ITO 4(1)(1), MUMBAI V. ALEX SECURITIES P. LTD, MUMBAI

ITA 4241/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1545 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 10-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Section: 195; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI. BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO. 4241 /MUM/2009. ASSESSMENT YEARS: 2005-06. THE INCOME TAX OFFICER, ALE X SECURITIES PVT. LTD. 4(1)(1), MUMBAI. VS. 9/11, 2 ND FLOOR, PODDAR MANSION VANKA MOHALLA, DR. B.B.VELKAR STREET, MUMBAI 400 002. PAN : AAACG9905H APPELLANT RESPONDENT APPELLANT BY : SHRI S.S. RANA AND SHRI PIYUSH JAIN. RESPONDENT BY : NONE. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS)-IV, MUMBAI DATED 01-04-20 09 FOR ASSESSMENT YEAR 2005-06. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE ISSUAL OF NOTICE BY RPAD. THERE IS NO VAKALAT FILED IN THIS C ASE NOR A PETITION FOR ADJOURNMENT HAS BEEN MADE. UNDER THESE CIRCUMSTANCE S, WE DISPOSE OF THIS CASE EXPARTE ON MERITS, QUA THE ASSESSEE, AFTE R HEARING THE LEARNED DR. 2 3. HEARD SHRI S.S.RANA, THE LEARNED CIT-DR ALONG W ITH SHRI PIYUSH JAIN, THE LEARNED DR. 4. THE ASSESSEE IS IN THE BUSINESS OF TRADING OF S HARES AND HIRE CHARGES. THE ADDITION IN QUESTION IS ON ACCOUNT OF INCREASE IN EQUITY SHARE CAPITAL AS WELL AS SHARE PREMIUM. DURING THE YEAR, THE SHARE CAPITAL OF THE ASSESSEE HAS INCREASED TO RS.60 LAKHS FROM RS.24,69 ,600/-. THERE IS ALSO AN INCREASE IN SHARE PREMIUM OF RS.3,16,83,600/-. T HE ASSESSEE SUBMITTED THE DETAILS GIVING IDENTITY OF THE PARTIES, WHO SUB SCRIBED TO THE SHARE CAPITAL, THEIR PERMANENT ACCOUNT NOS., ADDRESSES, C OPIES OF INCOME TAX RETURNS, COPIES OF BANK STATEMENT ETC. THE AO DOUBT ED THE CREDIT WORTHINESS OF THESE SHARE HOLDERS AND MADE AN ADDIT ION U/S 68. THE CIT(APPEALS) APPLIED THE DECISIONS OF THE HONBLE A PEX COURT IN THE CASE OF DEVINE LEASING & FINANCE LTD. 299 ITR 268 A AND LOVELY EXPORTS LTD. 216 CTR 195 (SC), AND DELETED THE ADDITION. 5. ON A PERUSAL OF THESE DECISIONS, WE FIND THAT T HE CIT(APPEALS) HAS NOT COMMITTED ANY ERROR IN HIS ORD ER. AT PARA 1.4 AND 1.5 HE HELD AS FOLLOWS : 1.4 THE APPELLANT HAS RELIED UPON THE CASE OF DEV INE LEASING & FINANCE LTD. 299 ITR 268 WHERE THE HONBL E SUPREME COURT OF INDIA AT PARA W HELD AS UNDER :- 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF IT ACT 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE A.O., THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGMENT. 3 1.5 THUS THE SUPREME COURT HAS HELD THAT EVEN IF S HARE APPLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY IS FROM THE BOGUS SHARE HOLDER, THE SAME CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. THE DECISION OF THE SUPREME COURT HAS TO BE FOLLOWED THROUGHOUT THE TERRITORY O F INDIA. THUS, NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY EV EN FROM BOGUS SHARE HOLDERS UNLESS AN AMENDMENT IS MADE IN THE IN COME TAX ACT. THE ADDITION OF R.15,00,000/- THEREFORE, HAS TO BE DELETED AND THE APPELLANT MUST SUCCEED IN VIEW OF COURT DECISIONS. GROUND NO.1 IS ALLOWED. 6. WE UPHOLD THESE FINDINGS OF THE CIT(APPEALS) AN D DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THIS 4 TH DAY OF JUNE, 2010. SD/- SD/- (D. MANMOHAN) (J. SUDHAKAR REDDY) VICE PRESIDENT. ACCOUNTANT MEMBER. MUMBAI, DATED : 4 TH JUNE, 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, B-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES, MUMBAI.