Commissioner Of Income Tax, Faridabad v. M/S Gp International Ltd., Faridabad

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No. 618 of 2009DATE OF DECISION : 02.12.2009 Commissioner of Income Tax, Faridabad Versus M/s GP International Ltd., Faridabad .... APPELLANT ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE MEHINDER SINGH SULLARHON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present:Ms. Urvashi Dhugga, Advocate,for the appellant-revenue.for the appellant-revenue. * * * SATISH KUMAR MITTAL , J. The revenue has filed this appeal under Section 260-A of theIncome Tax Act, 1961 (hereinafter referred to as `the Act'), against the orderdated 12.2.2009, passed by the Income Tax Appellate Tribunal, DelhiBench `I' New Delhi (hereinafter referred to as `the ITAT') in ITA No.4346/Del/2005, pertaining to the assessment year 1996-97, while raising thefollowing substantial questions of law : (i)Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in upholding theorder of the learned CIT (A) in deleting the addition ofRs. 3,30,000/- made by the Assessing Officer on accountof liability of M/s Axis Chemicals & Pharmaceuticalseven though the assessee had failed to prove thecase, the learned ITAT was right in law in upholding theorder of the learned CIT (A) in deleting the addition ofRs. 3,30,000/- made by the Assessing Officer on accountof liability of M/s Axis Chemicals & Pharmaceuticalseven though the assessee had failed to prove the existence and genuineness of the liability? (ii)Whether on the facts and in the circumstances of thecase, the learned ITAT was right in law in confirming theorder of the learned CIT (A) in deleting the addition ofRs. 15,00,000/- made by the Assessing Officer onaccount of unproved share capital disregarding the factthat the assessee had failed to prove the existence,genuineness and creditworthiness of these share holdersdespite specific requirement of the law? case, the learned ITAT was right in law in confirming theorder of the learned CIT (A) in deleting the addition ofRs. 15,00,000/- made by the Assessing Officer onaccount of unproved share capital disregarding the factthat the assessee had failed to prove the existence,genuineness and creditworthiness of these share holdersdespite specific requirement of the law? In the present case, the Assessing Officer, while completing the assessmentunder Section 143 (3) of the Act, made addition of Rs. 3,30,000/- in respectof outstanding payable to M/s Axis Chemicals and Pharmaceuticals Ltd.,Faridabad and addition of Rs. 15,00,000/- on account of unexplained sharecapital besides other additions. On appeal filed by the assessee, the CIT (A)vide its order dated 9.8.2000 set aside the assessment order and remandedback the matter to the Assessing Officer to frame the assessment afresh afterproviding full opportunity of being heard to the assessee. Thereafter, theAssessing Officer completed the assessment under Section 143 (3) read withSection 250 of the Act and again made the aforesaid two additions. Theassessee again filed appeal against the order of the Assessing Officer. TheCIT (A) deleted both the aforesaid additions. The appeal filed by therevenue against the order of the CIT (A) has been dismissed by the ITAT.Hence, this appeal. We have heard learned counsel for the appellant-revenue. As far as the addition of Rs. 3,30,000/- is concerned, it has been We have heard learned counsel for the appellant-revenue. As far as the addition of Rs. 3,30,000/- is concerned, it has been held that during the proceedings under Section 143 (3) read with Section250 of the Act, the assessee furnished a confirmation certificate from M/sAxis Chemicals and Pharmaceuticals Ltd., Faridabad along with PANnumber. On asking of the Assessing Officer, the assessee has confirmed thatthe said liability is still outstanding. In spite of that material, the AssessingOfficer made the addition of the amount on the basis that this liability hasceased to exist and the same is not payable by the assessee, and treated thesaid liability as income by invoking provision of Section 41 (1) of the Act.The CIT (A), while deleting the said addition, has observed that the similaraddition was made in the case of Febon Con, Faridabad, where the similarliability was shown to be payable to the same party i.e. M/s Axis Chemicalsand Pharmaceuticals Ltd., Faridabad. In that case, the said addition wasdeleted by the ITAT. It is the admitted position that the said order of theITAT passed in ITA No. 114 to 116/Del/2004 has become final. In view ofthese facts, in our opinion, the ITAT has rightly come to the conclusion thatthe aforesaid liability of the assessee cannot be said to have ceased to existand the provision of Section 41 (1) and explanation to this provision are notapplicable, because the assessee is still showing it as a liability in its booksand has not written off the same. Regarding the addition of Rs. 15,00,000/- on account ofunexplained share capital, it has been held that at the time of the originalassessment, the assessee had supplied the list of the persons along with theiraddresses to whom the shares were sold. The said list contained information, such as name, address and number of shares allotted. TheAssessing Officer had issued enquiry letter under Section 133 (6) of the Actat random basis to 25 persons, out of whom some of the persons confirmedthe genuineness of the transaction. However, some persons did not respond.In view of this fact, out of the total share capital of Rs. 54,28,500/-, theAssessing Officer made an addition of Rs. 15,00,000/- by treating thesources of share capital of those persons as unexplained. In our opinion, theCIT (A) as well as the ITAT have rightly deleted the aforesaid addition,because in the instant case, the Assessing Officer is not doubting theidentity of the persons from whom the assessee has shown receipt ofapplication money. Merely because some of the persons did not respond tothe notice issued by the Assessing Officer under Section 133 (6) of the Act,it cannot be taken that the said transaction was ingenuine. It has been heldby the Hon'ble Supreme Court inCommissioner of Income Taxv.LovelyExports (P) Ltd.(2008) 216 CTR 195 (SC) that if the share applicationmoney is received by the assessee company from alleged bogusshareholders, whose names are given to the Assessing Officer, then thedepartment is free to proceed to re-open their individual assessments inaccordance with law. But the said amount cannot be taken as unexplainedincome in the hands of the assessee. In view of the above, we do not find any illegality in theimpugned order passed by the ITAT and in our opinion, no substantialquestions of law, as raised by the revenue in this appeal, arise from the order ITA No. 618 of 2009 of the ITAT. Dismissed. December 02, 2009 ndj ( SATISH KUMAR MITTAL )JUDGE ( MEHINDER SINGH SULLAR )JUDGE