2013 (2) TMI 44 - HC - Income Tax

Supreme Court upholds deletion of bogus share application money, stresses proof of identity.

The Supreme Court upheld the deletion of Rs. 25,00,000 added as bogus share application money, as the appellant failed to prove the identity and ... Bogus share application money - ITAT deleted the addition - Held that:- Five companies subscribing the equity shares were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity of the share applicant companies and purchase of share had been proved by the assessee, thus as decided in CIT Versus Steller Investment Ltd [2000 (7) TMI 76 - SUPREME COURT] in case of capital contributed by a shareholder, the identity of the shareholder is only required to be proved - in favour of assessee. Issues:1. Addition of Rs. 25,00,000/- on account of bogus share application money.2. Ignoring the decision of Hon'ble Jurisdictional High Court.3. Relying on the obiter dicta of the Supreme Court.4. Ignoring the provisions of Section 68 of the IT Act, 1961.Analysis:Issue 1: Addition of Rs. 25,00,000/- on account of bogus share application moneyThe appellant challenged the deletion of the addition of Rs. 25,00,000/- on account of bogus share application money, arguing that the identity and creditworthiness of the alleged share applicants and the genuineness of the transactions were unproved. The appellant contended that the Assessing Officer rightly made the addition under Section 68 of the Income Tax Act. However, the CIT (A) and the Tribunal found that the share applicant companies were identified, and they had submitted their bank statements and other relevant documents, proving the identity and purchase of shares. The Supreme Court's rulings emphasized that proving the identity of the shareholder is crucial in such cases. Therefore, the deletion of the addition was upheld based on the evidence provided by the assessee.Issue 2: Ignoring the decision of Hon'ble Jurisdictional High CourtThe appellant argued that the ITAT erred in ignoring the decision of the Jurisdictional High Court in a specific case, which the appellant believed was binding and fully applicable to the present case. However, the Court held that the Supreme Court's authoritative pronouncements on the matter superseded the previous High Court judgment, making it no longer valid law. Therefore, the CIT (A) and the Tribunal did not commit any error in relying on the Supreme Court's decisions over the High Court judgment.Issue 3: Relying on the obiter dicta of the Supreme CourtThe appellant contested the reliance on the obiter dicta of the Supreme Court in a specific case, arguing that it did not apply to the present case and that the Tribunal erred in doing so. However, the Court found that the Supreme Court's rulings on the importance of proving the identity of shareholders were applicable in this case, and the CIT (A) and the Tribunal's decisions were in line with the legal principles established by the Supreme Court.Issue 4: Ignoring the provisions of Section 68 of the IT Act, 1961The appellant claimed that the ITAT erred in ignoring the provisions of Section 68 of the IT Act by upholding the order of the CIT (A) despite the alleged shareholders' identity, transaction genuineness, and creditworthiness not being proven. However, the Court found that the evidence provided by the assessee, including the submission of bank statements and other documents by the identified share applicant companies, was sufficient to establish the legitimacy of the transactions. Therefore, the decisions of the CIT (A) and the Tribunal were upheld, and the appeal was dismissed.