CIT-II,LUDHIANA vs. M/.S SHREE DADU AUTO(P) LTD. LUDHIANA

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ITA/704/2009HC Punjab & HaryanaPHHC01084841200930 March 2010Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE JITENDRA CHAUHAN2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no exception could be made to admit the appeal as the view of the Hon'ble Supreme Court in various judgments is absolutely clear. The Tribunal's finding that no addition could be made under Section 68 of the Act in the hands of the assessee-respondent firm when the identity of the share applicant and shareholder was disclosed and confirmed was upheld. The Court reasoned that the proper course for the Assessing Officer would have been to re-open the assessment of the share applicants/shareholders, rather than making an addition against the assessee-respondent. The appeal was therefore dismissed as having no merit. The operative direction was the dismissal of the appeal.

What were the facts?

The Revenue, Commissioner of Income Tax II, Ludhiana, has filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated February 26, 2009, passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench 'B'. The appeal pertains to assessment year 2005-06. The ITAT had held that when the identity of a share applicant and shareholder is disclosed, no addition can be made under Section 68 of the Act in the hands of the assessee-respondent firm, especially when the amount was received as share application money and confirmed by the applicant. The CIT(A) order indicated that two companies, M/s AFSL and M/s ACSL, had invested in the assessee-respondent's share application money, were assessed to tax, and their investments were reflected in their balance sheets.

What were the issues?

1. Whether the Tribunal was justified in holding that no addition can be made under Section 68 of the Income Tax Act, 1961, in the hands of the assessee-respondent firm when the identity of the share applicant and shareholder is disclosed and the amount was received as share application money duly confirmed by the applicant. Assessee's Contention: The judgment does not record any specific contentions made by the assessee. The ITAT's decision was based on Supreme Court judgments. Revenue's Contention: The Revenue has challenged the ITAT's order, arguing that an addition under Section 68 was permissible. The Revenue relies on the fact that the ITAT's decision was based on Supreme Court judgments in CIT v. Lovely Exports Pvt. Ltd. and CIT v. M/s Divine Leasing and Finance Ltd.

Which sections of the Income-tax Act were involved?

Section 68,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No.704 of 2009 Date of decision 30 .3.2010 Commissioner of Income Tax II, Ludhiana ... Appellant Versus M/s Shree Dadu Auto (P)Ltd. ... Respondent. CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JITENDRA CHAUHAN Present: Mr. Vivek Sethi,Advocate for the appellant 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. The Revenue has approached this Court under Section 260A of the Income Tax Act, 1961 (for brevity 'the Act') challenging order dated 26.2.2009 (P.3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”,Chandigarh (for brevity 'the Tribunal') in ITA No. 558/CHD/2008 in respect of the assessment year 2005-06. The Tribunal on the basis of the judgements of Hon'ble the Supreme Court rendered in the cases of CIT v. Lovely Exports Pvt. Ltd. (2008)216 CTR (SC) 195 and CIT v. M/s Divine Leasing and Finance Ltd. (2008) TIOL -118 SC IT has held that when the identity of the share applicant and share holder is disclosed then no addition can be made under Section 68 of the Act in the hands of the assessee- respondent firm especially when the assessee had received the impugned amount in the form of share application money which was duly confirmed by the share applicant. From the order of the CIT(A) it is clear that both the companies M/s AFSL and M/s ACSL have made investment in the share application money in the company of the assessee- respondent. Both the companies have been assessed to tax and the investment made by them has been disclosed in their respective balance sheets. It is in the aforesaid facts and circumstances that the Tribunal reached the conclusion that no addition under Section 68 of the Act could have been made and the Assessing Officer could have resorted to reopening the individual assessment of the share applicants /share holders holders applicants as has been held by Hon'ble the Supreme Court in the aforesaid judgements. Having heard learned counsel for the Revenue, we are of the considered view that no exception is provided to admit the appeal especially when the view of Hon'ble the Supreme Court in various judgements is absolutely clear. The proper course for the Assessing Officer could have been to re-open the assessment of the share applicants/ share holders rather than making addition against the assessee- respondent. There is thus no merit in the appeal. Dismissed.

(M.M.Kumar) Judge (Jitendra Chauhan) 30.3.2010 Judge okg

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