Allahabad High Court
Jaya Securities Ltd. vs Cit-Ii on 15 May, 2007
Bench: R.K. Agrawal, Bharati Sapru
JUDGMENT
1. The present appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') has been filed by the two assessees which has been admitted by this Court vide order dated 26-9-2006 on the following substantial question of law:
Whether under the facts and circumstances of the case, the Tribunal was justified in not deciding the controversy involved in the appeal, when all the relevant material was available to it and as such the controversy as to the addition made by the assessing officer under Section 68 of the Act in the hands of the company treating the shareholders as bogus could have been decided on the evidence available before it?
The appeal relates to the assessment years 1996-97 and 1997-98.
2. Briefly stated facts giving rise to the present appeal are as follows:
Certain additions were made by the assessing authority by invoking provisions of Section 68 of the Act in respect of investment made by different persons in the share capital of the appellants. The first appeal preferred by the appellants was dismissed by the Commissioner (Appeals). The Tribunal has restored the matter back to the assessing authority for making further enquiries.
3. We have heard Shri Shakeel Ahmad, learned Counsel for the appellants and Shri R.K. Upadhyaya, learned Standing counsel for the revenue.
4. Learned Counsel for the appellant submitted that no addition under Section 68 could be made in respect of the subscription amount towards the share capital of a company limited by shares whether it is private or public and in support thereof a Division Bench decision of the Delhi High Court has been referred in the case of CIT v. Steller Investment Ltd. which decision has been upheld by the Apex court in the case of CIT v. Steller Investment Ltd. .
5. Shri R.K. Upadhyaya on the other hand submitted that the Delhi High Court had only declined to call for a reference on the ground that no question of law arises which order has been upheld by the Apex Court which does not benefit the appellant.
6. The submission of Shri R.K. Upadhyaya is not correct. The Delhi High Court while declining to call for reference had given the following reasons:
It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It m ay be that there are some bogus shareholders in whose name shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount, of increased share capital can be assessed in the hands of the company itself.
7. The matter was carried by the revenue before the Apex court in Civil Appeal No. 7668 of 1996. The Apex court while dismissing the appeal had clearly held that "we are in agreement with the High Court". It clearly means that the reasoning given by the Delhi High Court reproduced above, stand confirmed by the Apex court and, therefore, the principle which emerges is that no addition to Section 68 can be made in the investment in the share capital of a company limited by shares whether public or private.
8. It may be mentioned here that the Apex court had decided the Civil Appeal and had not passed the order while considering the Special Leave Petition. While deciding the Special Leave Petition, it may not have amounted to confirmation of the reasoning given by the Delhi High Court but as the Apex court has decided the Civil Appeal expressing in agreement with the reasoning given by the Delhi High Court, it would amount to confirmation of the principles laid down by the Delhi High Court.
9. In view of the settled legal position, the Tribunal was, therefore, not justified in remanding the matter to the assessing officer for further enquiries and ought to have decided the appeal on merits.
The appeal, therefore, succeeds and is allowed.