ITO, New Delhi V. M/s. Universal Airways Ltd, New Delhi

ITA 4105/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73946 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 07-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Assessee Lawyers: V K JAIN
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM ITA NO.4105/DEL/2010 ASSESSMENT YEAR : 2007-08 ITO, WARD 18(1), NEW DELHI. VS. UNIVERSAL AIRWAYS LTD., F-2/7, OKHLA INDL. AREA, PHASE-I, NEW DELHI. PAN : AAACU6350J ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : S/ SHRI V.K. JAIN, CA & NEM SINGH, ADVOCATE DEPARTMENT BY : S HRI J.P. CHANDRAKAR, SR.DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 29.6.2010 IN RELATION TO THE ASSESSME NT YEAR 2007- 08. 2. ALL THE GROUNDS RELATE TO A SINGLE ISSUE OF DELE TION OF ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY IN CONTRAVENT ION OF THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT, 196 1 (HEREINAFTER ALSO CALLED THE ACT). ITA NO.4105/DEL/2010 2 3. BRIEFLY STATED, THE FACTS AS GATHERED FROM THE ASSESSMENT ORDER ARE THAT THE ASSESSEE RAISED SHARE APPLICATIO N MONEY OF `4.875 CRORE DURING THE YEAR UNDER CONSIDERATION. THE AO CALLED UPON THE ASSESSEE TO GIVE JUSTIFICATION FOR RAISING SUCH SHARE APPLICATION MONEY WHEN THERE WAS NO AUTHORIZED SHAR E CAPITAL JUSTIFYING THE ISSUANCE OF FURTHER SHARE CAPITAL. THE ASSESSEE STATED THAT THE ALLOTMENT OF SHARES COULD NOT TAKE PLACE DUE TO THE FACT THAT THE AUTHORIZED CAPITAL WAS NOT INCREA SED AND FURTHER THE TERMS OF ALLOTMENT WERE NOT FINALIZED. THE AO OPINED THAT THE PAID-UP SHARE CAPITAL AND SHARE APPLICATION MONEY C ANNOT EXCEED AUTHORIZED SHARE CAPITAL, WHICH IS THE MAXIMUM AMOU NT OF SHARE CAPITAL THAT A COMPANY CAN ISSUE. SINCE THE ASSESS EE RAISED SHARE APPLICATION WITHOUT RAISING ITS AUTHORIZED SH ARE CAPITAL, THE AO HELD THAT ADDITION WAS CALLED FOR. ON THE PERUS AL OF THE DETAILS OF SHARE APPLICATION MONEY, HE NOTICED THAT THE ASS ESSEE MADE REPAYMENT OF `70 LAC TO M/S DEVYANI FOODS PVT. LTD. THE ASSESSEE COMPANY RAISED SHARE APPLICATION MONEY WOR TH `4.475 CRORE FROM M/S ARCTIC DRINKS PVT. LTD., `76 LAC FRO M SHRI ATUL PUNJ AND `34 LAC FROM M/S INDO PACIFIC AVIATION PVT. LTD .. THE CUMULATIVE AMOUNT FROM THESE PARTIES TOTALING `5.57 5 CRORE WAS ITA NO.4105/DEL/2010 3 ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE . THE LD. CIT(A) DELETED THE ADDITION. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT TH E AO MADE THE ADDITION SIMPLY FOR THE REASON THAT THE SHARE APPLI CATION MONEY EXCEEDED THE AUTHORIZED SHARE CAPITAL. APART FROM THAT, HE DID NOT DISPUTE THE GENUINENESS OF THE RECEIPT OF AMOUN T IN THE HANDS OF THE ASSESSEE. IT CAN BE SEEN FROM PAGE 5 ONWARD S OF THE IMPUGNED ORDER THAT THE ASSESSEE FURNISHED BEFORE T HE AO AS WELL AS THE LD. CIT(A) COMPLETE DETAILS ABOUT THE SHARE APPLICATION MONEY, NAMELY, CONFIRMATION FROM THE PAYERS, THEIR ITR ACKNOWLEDGEMENTS AND BALANCE SHEETS ETC. ALONG WIT H PERMANENT ACCOUNT NUMBERS, WHEREVER AVAILABLE, EVI DENCING THAT SHARE APPLICATION MONEY WAS PAID BY THEM TO TH E COMPANY. NO INFIRMITY HAS BEEN POINTED OUT BY THE AO IN SUC H DETAILS. THUS, IT BECOMES EVIDENT THAT THE ONLY REASON WHICH WEIGH ED WITH THE AO FOR MAKING THE IMPUGNED ADDITION IS THAT THE AMO UNT OF SHARE APPLICATION MONEY COULD NOT HAVE BEEN RAISED WITHOU T THE CORRESPONDING INCREASE IN THE AUTHORIZED SHARE CAPI TAL. WHEN WE GO THROUGH THE GROUND TAKEN BY THE REVENUE IN ITS A PPEAL, IT CAN ITA NO.4105/DEL/2010 4 BE SEEN THAT THERE IS A REFERENCE TO THE CONTRAVENT ION OF THE PROVISIONS OF SECTION 68 OF THE ACT BY THE ASSESSEE . WHEN ALL THE NECESSARY DETAILS ABOUT THE IDENTITY AND CAPACITY O F THE SHAREHOLDERS TOGETHER WITH THE GENUINENESS OF THE R ECEIPT OF SHARE APPLICATION MONEY WERE PRODUCED BEFORE THE AO , AND THE OFFICER DID NOT DISPUTE THEIR CORRECTNESS, THERE CA N BE NO QUESTION OF MAKING ANY ADDITION U/S 68 OF THE ACT. IF THE A O WAS NOT CONVINCED, HE COULD HAVE CARRIED OUT FURTHER INVEST IGATION OF SUCH DETAILS. HAVING NOT DONE SO AND IMPLIEDLY ACCEPTED THE CORRECTNESS OF THE DETAILS, THERE CAN BE NO QUESTIO N OF INVOKING SECTION 68 OF THE ACT. BE THAT AS IT MAY, WE ARE UN ABLE TO FIND ANY PROVISION IN THE ACT WHICH CALLS FOR AUTOMATIC ADDI TION OF THE SHARE APPLICATION MONEY RECEIVED BY A COMPANY IN EXCESS O F ITS AUTHORIZED SHARE CAPITAL. AT THE MOST, SUCH SHARE A PPLICATION MONEY WOULD PARTAKE OF THE CHARACTER OF UNSECURED L OAN. EVEN IF WE EXAMINE THE RECEIPT OF SHARE APPLICATION MONEY I N TERMS OF UNSECURED LOANS, NO CASE HAS BEEN MADE OUT FOR THE APPLICABILITY OF SECTION 68 BECAUSE NONE OF THE DETAILS FILED BY THE ASSESSEE IN SUPPORT OF THE GENUINENESS OF THE RECEIPT OF MONEY FROM THE PAYEES HAS BEEN CONTROVERTED BY THE AO. IN VIEW OF THE FOREGOING ITA NO.4105/DEL/2010 5 DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT T HE LD. CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. WE, THER EFORE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE. 5. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 08.01.201 5. SD/- SD/- [ A.T. VARKEY ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 08 TH JANUARY, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.