COMMISSIONER OF INCOME TAX vs. INDUSTRIES (PVT. LTD.)

Whether the Reporters of local papers may be allowed to see the judgment?

The present appeal has been filed under Section 260A of Income Tax Act, 1961 (for brevity “Act, 1961”) challenging the order dated 28th August, 2009 passed by the Income Tax Appellate Tribunal (in short “Tribunal”) in ITA No. 1015/Del/2009, for the assessment year 2001-2002.

Mrs. Sonia Mathur, learned counsel for Revenue submitted that Tribunal had erred in law in deleting the addition made on account of 2010:DHC:4973-DB

However, upon a perusal of the file we find that the said addition was deleted by the Commissioner of Income Tax (Appeals) [in short “CIT(A)] and the Tribunal on the ground that the identity of the shareholders was not in doubt. In fact, the CIT(A) in its order has observed as under :- “(c) The appellant company has provided details of the IT Return filed, PAN, copy of balance sheet and details filed with Registrar of Companies to substantiate that the amount of share application money received from the said companies was genuine. The AG disregarded these evidences and has emphasized that identity and creditworthiness was not proved and held that the amount received as share application money cannot be treated as genuine and is only an accommodation entry.

The Tribunal while dismissing the appeal held as under:- “5. We have carefully considered the submissions of learned Senior DR. We have also carefully gone through the assessment order as well as order of CIT(Appeals). The Assessing Officer observed at page 5 of the assessment order that merely furnishing PAN, assessment particulars and confirmation by the share applicants is not enough. This observation of Assessing Officer is contrary to the law, explained by Hon’ble Supreme Court in the case of Lovely Exports Pvt. Ltd. (supra). It is not disputed in the present that both the share applicants are private limited company, the whereabouts of the company were given to the Assessing Officer along with PAN, assessment particulars and confirmations and in this manner, identity of the share applicants is established. If it is so, the ratio laid down by Hon’ble Supreme Court in the case of Lovely Exports Pvt. Ltd. (supra) will be fully applicable. It would be relevant to reproduce following observations of the 2010:DHC:4973-DB

In this view of the situation, we are of the opinion that addition has rightly been deleted by the learned CIT (Appeals) as the necessary particulars were placed on record by the assessee to prove the identity of the share applicants.

So as it relates to deletion of addition made on account of commission, it is observed that since principal amount is deleted, the question of assess ability of commission paid thereon does not arise and addition of the same is rightly deleted by the learned CIT (Appeals).”

In our considered opinion, the approach adopted by the Commissioner and ITAT is in consonance with the decision of Supreme Court in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd., 216 CTR 195 (SC). 6. Keeping in view the aforesaid mandate of law, the share application money cannot be regarded as undisclosed income of assessee under Section 68 of Act, 1961. In so far as the amount of commission is concerned, since the principal addition has been deleted, 2010:DHC:4973-DB