CIT, FARIDABAD vs. M/S G.P.INTERNATIONAL LTD. FARIDABAD

ITA/618/2009HC Punjab & HaryanaPHHC01084745200902 December 2009Author: MR. JUSTICE M.S. SULLAR,MR. JUSTICE SATISH KUMAR MITTAL5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT was correct in upholding the deletion of the Rs. 3,30,000/- addition. The assessee had furnished a confirmation certificate from M/s Axis Chemicals & Pharmaceuticals Ltd. along with its PAN, and confirmed the liability was outstanding. The AO invoked Section 41(1) on the basis that the liability had ceased to exist. However, the CIT(A) and ITAT noted that a similar addition in the case of Febon Con, involving the same creditor, was deleted by the ITAT and had become final. The Court agreed that the liability could not be said to have ceased as the assessee continued to show it as a liability and had not written it off. Regarding the Rs. 15,00,000/- share capital addition, the Court held that the CIT(A) and ITAT rightly deleted it. The assessee had provided a list of shareholders with addresses. While some persons did not respond to notices under Section 133(6), the AO did not doubt the identity of the applicants. The Court relied on the Supreme Court's decision in CIT v. Lovely Exports (P) Ltd., stating that if share application money is received from alleged bogus shareholders whose names are given, the department can proceed against the shareholders individually but cannot treat the amount as unexplained income in the hands of the assessee company.

What were the facts?

The Revenue (Commissioner of Income Tax, Faridabad) filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated February 12, 2009, passed by the Income Tax Appellate Tribunal (ITAT). The ITAT had dismissed the Revenue's appeal against the order of the CIT(A) which deleted two additions made by the Assessing Officer (AO) for the assessment year 1996-97. The first addition of Rs. 3,30,000/- was on account of outstanding liability to M/s Axis Chemicals & Pharmaceuticals Ltd. The second addition of Rs. 15,00,000/- was on account of unproved share capital. The AO had initially made these additions, the CIT(A) had remanded the matter, and upon re-assessment, the AO again made the additions, which were then deleted by the CIT(A).

What were the issues?

1. Whether, on the facts and in the circumstances, the ITAT was correct in upholding the CIT(A)'s deletion of the Rs. 3,30,000/- addition for outstanding liability to M/s Axis Chemicals & Pharmaceuticals Ltd., despite the assessee allegedly failing to prove its existence and genuineness? 2. Whether, on the facts and in the circumstances, the ITAT was correct in upholding the CIT(A)'s deletion of the Rs. 15,00,000/- addition for unproved share capital, disregarding the assessee's alleged failure to prove the existence, genuineness, and creditworthiness of shareholders as required by law? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The assessee failed to prove the existence and genuineness of the liability of Rs. 3,30,000/-. The assessee failed to prove the existence, genuineness, and creditworthiness of the shareholders for the Rs. 15,00,000/- share capital. The Revenue relied on the specific requirement of law for proving share capital.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 143(3),Section 250,Section 41(1),Section 133(6)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 618 of 2009 DATE OF DECISION : 02.12.2009 Commissioner of Income Tax, Faridabad .... APPELLANT Versus M/s GP International Ltd., Faridabad ..... RESPONDENT

CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTAL HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR

Present: Ms. Urvashi Dhugga, Advocate, for the appellant-revenue.

* * * SATISH KUMAR MITTAL , J. The revenue has filed this appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as `the Act'), against the order dated 12.2.2009, passed by the Income Tax Appellate Tribunal, Delhi Bench `I' New Delhi (hereinafter referred to as `the ITAT') in ITA No. 4346/Del/2005, pertaining to the assessment year 1996-97, while raising the following substantial questions of law : (i) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in upholding the order of the learned CIT (A) in deleting the addition of Rs. 3,30,000/- made by the Assessing Officer on account of liability of M/s Axis Chemicals & Pharmaceuticals even though the assessee had failed to prove the ITA No. 618 of 2009 -2- existence and ge

The order continues below.

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