The Tax Publishers2013 TaxPub(DT) 0917 (Del-HC) : (2013) 050 (I) ITCL 0420

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 68Unexplained credit in the form of share application money--Assessing officer held that assessee had received certain sum as unexplained credit in the form of share application money from 9 applicants and 5 out of 9 notices issued to applicants under section 133(6) were returned unserved, therefore, he was of the opinion that the burden which was primarily upon the assessee had not been discharged in explaining adequately the source of the said amount. Assessee contended that the decision of the Supreme Court in CIT v. Lovely Exports (P) Ltd. 216 CTR 195 only required that the assessee should in order to discharge the onus which fell upon it whenever section 68 was sought to be invoked, was to furnish such materials as are necessary and in its possession and on being submitted the proof of identity of the share applicants, its PAN, addresses, materials evidencing its existence such as relevant extracts of the RoC register or returns, etc., the onus shifted back to assessing officer who had to in order to dislodge the burden made further enquiries and satisfied himself that indeed the amount was to be added back under section 68. Held: Not rigtly so as the particulars of returns made available by the assessee and taken into consideration by the assessing officer in this case would show that the said parties/applicants had disclosed very meager income. The assessing officer also noticed that before issuing cheques to the assessee, huge amounts were transferred in the accounts of said share applicants. This discussion itself would reveal that even though the share applicants could not be accessed through notices, the assessee was in a position to obtain documents from them. More so the judgment in CIT v. Lovely Exports (P) Ltd. 216 CTR 195 could not be said to limit the inferences that could be logically and legitimately drawn by the revenue in the natural course of assessment proceedings. The information that assessee furnished would have to be credible and at the same time verifiable. In this case, 5 share applicants could not be served as the notices were returned unserved. Assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstance which the assessing officer in this case proceeded to draw inferences from. Having regard to the totality of the facts it was concluded that the Commissioner (Appeals) and the Tribunal fell into error in holding that assessing officer could not have added back the said amount under section 68.

Income Tax Act, 1961, Section 68

In the Delhi High Court

S. Ravindra Bhat & R.V. Easwar, J.J.

CIT v. Ultra Modern Exports Pvt. Ltd.

ITA 262/2012

11 December, 2012

Income Tax Act, 1961, S. 68

Decision: Against the assessee.

JUDGMENT

The Revenue is in appeal, aggrieved by the order of the ITAT dated 4-6-2011 in ITA-87/Del/2011. The question of law urged is :

'Whether on the facts and circumstances of the case, the ITAT could have deleted the entire addition of Rs. 4,34,00,000, citing the reason that the assessing officer has not doubted the identity of the share applicants and by placing reliance on the decision of the Apex Court in the case of M/s Lovely Exports Pvt. Ltd. besides other cases like Dhirajlal Girdhari Lal v. CIT : (2003) 261 ITR 736?'

2. The facts necessary for deciding this case are that for assessment year 2007-08, the assessing officer held that the assessee had received Rs. 4,34,00,000 as unexplained credit in the form of share application money from 9 applicants. After considering the materials on record, including the documentary evidence furnished by the assessee such as PAN numbers, detailed particulars of the addresses, audited accounts and bank statements of the share applicants etc. and lastly the return of allotment filed by the assessee with the ROC, the assessing officer was of the opinion that the burden which was primarily upon the assessee had not been discharged in explaining adequately the source of the said amount. The same was accordingly added back.

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