The judgment of the court was delivered by
K.S. JHAVERI, J. :-
By way of this appeal, the appellant has challenged the judgment and order dt. 29th Nov., 2005 of the Income-tax Appellate Tribunal, Ahmedabad Bench 'C' in ITA No. 1948/Ahd/2005 : asst. yr. 1994-95 wherein the Tribunal upheld the order of the CIT(A).
2. While admitting the matter on 11th Dec., 2006, the following substantial question of law were framed by the Court for consideration :
"Whether on the facts and in the circumstances of the case, the law as stated by the Tribunal in regard to the onus on the company in respect of share application money is correctly stated ?"
3. The brief facts of the case are as under :
The appellant is a company engaged in the business of fabrication and erection of transmission towers. One of the shareholders – Smt. Manjulaben Dalwadi of Nadiad applied for shares of the company and the appellant received Rs. 5,00,000 towards share application money on different dates. According to the AO, this source of Rs. 5,00,000 could not be explained by Smt. Manjulaben and therefore, addition of Rs. 5,00,000 was made in the hands of the appellant under s. 68. The matter was decided in favour of the appellant by the CIT (A), but on a second appeal the Tribunal set aside the issue.
The AO was given an opportunity as directed by the Tribunal. The said Smt. Manujalben also filed a confirmation letter confirming that she had paid by cheque the above amount to the company towards shares and she also stated that her husband was a businessman who expired in the year 1986 leaving the business funds and income.
It is the case of the company that the Tribunal approached the matter as if this was a case of cash credit under s. 68 as distinguished from the share application money from a person whose identity is established and held that onus under s. 68 is not discharged. Being aggrieved with the order dt. 29th Nov., 2005 of the Tribunal as stated hereinabove, the above appeal has been preferred.
4. Learned counsel for the appellant Mr. Manish J. Shah has taken this Court to the facts of the case and has submitted that the Income Tax Tribunal has wrongly exercised its powers as stated in view of the decision of the Hon'ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 which reads as under :
"2. Delay condoned.—Can the amount of share money be regarded as undisclosed income under s. 68 of the 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 AO, 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.
3. Subject to the above, special leave petition is dismissed."
It is further submitted that the above principle has been followed by this Court in various decisions and therefore, the question in this Appeal is required to be answered in favour of the assessee.
5. Learned Counsel for the respondent Mr. K.M. Parikh has drawn the attention of the Court to the findings of the CIT(A) and also of the Income Tax Tribunal and has contended that no interference is called for by this Court in the facts of the case and the appeal deserves to be dismissed.
6. We have heard learned advocates appearing for the parties and perused the records of the case. The decision of the Hon'ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra) has been followed consistently by this Court in various decisions as detailed herein above :
(a) Hindustan Inks & Resins Ltd. vs. Dy. CIT (2011) 60 DTR (Guj) 18 ;
(b) CIT vs. Shree Rama Multi Tech Ltd. (2013) 34 taxmann.com 177 (Guj);
(c) CIT vs. Bhavana Property Developers Ltd. in Tax Appeal No. 1039 of 2009, dt. 11th Jan., 2011
(d) CIT vs. Guptex (P) Ltd. in Tax Appeal No. 1309 of 2010, dt. 14th Sept., 2011
(e) CIT vs. Nilchem Capital Ltd. in Tax Appeal Nos. 2087 of 2009 with 2088 of 2009 dt. 14th Nov., 2011
(f) CIT vs. Satyendra Traders (P) Ltd. in Tax Appeal No. 692 of 2010, dt. 4th Oct., 2011
(g) CIT vs. Ranchhod Jivabhai Nakhava in Tax Appeal No. 50 of 2011 dt. 20th March, 2012
(h) CIT vs. Belgium Glass & Ceramics (P) Ltd. in Tax Appeal No. 442 of 2011 dt. 13th June, 2012
(i) CIT vs. Maruti Aluminium (P) Ltd. in Tax Appeal No. 330 of 2011, dt. 27th June, 2012 and
(j) CIT vs. Gay Lord Industries Ltd. in Tax Appeal No. 1426 of 2011, dt. 27th June, 2012.
It is also necessary to refer to reproduce hereunder para 9 of the decision of this Court in the case of Asstt. CIT vs. Tarujyot Investment Ltd. rendered in Tax Appeal No. 457 of 1999, dt. 9th Aug., 2010 which reads as under :
"9. Thus, from the facts emerging on record, it is apparent that during the period immediately after its incorporation the assessee company had practically done no business so as to generate income of Rs. 50 lakhs. The AO on inquiry has found many of the alleged shareholders to be benamidars or having not invested the money, but at the same time, he has traced out the source of money to some specific persons, who were the real investors. The Supreme Court has in the case of CIT vs. Lovely Exports (P) Ltd. (supra), held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen the individual assessments in accordance with law. Such amounts cannot be regarded as undisclosed income under s. 68 of the assessee company. Applying the said principles to the facts of the present case, the AO having traced out the source of funds to specific persons who had invested the same in share of the assessee company, it was open for the AO to proceed against the said persons. The funds not having emanated from the assessee company, there was no warrant for making addition of the said amount as undisclosed income under s. 68 of the act in its hands. In the circumstances, the Tribunal was justified in deleting the addition of Rs. 50,00,000 made under s. 68 of the Act. The question stands answered accordingly, that is, in favour of the assessee and against the Revenue."
7. Considering the law laid down in the above decisions and in the facts of the case, we answer the issue in favour of the assessee and against the Department.