Commissioner of Income Tax vs Jay Dee Securities and Finance Ltd.

We have heard Shri A.N. Mahajan, learned counsel for the Department. Shri S.K. Garg has sent illness slip. The certified copy of the order has been filed in Income Tax Appeal No. 327 of 2010. The defect reported in Income Tax Appeal Defective No. 153. of 2010 for not filing certified copy stands removed. The appeal may be given regular number.

In these appeals directed against the order of the income tax Appellate Tribunal dated September 11, 2009, the Revenue has raised a question of law as to whether the income tax Appellate Tribunal erred in law in treating the deposits in shape of share application money as genuine, when the evidence on record indicated otherwise in the form of share applicant companies being bogus, as outcome of the enquiries conducted by the Assessing Officer as well as the investigation wing revealed that the share applicant companies are mere entry operators hence non-genuine. The Revenue has also raised a question as to whether the income tax Appellate Tribunal erred in law in not appreciating that as per section 68 of the income tax Act, 1961, the primary onus of proving the entries found credited in the books to the satisfaction of Assessing Officer is of the assessee-company.

The Tribunal recorded findings that the assessee had produced the return of income filed by the relevant shareholders who had paid share application money. The assessee had also produced the confirmation of shareholders indicating the details of addresses, PAN and particulars of cheques through which the amount was paid towards the share application money. The Tribunal thereafter relied upon the judgment of the Supreme Court in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd., ; wherein it was held that if the assessee produces the names, addresses, PAN details of the shareholders then the onus on the assessee to prove the source of share application money stands discharged. If the assessing authority was not satisfied with the creditworthiness of the shareholders, it was open to the assessing authority to verify the same in the hands of the shareholders concerned. The Tribunal has relied upon an order of the Supreme Court in the case of Commissioner of Income Tax Vs. Divine Leasing and Finance Ltd., .

We further find that in CIT v. Lovely Exports (P.) Ltd. (2009) 319 ITR (St.) 5 (SC); 216 CTR 195 in Special Leave to Appeal No. 11993 of 2007 the Supreme Court held on January 11, 2008, as follows:

Delay condoned.

Can the amount of share money be regarded as undisclosed income u/s 68 of the income tax 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 Assessing Officer, 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.

Subject to the above, SLP is dismissed.

In view of the decision of the Supreme Court, we dismiss the appeals with the observations that the Department is free to proceed to reopen their individual assessments of the shareholders whose names and details were given to the Assessing Officer.