2017 (7) TMI 1202 - HC - Income Tax

Court Upholds Tribunal Decision on Section 68 Additions Burden of Proof

The Commissioner of Income Tax, Alwar Versus M/s Jalan Hard Coke Ltd.

The court upheld the Tribunal's judgment in favor of the assessee, dismissing the appellant's challenge regarding the deletion of additions made under ... Additions made u/s. 68 - undisclosed income of the assessee - share application did not have the means to make investment - Tribunal deleted the addition - Held that:- All the share applicants stand identified. The assessee has provided PANs of the share applicants. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee company and the share applicants. The statements recorded during survey has got no evidentiary value without any supporting documents or evidence. - See Commissioner of Income Tax vs. Value Capital Services P. Ltd.[2008 (4) TMI 263 - DELHI HIGH COURT] Taking into consideration all the company cannot be assessed for the income tax to find out the person who has applied as share holder. The view of taken by the Tribunal is just and proper, therefore, the issue is answered in favour of the assessee and against the department. Issues:Challenge to Tribunal's judgment and order for statistical purposesAnalysis:The appellant challenged the Tribunal's judgment allowing both the assessee's and department's appeals for statistical purposes. The court framed a substantial question of law regarding the findings of the Tribunal on the deletion of additions made under section 68. The appellant contended that the share application money was kept by the company as the directors did not consider share allotment favorable, and the company invested the money in purchasing a flat. The Tribunal ruled against the department, emphasizing the identification of share applicants, provision of PANs, mode of payment, and lack of direct or indirect relation between the company and applicants. The court referenced the Supreme Court's decision in CIT vs. Lovely Export Pvt. Ltd., stating that if share application money is received from alleged bogus shareholders, individual assessments can be reopened. The appellant relied on various decisions, including Commissioner of Income-tax Vs. Orissa Corporation P. Ltd., to argue that the burden was on the Department to prove the source of investment. The court ultimately sided with the assessee, holding that the company cannot be assessed to identify share applicants, and dismissed the appeal.