Commissioner of Income Tax vs Taruna Auto Pvt. Ltd.

Manmohan, J.—The present appeal has been filed u/s 260A of Income Tax Act, 1961 (for brevity "Act, 1961") challenging the order dated 19th June, 2009 passed by the Income Tax Appellate Tribunal (in short "ITAT") in ITA No. 1146/Del/2009, for the assessment year 2001-2002.

Ms. Prem Lata Bansal, learned Counsel for Revenue submitted that ITAT had erred in law in deleting the addition of rupees twelve lacs on account of undisclosed income u/s 68 of Act, 1961. She further submitted that the burden was on the assessee to prove the identity and creditworthiness of the shareholder as well as the genuineness of the transaction - which the assessee had failed to discharge in the present case.

Both the Commissioner of Income Tax (Appeals) [in short "Commissioner"] and the ITAT have found that the assessee had filed copies of share applications, share certificates, conformations/affidavits and income tax return acknowledgements. The PAN numbers of the investors had also been furnished to the assessing officer. Both the authorities below have also held that if the share application money had been received by the assessee from alleged bogus shareholders, then the Revenue was free to reopen the alleged shareholders'' assessment in accordance with law.

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 v. Lovely Exports (P) Ltd. 216 CTR 195 (SC) wherein it has been held as under:

Can the amount of share money be regarded as undisclosed income u/s 68 of IT Act, 1961? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment....

Keeping in view the aforesaid mandate of law, the share application money of rupees twelve lacs cannot be regarded as undisclosed income of assessee u/s 68 of Act, 1961. Accordingly, present appeal is dismissed in limine but with no order as to costs.