2010 (3) TMI 239 - HC - Income Tax

Cash Credits additions u/s 68 shape application / share holder undisclosed sources Held that when the identity of the share applicant and share holder is disclosed then no addition can be made under Section 68 of the Act in the hands of the assessee- respondent firm especially when the assessee had received the impugned amount in the form of share application money which was duly confirmed by the share applicant - . The proper course for the Assessing Officer could have been to re-open the assessment of the share applicants/ share holders rather than making addition against the assessee- respondent. Revenue appeal dismissed

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 regarding addition under Section 68 of the Act in the assessment year 2005-06.

Analysis:

The High Court of PUNJAB & HARYANA heard a case where the Revenue challenged an order passed by the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961. The Tribunal had ruled that no addition could be made under Section 68 of the Act in the hands of the assessee-respondent firm when the identity of the share applicant and share holder is disclosed. The Tribunal based its decision on judgments of the Supreme Court in cases of CIT v. Lovely Exports Pvt. Ltd. and CIT v. M/s Divine Leasing and Finance Ltd. The Court noted that both companies, M/s AFSL and M/s ACSL, had made investments in the share application money of the assessee-respondent, which were duly confirmed and disclosed in their balance sheets.

The Court emphasized that the Assessing Officer should have re-opened the assessment of the share applicants/share holders instead of making additions against the assessee-respondent. It was highlighted that the Supreme Court's judgments were clear on this matter, and no exception existed to admit the appeal. The Court concluded that there was no merit in the appeal and dismissed it accordingly.

In summary, the High Court upheld the Tribunal's decision, emphasizing the importance of disclosing the identity of share applicants and holders to avoid additions under Section 68 of the Income Tax Act. The Court directed the Assessing Officer to re-open assessments of share applicants/share holders rather than making additions against the assessee-respondent, in line with the Supreme Court's established precedents.