.C. ----- J U D G M E N T
(Delivered by P.D.DINAKARAN, J.) The above tax case appeals are directed against the order of the Income-tax Appellate Tribunal in ITA Nos.1182 & 1714/Mds/2002 dated 24.3.2006 for the assessment years 1998-99 and 1999-2000 respectively, raising the following substantial questions of law.
(a) Whether in the facts and circumstances of the case, the Tribunal was right in holding that share application money in fictitious names cannot be treated as undisclosed income of the assessee?
(b) Whether in the facts and circumstances of the case, the Tribunal was right in holding that the enquiries can be conducted in the hands of the shareholders only, when the entire addition is because the share holders have been found to be non existent/fictitious persons?
2. The brief facts led to the filing of the above appeals are as under.
The assessee filed its returns for the assessment years 1998-99 and 1999-2000. The Assessing Officer made additions in respect of the share application money under Section 68 of the Act, finding that the assessee had brought the undisclosed income by way of share applications in fictitious name and passed order accordingly. Hence, the assessee preferred appeals to the Commissioner of Income Tax (Appeals). The Commissioner deleted the addition made by the Assessing Officer for the assessment year 1998-99 and upheld the addition made for the assessment year 1999-2000. Against the said order, the Revenue as well as the assessee preferred appeals before the Income Tax Appellate Tribunal. The Tribunal allowed the appeal preferred by the assessee and dismissed the appeal preferred by the Revenue. Hence, the above appeals.
3. In Commissioner of Income Tax v. Stellar Investment Ltd. (192 ITR 287), where the increase in subscribed capital of the respondent-Company, accepted by the Income Tax Officer and rejected by the Commissioner on the ground that a detailed investigation was required regarding the genuineness of subscribers to share capital, as there was a device of converting black money by issuing shares, with the help of formation of an investment, which was reversed by the Tribunal, the Delhi High Court held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company.
4. The view taken by the Delhi High Court in Commissioner of Income Tax v. Stellar Investment Ltd. (192 ITR 287) cited supra, was confirmed by the Apex Court and the same was reported in 251 ITR 263.
5. Applying the ratio laid down in the decision cited supra, we do not find any substantial question of law arises for our consideration. Accordingly, these appeals are dismissed. Consequently, M.P.No.1 of 2007 is also dismissed.
Index : Yes (P.D.D.J.) (P.P.S.J.J.)
Internet : Yes 21.6.2007.
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P.D.DINAKARAN, J,
AND
P.P.S.JANARTHANA RAJA, J.
TC(A) Nos.782 & 783 of 2007.
21.6.2007.