1991 (4) TMI 100 - HC - Income Tax

Summary

Issues Involved:
The issue involves the validity of invoking section 263 by the Income-tax Appellate Tribunal based on the Assessing Officer's failure to investigate the genuineness and creditworthiness of shareholders, some of whom were students and housewives.

Judgment Details:
The case pertains to an increase in the subscribed capital of the assessee, which was accepted by the Income-tax Officer during assessment. However, the Commissioner of Income-tax found that the Assessing Officer did not conduct a thorough investigation, suspecting the conversion of black money into white through share issuance with the help of an investment company. Additionally, the Assessing Officer did not inquire into the genuineness of the share capital subscribers, leading to the Commissioner setting aside the assessment order.

The Tribunal, without delving into the reasons, overturned the Commissioner's decision. The High Court noted that even if some shareholders were not genuine, the increased share capital cannot be treated as undisclosed income of the assessee. The Court highlighted that while there may be bogus shareholders, attributing the increased share capital as the company's income is not justified. If the individuals who allegedly provided the money are to be reassessed, it would be logical, but assessing the share capital in the company's hands is unwarranted.

Consequently, the High Court found no legal question to be addressed and dismissed the petition seeking reference on the matter.