Gujarat High Court
Commissioner Of Income Tax Iii vs Namastey Chemicals Pvt on 18 March, 2013
Author: Akil Kureshi
Bench: Akil Kureshi
COMMISSIONER OF INCOME TAX III....Appellant(s)V/SNAMASTEY CHEMICALS PVT LTD....Opponent(s) O/TAXAP/25/2013 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 25 of 2013 ================================================================ COMMISSIONER OF INCOME TAX III....Appellant(s) Versus NAMASTEY CHEMICALS PVT LTD....Opponent(s) ================================================================ Appearance: MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 18/03/2013 ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal ( the Tribunal for short) dated 13.7.2012 raising following questions for our consideration :
Whether the ITAT was justified in law in deleting the addition of Rs.46,00,000/- made by the A.O. u/s.68 on account of share application money received for the year under consideration by relying on the Hon ble Apex court s decision in the case of Lovely Export reported in 261 CTR 195 (SC) without appreciating the fact that the above SLP filed by the Department was dismissed in limine without being admitted and in the present case, the assessee was unable to establish the creditworthiness of the investors and the genuineness of the transaction as mandated by section 68 of the Act, which also gets support form the recent decision of the Hon ble Delhi High Court in the case of Frostari (P) Ltd. reported in (2012) 18 taxmann 18 (Jhar) the decision of ITAT Indore Bench in the case of Vaibhav Cotton (P) Ltd. (2912) 26 taxmannm 352 (Indore) wherein the cases relied upon by the ITAT in the case of Lovely Export (supra) has been distinguished?
Issue pertains to addition of Rs.55 lacs made by the Assessing Officer for the assessment year 2001-02 under section 68 of the Income Tax Act, 1961. The assessee Company had received share application money from various individuals. The Assessing Officer had made different categories and found that confirmation in number of cases was not received from share applicants and had therefore made additions.
The assessee challenged such decision before the Commissioner (Appeals) who restricted the addition of Rs.13,00,100/- making following observations :
From the above it can be concluded as under:
out of total amount received of RS.55,00,000 as added by the AO, Rs.27,58,000 have been received by bank demand drafts.
The appellant during the course of appellate proceedings have submitted confirmations from all the persons which contain name and address respective person, made of acceptance and source thereof who contributed for share application money.
Category A indicates those who have denied investment aggregating to Rs.9,00,000, Category E are the persons where some other persons were found to be residing at the given address where total amount involved is Rs.3,00,000 and Category F are cases where no confirmation were submitted for Rs.1,00,100.
In view of the above discussion, I am of the view that only addition in case of above category of persons wherein either they have denied having contributed for share application money or no person was found at the address given by the appellant or where no confirmation was submitted by the appellant during the assessment proceedings, which comes to Rs.13,00,1090 (i.e. category A, E and F).
The AO is therefore directed to restrict the addition to Rs.13,00,100 as against he same made of Rs.55,00,000. The appellant gets relief of Rs.41,99,900 on this score.
In the result the appeal is partly allowed.
The said decision of the CIT(Appeal) gave rise to two cross appeals at the hands of the assessee as well as the Revenue. Both these appeals were disposed by a common judgment dated 13.7.12. The Tribunal rejected the Revenue s appeal and partially allowed the appeal of the assessee. The Tribunal in addition to the benefit granted by the CIT (Appeals) further deleted addition to the extent of Rs.4,00,100/- and retained only an amount of Rs.9 lacs. Such amount represented the total sum relating to individual share applicants who denied having made any investment in the assessee company. The Tribunal placed reliance on the decision of the Apex Court in the case of CIT v. Lovely Export Pvt. Ltd., (2010) 14 SCC 761 and observed as under:
6. After hearing both the parties and perusing the record, we find that there is no dispute about the fact that names and addresses of the persons from whom share application money was received by the assessee company are on record, thus the identity of the subscribers is not in dispute. On these facts, this Bench of the Tribunal has been consistently following the decision of Hon ble Apex court in the case of CIT vs. Lovely Exports Pvt. Ltd. As, the 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 l;who have denied to have subscribed to the shares of the company, respectfully following the same, we are of the considered opinion that the addition is to be restricted to ht 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.
We hold accordingly.
Having heard the learned counsel for Revenue we do not find that the Tribunal committed any error. The Supreme Court in the case of Lovely Export (supra) observed as under:
Delay condoned.
Can the amount of share application money be regarded as undisclosed income under Section 68 of the Income Tax Act,1961 ? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee Company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment.
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. The issue thus would fall squarely within the ambit of the judgment of the Supreme court in the case of Lovely Exports (supra). No error of law can be stated to have been committed by the Tribunal. Tax Appeal is therefore dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) (vjn) Page 4 of 4