2019 (2) TMI 818 - HC - Income Tax

High Court upholds Tribunal's decision on share application money inclusion in income under Income Tax Act

Pr. Commissioner of Income Tax -1 Versus M/s. Pushti Consultants Pvt. Ltd.

Pr. Commissioner of Income Tax -1 Versus M/s. Pushti Consultants Pvt. Ltd. - TMI Issues:Challenge to order of Income Tax Appellate Tribunal regarding addition of share application money to income for Assessment Year 2008-09.Analysis:1. The respondent received share application money of Rs. 2.20 crore during the assessment year, which was added to their income by the Assessing Officer. The respondent provided documents to substantiate the source of the funds, including a board resolution and a letter from the source company. However, the Assessing Officer deemed the transaction as an attempt to evade tax, as the source company had sufficient funds available but did not pay the balance amount within the specified time frame.2. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, relying on the McDowell & Co Ltd case, dismissing the respondent's appeal. The Tribunal, in its order, noted that the share application money was received through proper banking channels and extended the time for payment at the source company's request. When the source company failed to pay, the respondent forfeited the amount in the subsequent assessment year.3. The Tribunal found the evidence established the identity, capacity, and genuineness of the share application money received. The funds were received through proper banking channels, supported by ledger accounts, bank statements, and audited annual accounts of the source company. Additionally, a Chartered Accountant's valuation report confirmed the share price and the source company's payment through selling its own investments.4. The High Court noted that the Tribunal's finding was based on detailed examination of the evidence, establishing the legitimacy of the transaction. The respondent had complied with the requirements of Section 68 of the Income Tax Act by explaining the source of funds. The Court emphasized that the McDowell case was not applicable in this scenario, as there was no evidence to support tax evasion motives. The Court cited other cases to support the view that imputing tax evasion plans without evidence is unjustified.5. Ultimately, the High Court dismissed the appeal, stating that the Tribunal's decision was a factual finding supported by evidence and not perverse. The appeal did not raise any substantial question of law, leading to its dismissal without costs.