2010 (5) TMI 65 - HIGH COURT OF DELHI

Share application money - undisclosed income - During the course of assessment, when asked to prove the identity and creditworthiness of the applicants and genuineness of the transactions, the assessee company furnished copies of their applications for allotment of shares, confirmation of payments, copies of their Certificates of Incorporation, printouts of their PAN details, copies of their PAN cards as well as company details, downloaded from the site of the Department of Company Affairs, showing their addresses. Notices under Section 133(6) of the Act were issued to all the 12 applicants, who reiterated the confirmation given by them and also supplied copies of their accounts. The Assessing Officer, however, added the entire amount of ₹ 44 lakhs to the income of the assessee company, on the grounds that the parties were not produced by the assessee, some of the applicants had a common address during inspection by the Income Tax Inspector, five applicants were not found functioning at the given address and reply submitted by the applicants were late. – CIT(A) and ITAT deleted the addition.

Held that: The Assessing Officer was not justified in adding the amount of share application money to the income of the assessee, merely because the applicants did not respond to the notices sent to them. If the Assessing Officer so wanted, he could have found out the current address of those applicants, who, according to the report of the Inspector, were not found functioning at the address given to the Assessing Officer, by summoning the Directors, etc. of those companies and asking them to furnish the current address of the company. The names and addresses of Directors, if not available with the assessee, could have been obtained from the office of Registrar of Companies or from the banks on which the cheques were drawn. No such attempt, however, was made by the Assessing Officer. In these circumstances, we found no reason to disturb the finding of fact recorded by the ITAT. – Decided in favor of assessee