The Commissioner Of Income Tax, Alwar v. M/S Jalan Hard Coke Ltd. 4/3, Kala Kua, Alwar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 419 / 2008 The Commissioner of Income Tax, Alwar ----Appellant Versus M/S Jalan Hard Coke Ltd. 4/3, Kala Kua, Alwar. ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain with Ms. Shiva Goyal.For Respondent(s) : Mr. Ananat Kasliwal. _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGHJudgment 31/07/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the tribunal has allowedthe appeal of the assessee as well as appeal of the department forstatistical purposes. 2.While admitting the appeal, this court on 11.11.2008 framed the following substantial question of law:- “(i)Whether on the facts and circumstances of thecase, the findings of the Tribunal are not perverse inreversing the order of the CIT (A) by which theadditions made u/s. 68 for a sum of Rs.2,67,95,000/-were deleted?” 3.Learned counsel for the appellant contended that in view of the observation of the AO which reads as under:- “In response to above, the assessee has filed the detailsof share capital money vide its letter No.JHCL/99-2000dated 10.08.1999. The details filed reveal that there arenumber of share applicants who applied for allotment ofshares, most of them are residing in Delhi and the applicants applied for allotment of shares through D.D.smostly of Rs. 2 lac each. The assessee, was therefore,specifically asked vide my office letter dated 27.08.1999to furnish complete details and photocopies of the shareapplications were asked to be furnished. The assesseehas filed written reply dated 31.08.1999 stating thereinthat the directors of the company did not consider theallotment of shares favourable to the company and assuch, they did not allot the shares and kept shareapplication money till date with the company.” 4.It is contended that the above observation was partly modified by the CIT(A) which reads as under:- applicants applied for allotment of shares through D.D.smostly of Rs. 2 lac each. The assessee, was therefore,specifically asked vide my office letter dated 27.08.1999to furnish complete details and photocopies of the shareapplications were asked to be furnished. The assesseehas filed written reply dated 31.08.1999 stating thereinthat the directors of the company did not consider theallotment of shares favourable to the company and assuch, they did not allot the shares and kept shareapplication money till date with the company.” 4.It is contended that the above observation was partly modified by the CIT(A) which reads as under:- “(4.3) I have carefully considered the facts of the case and therival submissions. The brief facts of the case are that thecompany which was originally incorporated on 26.06.1981 asper the Memorandum of Association and later on the companychanged its name as Jalan Hard Coke w.e.f. 10.04.1992. Duringthe year underconsideration the company had incurred its sharecapital by Rs.26795000/- and had shown interest incomeearned on surplus fund amounting to Rs. 502394/-. Theappellant filed the details of the share capital money before theAO vide its letter No.JHCL/99-2000 dated 10.08.1999. Thedetails filed that there are number of share applicants whoapplied for the allotment of the share and most of them wereresiding in Delhi and each application was for Rs.2 lacs eachand the payment invariably was made by Dds. The appellant ona direction from the AO filed the photo copies of the shareapplications and the details of the share allotment with proof ofdespatch thereafter. The appellant filed the photo copies of theshare application but informed the AO vide their letter dated31.08.1999 with the directors of the company did not considerthe allotment of shares favourable to the company and as suchthey did not allot the shares to any of these applicants and theshare application money remained with the company till date.The company in the last invested the share application money inpurchase of flat at Mumbai. The AO looking to the peculiar factsof the case required the appellant to produce all thepersons/share applicants for examination as per notice u/s142(1) dated 21.10.1999. The appellant vide their reply dated25.10.1999 expressed their inability to produce the shareapplicants and reiterated that since the share application moneyfrom identifiable persons having capacity and credit worthinessof making share application as well as the fact that during anypoint of time the company never earned the seized amount noaddition u/s 68 of the IT Act should be made. The perusal of theshare applications and the affidavits revealed that most of themare dated 02.03.1995 much before the case was taken up forscrutiny. These affidavits therefore appeared to have been gotprepared in advance in order to explain the investment of theaffidavits are written a stereo type fixed language and thecontents are of very routine nature. Most of these are notattested by the Notary Public and even were the same areattested they are not in accordance with the requirements laiddown in the CPC in order XIS, XI, XIA, XIII & XIV at page 449 &450 of the Code of Civil Procedure, 1908 by PRAFULL C.PANT, First Edition, 1998 as the Notary Public before whom theaffidavit has been sworned has not placed the necessarycertificate at the bottom of the affidavit as required by theaforementioned Rules.” 5.The Tribunal while allowing the issue has held against thedepartment. 6.Counsel for the appellant contended that in view of the factthat the amount which was received on the share applications waskept by the company and the applicants made the payment throughDemand Draft, the payment was approved in a particular fashion andmost of the applicants are residing in Delhi. In that view of thematter the view taken by the both the authorities is required to bereversed. First Edition, 1998 as the Notary Public before whom theaffidavit has been sworned has not placed the necessarycertificate at the bottom of the affidavit as required by theaforementioned Rules.” 