Commissioner Of Income Tax, Bhopal v. People's International & Service Pvt. Ltd. Bhopal

HIGH COURT OF MADHYA PRADESH, JABALPUR Income Tax Appeal No.91/2014 Commissioner of Income Tax, Bhopal Versus People's International & Service Pvt. Ltd. Bhopal Income Tax Appeal No.92/2014 Commissioner of Income Tax, Bhopal Versus People's International & Service Pvt. Ltd. Bhopal Income Tax Appeal No.94/2014 Commissioner of Income Tax, Bhopal Versus People's General Hospital Pvt. Ltd. Bhopal Income Tax Appeal No.95/2014 Commissioner of Income Tax, Bhopal Versus People's General Hospital Pvt. Ltd. Bhopal Present : Hon. Shri Justice Rajendra MenonHon. Shri Justice Sanjay Yadav Shri Sanjay Lal, counsel for appellant. Whether approved for reporting: I.T.A.No.91/2014 Commissioner of Income Tax Vs. People's International & Service O R D E R(15.10.2014) As common question of law and facts areinvolved in these appeals, we propose to dealwith the matter and dispose of the appeals bythis common order. 2.Calling in question the tenability of orderspassed identical in nature by the Income TaxAppellate Tribunal for different assessment yearsi.e., 2002-2003, 2004-2005, 2006-2007 & 2007-2008 respectively, these four appeals have beenfiled under section 260-A of the Income Tax Act,1961. 3.For the convenience facts are taken fromI.T.A.No.91/2014 (CIT Vs. People's International &Service Pvt. Ltd.). 4.During the assessment proceedings it wasfound that the assessee had received investmentin their share capital and credit from M/s AllianceIndustries Ltd., Gibraltar and by holding that thesource of income of foreign investment is notexplained and finding there to be no material toshow as to how the assessee received amount ofinvestment in the assessee establishment, theassessing officer made certain additions in theincome by involving the provisions of section 68 Commissioner of Income Tax Vs. People's International & Service of the Act. However, when the matter travelledto the Commissioner (Appeals) and then to theappellate Tribunal, the appellate authority foundthat as the assessee had disclosed the source ofincome i.e. income derived from the foreigninvestment, no further enquiry is required fromthe assessee and it is for the department toverify the source of income of the foreigninvestor and if it is found doubtful the enquiryshould be conducted against the foreign investor. 5.The appellate authority after hearing all theconcerned found that for various otherassessment years with regard to similarinvestment being made by various investors likeM/s Alliance Industries Ltd., Gibraltar additionmade under section 68 of the Act were interferedwith and the orders passed by the appellateauthority have been upheld by the High Courtdismissing the appeals filed by the revenue by anorder dated 27.6.2013. 6.From para 3 of the impugned order theappellate tribunal had referred to the orderspassed in identical cases and in para 3.2 theorder passed by the High Court, which reads asunder is reproduced :- “13.By recording aforesaidfindings, the Commissioner of IncomeTax (Appeals) reversed the order ofthe Assessing Offi cer and directedfindings, the Commissioner of IncomeTax (Appeals) reversed the order ofthe Assessing Offi cer and directed People's International & Service deletion of additions made in thematter. The ITAT affi rmed the orderof CIT(A) with similar reasoning. 14.In the light of the aforesaidfactual position, the legal positionmay be looked into because theaforesaid factual position has notbeen disputed by the parties. 15.In Lovely Export (supra) theApex Court considering the questionheld thus : “13.By recording aforesaidfindings, the Commissioner of IncomeTax (Appeals) reversed the order ofthe Assessing Offi cer and directedfindings, the Commissioner of IncomeTax (Appeals) reversed the order ofthe Assessing Offi cer and directed People's International & Service deletion of additions made in thematter. The ITAT affi rmed the orderof CIT(A) with similar reasoning. 14.In the light of the aforesaidfactual position, the legal positionmay be looked into because theaforesaid factual position has notbeen disputed by the parties. 15.In Lovely Export (supra) theApex Court considering the questionheld thus : “2Can the amount of share moneybe regarded as undisclosed incomeunder s.68 of IT Act, 1961 ? We findno merit in this Special Leave Petitionfor the simple reason that if theshare application money is receivedby the assessee company fromalleged bogus shareholders, whosenames are given to the A.O., then theDepartment is free to proceed toreopen their individual assessmentsin accordance with law. Hence, wefind no infirmity with the impugnedjudgment.” 16.The aforesaid judgment hasbeen followed by all the Courts andthe judgments relied on by theappellants relates to the period priorto the judgment in Lovely Exports.As the Apex Court has specificallyheld that if the identity of the personproviding share application money isestablished then the burden was noton the assessee to prove thecreditworthiness of the said person.However,thedepartmentcanproceed against the said Company inaccordance with law. The position ofthe present case is identical. It is notthe case of any of the parties thatM/s Alliance Industries Limited,Sharjah is a bogus company or a non-existent company and the amountwhich was subscribed by the saidCompanybywayofsharesubscription was in fact the money ofthe respondent assessee. In thepresent case, the assessee hadestablished the identity of investorwho had provided the sharesubscription and it was established I.T.A.No.91/2014 Commissioner of Income Tax Vs. People's International & Service that the transaction was genuinethough as per contention of therespondent the creditworthiness ofthe creditor was also established. Inthe present case, in the light of thejudgment of Lovely Exports (P) Ltd.,we have to see only in respect of theestablishment of the identity of theinvestor. The Delhi High Court also inDivine Leasing & Finance Ltd. (supra),considering the similar question heldthat the assessee Company havingreceivedsubscriptionstothepublic/rights issue through bankingchannels and furnished completedetails of the shareholders, noaddition could be made under section68 in the absence of any positivematerial or evidence to indicate thatthe shareholders were benamidars orfictitious persons or that any part ofthesharecapitalrepresentedcompany'sownincomefromundisclosed sources. The similarview has been taken by the otherHigh Courts. 17.As the Apex Court hasconsidered the law in Lovely Exports(supra) and in view of law laid downby the Apex Court, we find that thesubstantial questions framed in theseappeals do not arise for ourconsideration. Accordingly, all theseappeals are dismissed with no orderas to costs.” 7.From the aforesaid narration of facts it isclear that similar objections raised by therevenue in the matter of creditworthiness withregard to investment made by M/s AllianceIndustries Ltd and similar objection of therevenue have already been considered andrejected and following the same, identical ordershave been passed in this impugned orders also. 8.Considering the fact that the question M I.T.A.No.91/2014 Commissioner of Income Tax Vs. People's International & Service 7.From the aforesaid narration of facts it isclear that similar objections raised by therevenue in the matter of creditworthiness withregard to investment made by M/s AllianceIndustries Ltd and similar objection of therevenue have already been considered andrejected and following the same, identical ordershave been passed in this impugned orders also. 8.Considering the fact that the question M I.T.A.No.91/2014 Commissioner of Income Tax Vs. People's International & Service involved in these appeals has already beenconsidered and rejected by the Coordinate Benchof this Court, we see no reason to make anyfurther indulgence in the matter. 9.Accordingly, finding no substantial questionof law made out warranting consideration inthese appeals, the same are dismissed. (Rajendra Menon) (Sanjay Yadav) Judge Judge