D. B. Income Tax Appeal v. M/S Subh Fabrics Ltd

17 D. B. INCOME TAX APPEAL NO. 03/2007 (C.I.T. Ajmer Vs. M/s Subh Fabrics Ltd) DATE OF ORDER:1[st] March 2012 HON'BLE MR. JUSTICE DINESH MAHESHWARI HONBLE MR. JUSTICE C. M. TOTLA ' Mr. K.K. Bissa, for the appellant Mr. Anjay Kothari, for the respondent In relation to the same assessee (the respondent herein)the appeal relating to assessment year 1997-1998 was decided bythe Commissioner of Income-Tax (Appeals) on 11.02.2004. Theassessee and revenue preferred separate appeals against the saidorder dated 11.02.2004 before the Income Tax Appellate Tribunal,Jodhpur Bench, Jodhpur: the appeal by the assessee being ITANo.171/JU/2004; and the appeal by the revenue being ITANo.221/JPDR/2004. The aforesaid appeal of the assessee waspartly allowed by the Tribunal on 24.12.2004 whereas the appeal ofthe revenue was dismissed by the Tribunal on 29.12.2004. The revenue has filed this appeal jointly in relation tothe aforesaid orders passed by the Tribunal in two appeals. Afterconsidering this appeal for admission on 19.01.2007, this Courtthough dismissed the appeal in relation to ITA No. 221/JPDR/2004but admitted the same in relation to ITA No.171/JU/2004, relating tothe addition of an amount of Rs.48,000/- received by the assesseeon account of share application money, on the following substantialquestion of law :- “Whether in the facts and circumstances the Tribunalcould reach reasonably to the conclusion that theassessee has been able to prove that the amount ofcould reach reasonably to the conclusion that theassessee has been able to prove that the amount of (C.I.T. Ajmer Vs. M/s Subh Fabrics Ltd) share application money alleged to have been receivedfrom Shri Kishan Chechani and Shri Kishan Lal Aahirwas really received from these two persons in view ofthe statements of Shri Kishan Chechani and Shri KishanLal Aahir recorded by the Assessing Officer.” The Tribunal has considered the matter in paragraph-5 of the order impugned that reads as under :- “I have considered the rival submissions and thematerial available on record. A similar issue had beendecided by the ITAT, Jodhpur Bench in the case of JCITVs. Hanuwant Cement Company (P) Limited (supra)wherein the relevant findings had been given at para3.12 of the order dated 06.01.04, which reads asunder :- “After considering the rival submissions andcarefully going through the materialavailable on record, we are of the view thatthe issue in question is fully covered infavour of the assessee by the decisionHon'ble Delhi High Court in the case of CITVs. Steller Investment Limited : (1991) 192ITR 287 (Del.). The aforesaid decision hasbeen affirmed by the Hon'ble SupremeCourt in the case of CIT Vs. StellerInvestment Limited (2000) : 251 ITR 263(SC). The Hon'ble High Court in the abovereferred case in the Head Note, held thateven if it be assumed that the subscribersto the increased share capital were notgenuine, under no circumstances could theamount of share capital be regarded asundisclosed income of the company. Thusfrom the above decision, it is clear thatunder no circumstances, the amount of theshare capital can be regarded asundisclosed income of the company.Accordingly, we find no merit in the appealsfiled by the department and feel nohesitation in confirming the impugned orderpassed by the CIT(A).” So, by respectfully following the earlier order of theTribunal (authored by me) dated 6.1.2004. I delete theaddition made by the Assessing Officer and confirmed bythe CIT(A).” The learned counsel for the respondent-assessee submits that the question as formulated does not even arise in thiscase because it remains settled with the consistent decisions of theCourts that even in case of doubt about subscribers to the increasedshare capital, the amount of share capital cannot be regarded asundisclosed income of the company. The learned counsel has So, by respectfully following the earlier order of theTribunal (authored by me) dated 6.1.2004. I delete theaddition made by the Assessing Officer and confirmed bythe CIT(A).” The learned counsel for the respondent-assessee submits that the question as formulated does not even arise in thiscase because it remains settled with the consistent decisions of theCourts that even in case of doubt about subscribers to the increasedshare capital, the amount of share capital cannot be regarded asundisclosed income of the company. The learned counsel has D. B. INCOME TAX APPEAL NO. 03/2007 (C.I.T. Ajmer Vs. M/s Subh Fabrics Ltd) referred to the decision in the case of Shree Barkha Synthetics LtdVs. Assistant Commissioner of Income Tax : [2006] 283 ITR 377(Raj.), wherein this Court has noticed that in Steller's case [(2001)251 ITR 263], the Hon'ble Supreme Court has affirmed the view ofDelhi High Court in the case of CIT Vs. Stellar Investment Limited : (1991) 192 ITR 287 (Del.) that reads as under :- “It is evident that even if it be assumed that thesubscribers to the increased share capital were notgenuine, nevertheless, under no circumstances, canthe amount of share capital be regarded asundisclosed income of the assessee. It may be thatthere are some bogus shareholders in whose namesshares had been issued and the money may have beenprovided by some other persons. If the assessment of thepersons who are alleged to have really advanced themoney is sought to be reopened, that would have madesome sense but we fail to understand as to how thisamount of increased share capital can be assessed in thehands of the company itself.” (emphasis supplied) The learned counsel for the appellant-revenue frankly and fairly does not dispute the proposition aforesaid. In view of the above, we have no hesitation in upholding the objection of the learned counsel for the respondent that thequestion as formulated does not arise because so far as theassessee company (respondent herein) is concerned, the amountreferable to the share application cannot be attributed to it; and thisamount cannot be assessed in the hands of the company. Thus, theview as taken by the Tribunal in this case cannot be said to beunjustified. Accordingly, this appeal stands dismissed. (C.M.TOTLA), J.(DINESH MAHESHWARI), J.