COMMISSIONER OF INCOME TAX vs. GOURDIN HERBALS INDIA LTD.

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ITA - 665 / 2009HC Delhi17 September 20091 pages
For Petitioner: PREM LATA BANSAL
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal had rightly concluded that the assessee had discharged its burden. The Court's reasoning was based on the Supreme Court's judgment in Commissioner of Income Tax Vs. Lovely Exports Pvt. Ltd. (216 CTR 195). The Court opined that if the three subscribing companies had received cash and deposited it into their bank accounts, it was the responsibility of the Income Tax Department to take action against those companies, not to make an addition in the hands of the assessee. Therefore, no substantial question of law arose for consideration, and the appeal was dismissed.

What were the facts?

The assessee, an unnamed company, received share application money from three companies: M/s. Kuberco Sales Pvt. Ltd., M/s. Garg Finvest Pvt. Ltd., and M/s. Mafico Leasing and Consultants Pvt. Ltd. The Assessing Officer (AO) questioned the source of funds for these investments. In response, the assessee provided bank account copies, certificates of incorporation, and income tax returns of the three investing companies, establishing their identity and genuineness. The AO's sole basis for making an addition was that cash deposits were observed in the investing companies' bank accounts, from which cheques were issued to the assessee as share application money. The Income Tax Appellate Tribunal (ITAT) had previously ruled in favor of the assessee.

What were the issues?

1. Whether the Tribunal was correct in holding that the assessee discharged its burden of proof regarding the genuineness of share capital received, despite cash deposits in the accounts of the subscribing companies, under Section 68 of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that by providing the identity and genuineness of the subscribing companies through their incorporation certificates, IT returns, and bank statements, it had discharged its initial burden. The presence of cash deposits in the subscribing companies' accounts, from which they subsequently issued cheques, did not shift the burden back to the assessee. The issue of the source of cash in the subscribing companies' accounts was a matter for the Revenue to investigate with those companies. Revenue's Contention: The Revenue's basis for addition was the observation of cash deposits in the bank accounts of the three subscribing companies, which were then used to issue cheques for share application money to the assessee. The Revenue likely contended that this indicated a lack of genuine source for the funds and that the assessee had not proven the genuineness of the share capital.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF DELHI AT NEW DELHI . 17.09.2009 2# Present: Ms. P.L. Bansal with Ms. Anshul Sharma and Mr. Paras Chaudhary, Advs. for the appellant. . +ITA No.665/2009 Three companies, viz., M/s. Kuberco Sales Pvt. Ltd., M/s. Garg Finvest Pvt. Ltd. and M/s. Mafico Leasing and Consultants Pvt. Ltdhad subscribed to the . . share capital issued by the assessee. The Assessing Officer had some doubts about the source of the investment made by those three companies and therefore, made certain inquiries. In response, the assessee produced the copy of the bank accounts of all the three companies, their certificates of incorporation and also the income tax returns filed by them. From the above documents, the identity and genuineness of these companies is clearly established. The only ground for making addition by the AO was that the bank accounts of the three companies revealed that the amounts in cash were deposited in those accounts and thus cheques were issued in favour of the assessee company along with share application money. In these circumstances, we are of the opinion that following the judgment of the Supreme Court in the case of Commissioner of Income Tax Vs. Lovely Exports Pvt. Ltd., 216 CTR 195, the ITAT has rightly held that the assessee had discharged its burden. In case those three companies had received certain cash, which were deposited in the bank accounts, it was for the Income Tax Department to take action against the said companies. We are, therefore, of the opinion that no substantial question of law arises for our consideration in this appeal, which is accordingly dismissed. A.K. SIKRI, J. . . . VALMIKI J. MEHTA, J. September 17, 2009 pmc .

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