2019 (11) TMI 590 - HC - Income Tax

High Court upholds decisions on share application money treatment under Income Tax Act

The High Court dismissed the Appeal, upholding the decisions of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal regarding ... Unexplained cash credit - genuineness of share application money - creditworthiness of shareholder - addition under Section 68 of the Income tax Act - year of receipt vis a vis year of assessment - remand for verificationUnexplained cash credit - year of receipt vis a vis year of assessment - addition under Section 68 of the Income tax Act - Deletion of the addition of Rs. 5,18,44,700 purportedly made under Section 68 in assessment year 2007-08. - HELD THAT: - Both the Commissioner (Appeals) and the Tribunal, after considering the remand report of the Assessing Officer, found that the sum of Rs. 5,18,44,700 related to receipt in the assessment year 2006-07 and therefore did not belong to the assessment year 2007-08. The Assessing Officer's own remand report accepted that position. Having regard to the attribution of the receipt to the earlier year, the deletion of that amount from the impugned assessment year was upheld and no further adjudication on the merits for that amount in AY 2007-08 was warranted.Deletion of the addition of Rs. 5,18,44,700 stands because the amount pertains to AY 2006-07 and not to AY 2007-08; no substantial question of law arises from this part.Genuineness of share application money - creditworthiness of shareholder - remand for verification - addition under Section 68 of the Income tax Act - Whether the remaining amount of approximately Rs. 2.94 crores received as share application money was genuine and attributable to the assessee in the assessment year 2007-08. - HELD THAT: - The Tribunal set aside the Commissioner (Appeals) finding insofar as it deleted the addition of the remaining amount and remanded the matter to the Assessing Officer for examination of the genuineness of the investment by Shri Vakil. The Tribunal directed the Assessing Officer to verify identity, genuineness and creditworthiness and to consider the parties' contentions afresh; the High Court recorded that the contentions on this amount will be considered on remand.Matter remitted to the Assessing Officer for verification of the genuineness of the investment of the said amount and for fresh consideration in accordance with the directions of the Tribunal.Final Conclusion: The Revenue's appeal is dismissed. The deletion of Rs. 5,18,44,700 is sustained as that sum pertains to AY 2006-07; the balance amount (approx. Rs. 2.94 crores) was remanded to the Assessing Officer for verification of genuineness and creditworthiness and for fresh adjudication. Issues:1. Addition of share application money under section 68 of the Income Tax Act, 1961.2. Treatment of share application money in the assessment year.Analysis:1. The Appellant Revenue challenged the order of the Income Tax Appellate Tribunal regarding the addition of share application money under section 68 of the Income Tax Act, 1961. The Assessing Officer treated the amount received as share application money as unexplained cash credit and added it as income from other sources due to the failure of the Assessee to prove the genuineness of the transaction and creditworthiness of the shareholder. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to take necessary action for the amount received in the previous assessment year and deleted the addition for the remaining amount after finding sufficient evidence of genuineness. The Tribunal confirmed that the amount not pertaining to the relevant assessment year should be excluded and remanded the matter for further examination of the remaining amount.2. The Tribunal's decision to exclude the amount not relevant to the assessment year was upheld by the High Court. The Court noted that the Assessing Officer had accepted this position in the remand report. Regarding the remaining amount, the Court agreed with the Tribunal's decision to send it for verification by the Assessing Officer to determine its genuineness. The Court concluded that the questions raised did not give rise to any substantial question of law, leading to the dismissal of the Appeal.In conclusion, the High Court dismissed the Appeal, upholding the decisions of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal regarding the treatment of share application money under section 68 of the Income Tax Act, 1961. The Court affirmed the exclusion of the amount not relevant to the assessment year and the remand for further verification of the remaining amount to establish its genuineness.