Commissioner of Income Tax vs People's International and Service Pvt. Ltd.

As common question of law and facts are involved in these appeals, we propose to deal with the matter and dispose of the appeals by this common order.

Calling in question the tenability of orders passed identical in nature by the Income Tax Appellate Tribunal for different assessment years i.e., 2002-2003, 2004-2005, 2006-2007 & 2007- 2008 respectively, these four appeals have been filed under section 260-A of the Income Tax Act, 1961.

For the convenience facts are taken from I.T.A. No.91/2014 (CIT Vs. People''s International & Service Pvt. Ltd.).

During the assessment proceedings it was found that the assessee had received investment in their share capital and credit from M/s. Alliance Industries Ltd., Gibraltar and by holding that the source of income of foreign investment is not explained and finding there to be no material to show as to how the assessee received amount of investment in the assessee establishment, the assessing officer made certain additions in the income by involving the provisions of section 68 of the Act. However, when the matter travelled to the Commissioner (Appeals) and then to the appellate Tribunal, the appellate authority found that as the assessee had disclosed the source of income i.e. income derived from the foreign investment, no further enquiry is required from the assessee and it is for the department to verify the source of income of the foreign investor and if it is found doubtful the enquiry should be conducted against the foreign investor.

The appellate authority after hearing all the concerned found that for various other assessment years with regard to similar investment being made by various investors like M/s. Alliance Industries Ltd., Gibraltar addition made under section 68 of the Act were interfered with and the orders passed by the appellate authority have been upheld by the High Court dismissing the appeals filed by the revenue by an order dated 27.6.2013.

From para 3 of the impugned order the appellate tribunal had referred to the orders passed in identical cases and in para 3.2 the order passed by the High Court, which reads as under is reproduced :-

"13. By recording aforesaid findings, the Commissioner of Income Tax (Appeals) reversed the order of the Assessing Officer and directed deletion of additions made in the matter. The ITAT affirmed the order of CIT(A) with similar reasoning.

In the light of the aforesaid factual position, the legal position may be looked into because the aforesaid factual position has not been disputed by the parties.

In Lovely Export (supra) the Apex Court considering the question held thus :

"2 Can the amount of share money be regarded as undisclosed income under s.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 to the A.O., 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."

The aforesaid judgment has been followed by all the Courts and the judgments relied on by the appellants relates to the period prior to the judgment in Lovely Exports. As the Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s. Alliance Industries Limited, Sharjah is a bogus company or a non- existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing & Finance Ltd. (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company''s own income from undisclosed sources. The similar view has been taken by the other High Courts.

As the Apex Court has considered the law in Lovely Exports (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs."

From the aforesaid narration of facts it is clear that similar objections raised by the revenue in the matter of creditworthiness with regard to investment made by M/s. Alliance Industries Ltd. and similar objection of the revenue have already been considered and rejected and following the same, identical orders have been passed in this impugned orders also.

Considering the fact that the question involved in these appeals has already been considered and rejected by the Coordinate Bench of this Court, we see no reason to make any further indulgence in the matter.

Accordingly, finding no substantial question of law made out warranting consideration in these appeals, the same are dismissed.