5.The Tribunal while allowing the issue has held against thedepartment. 6.Counsel for the appellant contended that in view of the factthat the amount which was received on the share applications waskept by the company and the applicants made the payment throughDemand Draft, the payment was approved in a particular fashion andmost of the applicants are residing in Delhi. In that view of thematter the view taken by the both the authorities is required to bereversed. 5.However, counsel for the respondent has relied upon thejudgment in the case of Commission of Income Tax-I Vs. M/s. ARLInfratech, Ltd.,(D.B. Income Tax Appeal No.24/2014) decided on28.09.2016 wherein this court has held as under:- “4.Counsel for the appellant has mainly contendedthat the all companies which were floated early one weekprior to the public issue and only because theirapplications have a PAN number and the paymentthrough cheque with credit worthiness and their worthwas not examined. The Assessing Officer whileconsidering the same has relied upon the inspectorreport. However, the same was not allowed to be cross-examined by the assessee. 5.Taking into consideration the aforesaid facts, theTribunal in para 2.6, observed as under:- “Adverting, the facts of the given case, we are of theconsidered opinion that all the share applicants standidentified. The assessee has provided PANs of the shareapplicants. The mode of payment has also been madeexplained. There is no direct or indirect relation betweenthe assessee company and the share applicants. Thestatements recorded during survey has got noevidentiary value and the law is very much settled onthis issue. In any case, even under the provisions ofSection 68 of the Act, the assessee cannot be forced to prove the source of the source. The law on this subject isalso settled by numerous decisions. The alleged report ofthe Inspector of the Department who is stated to havevisited at the given addresses of the share applicantswas never put or confronted to the assessee. Thecumulative effects of these reasons is that the impugnedaddition cannot be added in the hands of the assesseecompany. Accordingly, we order to delete the entireadditions and allow the appeal of the assessee.” 6.In our view, the decision of the Supreme Court inthe case of CIT vs. Lovely Export Pvt. Ltd. reported in(2009) 319 ITR (St.) 5 (SC) held as under:-“Canthe amount of share money be regarded as undisclosedincome under s.68 of IT Act, 1961? We find no merit inthis Special Leave Petition for the simple reason that ifthe share application money is received by the assesseecompany from alleged bogus shareholders, whose namesare given to the AO, then the Department is free toproceed to reopen their individual assessmkents inaccordance with law. Hence, we find no infirmity with theimpugned judgment.” 7.Counsel for the respondents relied upon followingdecisions:- (I) Commissioner of Income-tax Vs. Orissa CorporationP. Ltd., (1986) 159 ITR 0078 (ii) Shree Barkha SyntheticsLtd. vs. Assistant Commissioner of Income Tax, (2006)283 ITR 0377 (iii) Commissioner of Income Tax v. StellarInvestment Ltd. (Delhi High Court), (1991) 192 ITR0287 (iv) Commissioner of Income Tax vs. StellerInvestement Ltd. (Supreme Court of India), (2001) 251ITR 0263 (v) Commissioner of Income Tax vs. DivineLeasing and Finance Ltd. (Delhi High Court), (2008) 299ITR 0268 (vi) Commissioner of Income Tax vs. First PointFinance Ltd. (Rajasthan High Court) (vii) Commissionerof Income Tax vs. GP International Ltd. (Punjab &Haryana High Court). 7.Counsel for the respondents relied upon followingdecisions:- (I) Commissioner of Income-tax Vs. Orissa CorporationP. Ltd., (1986) 159 ITR 0078 (ii) Shree Barkha SyntheticsLtd. vs. Assistant Commissioner of Income Tax, (2006)283 ITR 0377 (iii) Commissioner of Income Tax v. StellarInvestment Ltd. (Delhi High Court), (1991) 192 ITR0287 (iv) Commissioner of Income Tax vs. StellerInvestement Ltd. (Supreme Court of India), (2001) 251ITR 0263 (v) Commissioner of Income Tax vs. DivineLeasing and Finance Ltd. (Delhi High Court), (2008) 299ITR 0268 (vi) Commissioner of Income Tax vs. First PointFinance Ltd. (Rajasthan High Court) (vii) Commissionerof Income Tax vs. GP International Ltd. (Punjab &Haryana High Court). 8.Taking into consideration the observations relied onby the respondents and judgment of the Delhi High Courtin the case of Commissioner of Income Tax vs. ValueCapital Services P. Ltd. reported in (2008) 307 ITR334 (Delhi) more particularly, the observationswhich reads as under :- “The Court in that case held that the additional burdenwas on the Department to show that even if shareapplication did not have the means to make investment,the investment made by them actually emanated fromthe coffers of the assessee so as to enable is to betreated as the undisclosed income of the assessee. Inthe absence of such findings, addition could not be madein the income of the assessee under Section 68 of theAct.” 9.We have heard Mr. Anuroop Singhi counsel for theappellant and Mr. Naresh Gupta counsel for therespondent. 10.Taking into consideration the observations made bythe twin decisions as observed by the Tribunal that allthe share applicants stand identified. The assessee hasprovided PANs of the share applicants. The mode ofpayment has also been made explained. There is nodirect or indirect relation between the assessee companyand the share applicants. The statements recordedduring survey has got no evidentiary value without anysupporting documents or evidence.” 6.Taking into consideration the aforesaid decision we are of theconsidered opinion that company cannot be assessed for the incometax to find out the person who has applied as share holder. The viewof taken by the Tribunal is just and proper, therefore, the issue isanswered in favour of the assessee and against the department. 7.The appeal stands dismissed. (INDERJEET SINGH),J.Mohit GroverSr. No.46. (K.S. JHAVERI),J.