Share capital subscriptions treated as undisclosed income u/s68: remand for further enquiry overturned, additions rejected.

Additions made under s.68 of the Income-tax Act, 1961 in respect of sums received towards share capital subscription were held unsustainable, as such receipts cannot be assessed as undisclosed income of the company merely because the subscribers are alleged to be non-genuine. Applying the settled legal position affirmed by the SC, the HC held that the ITAT erred in remanding the matter to the AO for further enquiry into the share applicants. The remand was set aside and the assessees' appeals were allowed on the substantive determination that no s.68 addition lies on share capital receipts in a company limited by shares.

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Issues Involved:
The judgment involves the interpretation of section 68 of the Income-tax Act, 1961 regarding additions made by the assessing authority in relation to investments in share capital, specifically focusing on whether such additions were justified and whether the Tribunal was correct in remanding the matter for further enquiries.

Summary:
The appeal under section 260A of the Income-tax Act, 1961 was filed by two assessees concerning the assessment years 1996-97 and 1997-98. The assessing authority had made additions under section 68 of the Act in relation to investments in the share capital of the appellants by different persons. The CIT (Appeals) dismissed the first appeal, leading to the matter being restored by the Tribunal back to the assessing authority for additional inquiries.

During the hearing, the appellant's counsel argued that no addition under section 68 could be made in respect of share capital subscription amounts, citing a Delhi High Court decision upheld by the Apex Court. On the other hand, the Standing Counsel for the revenue contended that the Delhi High Court's decision did not benefit the appellant as it was upheld by the Apex Court.

The Delhi High Court's reasoning emphasized that even if subscribers to increased share capital were not genuine, the share capital amount cannot be treated as undisclosed income of the assessee. The Apex Court's confirmation of the Delhi High Court's decision established that no addition under section 68 could be made in the investment in the share capital of a company limited by shares, whether public or private.

The Tribunal's decision to remand the matter for further inquiries was deemed unjustified in light of the established legal position. The judgment allowed the appeal, emphasizing that the Tribunal should have decided the appeal on its merits rather than remanding it for additional investigations.

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