High Court Of Delhi
Bhav Shakti Steel Mines (P) Ltd. vs. CIT
Section 68
Badar Durrez Ahmed & Rajiv Shakdher, JJ.
IT Appeal 1174 of 2007
16th December, 2008
Counsel Appeared :
R. Santhanam, for the Appellant : R.D. Jolly, for the Respondent
JUDGMENT
Badar Durrez Ahmed, J. :
Admit. The following substantial question of law arises for consideration of this Court :
“Whether the Tribunal was justified in law in remanding back the case to the AO when the matter has been examined on merits by the CIT(A)”
2. Filing of paper books is dispensed with. Counsel for the parties agreed that this appeal can be disposed of straightaway.
3. We are of the view that the question framed above needs to be answered in favour of the assessee and against the Revenue. We note that the Tribunal arrived at the following conclusion : “It is seen that it is a case of private limited company and the money has been received in cash. Therefore, a heavy duty is cast to establish not only the identity of share applicants but also the creditworthiness of the share applicants and the genuineness of transaction. It is further seen that the assessee has only established the identity of the share applicants by producing PAN card number., etc. There has been no investigation either by the AO or by CIT(A) who has coterminous power with the AO to find out the creditworthiness of these persons. The assessee has filed the bank statement of some of the persons, however, there is no finding by CIT(A) that there existed the equivalent or more amount in the bank accounts of these persons which was withdrawn and the same was deposited in cash with the share application form with the assessee company. Thus, we are of the view that mere establishment of the identity of the share applicant would not be sufficient to satisfy the requirement of law as laid down in s. 68 of the Act, particularly when the share application money has been received in cash and the assessee is a private limited company. Thus, the burden heavily lies upon the assessee to establish the three ingredients of s. 68 of the Act to the satisfaction of the AO. In the facts and circumstances of the case, we consider it just and proper to set aside the impugned order and restore the same to the file of the AO to examine the matter afresh in accordance with the law. In view of the aforesaid observations of the Hon’ble High Court that where money have been received in cash or demand draft, the standard of proof would be much more rigorous and stringent. We direct the AO to examine the share applicants. Needless to mention that a reasonable opportunity of being heard be given to the assessee.”
4. However, when we went through the order of the CIT(A) we found that he has examined the question of identity, creditworthiness and genuineness of each of the shareholders. The said examination appears in sub-paras (i) to (xx) in para 2.4, which run from ps. 48 to 57 of the appeal papers. We find that the CIT(A) had considered in detail the case of each of the shareholders and came to a conclusion of fact that the identity and creditworthiness of the shareholders and the genuineness of the transactions stood established. Therefore, the finding returned by the Tribunal to the contrary cannot be accepted as it is contrary to the record. In any event we also note that the Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd.(2008) 216 CTR (SC) 195 considered the question as to whether the share application money can be regarded as undisclosed income under s. 68 of the IT Act, 1961. The Supreme Court dismissing the Special Leave Petition observed that if the share 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 assess them individually, in accordance with law. The Supreme Court did not find any infirmity with the impugned judgment of the High Court which was a common order along with the decision reported in CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del). Since the CIT(A) has not only found that the identity of each of the shareholders stood established, but has also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their IT returns as well as in their balance sheets, in these circumstances we see merit in what the learned counsel for the appellant has submitted and we feel that the Tribunal was unjustified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective. Consequently we decide the question in favour of the assessee and set aside the order passed by the Tribunal.
5. The appeal stands allowed. No order as to cost.
[Citation : 320 ITR 619]
