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2014 Supreme(Del) 489
High Court of Delhi
THE HONOURABLE MR. JUSTICE S. RAVINDRA BHAT & THE HONOURABLE MR. JUSTICE R.V. EASWAR
Onassis Axles Private Limited
Versus
Commissioner of Income Tax
ITA No. 31 of 2013
Decided On : 13-02-2014
For the Appellant:Salil Aggarwal, Prakash Kumar, Advocates.
For the Respondent:Balbir Singh, Sr. Standing Counsel with Abhishek Singh Baghel, Advocates.
The obligation of the assessee to dispel doubts regarding the genuineness of the investor and the transaction, as established in the case of Lovely Exports Pvt. Ltd.
Headnote:
Income Tax - Share Application Money - Section 68 - The court discussed the genuineness of share application money received by the assessee and its inclusion under Section 68 of the Income Tax Act. The court analyzed the evidence provided by the assessee, the findings of the Assessing Officer, the CIT (A), and the Tribunal, and ultimately affirmed the view of the ITAT in favor of the revenue.
Fact of the Case:
The assessee received a sum of Rs.1.8 crore as share application money, with Rs.80 lakhs in dispute. The Assessing Officer (AO) requested details regarding the genuineness of the transactions, identity, and creditworthiness of the share applicants. The AO found discrepancies in the bank accounts and rejected the affidavits as self-serving evidence, making an addition of Rs.80,00,000/- under Section 68 of the Act.
Finding of the Court:
The court affirmed the view of the ITAT, holding that the share application money was not genuinely received by the assessee. The court noted discrepancies in the bank accounts, lack of resources of the share applicants, and the dubious nature of the transaction, ultimately dismissing the appeal in favor of the revenue.
Issues: The issues revolved around the genuineness of the share application money received by the assessee and its inclusion under Section 68 of the Income Tax Act.
Ratio Decidendi: The court emphasized the obligation of the assessee to dispel doubts regarding the genuineness of the investor and the transaction, as established in the case of Lovely Exports Pvt. Ltd. The court found that the evidence provided raised more questions than answers, leading to the inclusion of the amount under Section 68 as unexplained.
Final Decision: The appeal was dismissed, affirming the view of the ITAT in favor of the revenue.
S. Ravindra Bhat, J. (Open Court)
C.M. APPL. 933/2013 (for exemption)
Allowed, subject to all just exceptions.
ITA 31/2013
1. This is an assessee’s appeal, directed against an order of the Income Tax Appellate Tribunal (ITAT), of 18.05.2012 in I.T.A. No.1637/Del/2011. The assessment year concerned is 2007-08. The following question of law arises for consideration:
“Did the Tribunal fall into error of law in setting aside
the order of the CIT (A) accepting the assessee’s contention that share application amount, to the extent of Rs.80 lakhs, received by it, had been properly explained and it could not be included under Section 68?”
2. The assessee, during the relevant period (A.Y. 2007-08) claimed that a sum of Rs.1.8 crore had been received by it towards shares, as application money. The amount in dispute is Rs.80 lakhs. The Assessing Officer (AO) asked the assessee during the assessment to explain the amounts received from three applicants viz. M/s. Hub Services P. Ltd. (Rs.25,00,000/-); M/s. R.S. Associates P. Ltd. (Rs.30,00,000/-) & M/s. Transaction India P. Ltd. (Rs.25,00,000/-). The AO asked the learned AR of the assessee to file details regarding genuineness of the transactions, identity and creditworthiness with regard to share application money received. The assessee in response thereto filed photo copies of the following documents: (i) Share Applications containing the details of pay orders; (ii) Undated confirmations; (iii) Undated affidavits of the companies from whom share application money was received; (iv) Undated copy of Resolution; (v) Memorandum and Article of Association; (vi) Acknowledgement of return for Assessment Year 2005-06; (vii) PAN Cards in respect of Hub Services P. Ltd. and Transaction India P. Ltd.
3. The AO asked the assessee to furnish copies of bank accounts for the F.Y. 2006-07 of all three share applicants along with their balance-sheet, profit and loss account, income-tax returns, tax audit report and auditor's report for Assessment Year 2007-08. The AO issued summons under Section 131 of the Act to the said three parties, which came back unserved with the postal remarks, “No such person”. The AO communicated this fact to the learned AR of the assessee by an order-sheet entry dated 16.12.2009 and he was asked to file either the latest address of these three companies or to produce the directors of those companies along with details already asked for by him. The case was thereafter adjourned to 21.11.2009 and again adjourned to 24.12.2009. The assessee’s representative by a letter dated 24.12.2009 stated that all other details relating to share application monies were filed. All the three share applicants were existing entities and had filed their necessary returns with ROC. The assessee filed the necessary communication with the ROC for the Assessment Year 2007-08 by all the three companies. As all the three applicants were existing and assessed to income-tax, it was argued that the share applicants were genuine. The assessee, however, failed to provide bank statements for F.Y. 2006-07 of the aforesaid three companies.
4. Acting on the basis of the materials furnished by the assessee, the AO found that all the three pay orders were obtained from Mahamedha Urban Cooperative Bank Ltd., Noida. He issued summons to the said bank, requiring it to send the bank statements of the three companies from 01.04.2006 till the date of summons. From the information received from the bank, the AO found that M/s. Hub Services P. Ltd. opened bank account No.1002014026499 on 31st March, 2007 whereas the pay order was dated 29.09.2006. M/s. R.S. Accessories P. Ltd., also opened account No 1002014026502 on 31st March, 2007 whereas the pay order was dated 29.09.2006. The assessee’s contention that the pay orders were made from the accounts on 29.09.2006 was, therefore, not accepted. M/s. Transaction India P. Ltd. had two accounts bearing No. 1002014026258 and No. 10020140025746. Both these accounts were opened
