SHARE application money is generally taken with a pinch of salt by our texmen. The Revenue often tends to believe that this is one of the sure shot routes to channelise own fund into the company or to convert black into white money. Anyway, the issue in the instant case is - Whether provision of section 68 stands on different footing in the case of share application money, and the burden of the assessee stood discharged on the submission of names and addresses of the share applicants, without proving their creditworthiness. And the High Court decision is YES.
Facts of the case
Assessee received share application money from share applicants via banking channel. Before the AO assessee filed confirmation of all the share holders along with their full address details, PAN numbers etc. Summons issued by the AO returned unserved. Accordingly the AO treated the share application money as bogus and added the same to the income of assessee as un-explained cash credit. CIT (A) affirmed the order of the AO. ITAT allowed the appeal of the assessee.
On appeal, and after hearing the parties the High Court held that,
++ the Tribunal has recorded that the respondent-assessee had filed confirmations from all share applicants with details of share capital paid which contained details such as full addresses, permanent account numbers and tax jurisdiction of the depositors. The Tribunal further recorded that all payments were received by cheques and were credited in the bank account of the respondent; the share application forms contained all details of the depositors; their confirmations were clear with all addresses; and that they were on the departmental records as tax-payers. In the aforesaid factual background, the Tribunal was of the view that the respondent had sufficiently discharged its burden of explaining the same.
++ The Tribunal further observed that the department has not brought any material on record to show that the depositors were bogus. According to the Tribunal none of the decisions relied upon by the revenue had held that the assessee was required to establish the credit worthiness of the share applicants strictly in the manner understood in the context of cash credits under section 68 of the Act. The Tribunal was of the view that the assessee had given the names and addresses of the share applicants, it was within the knowledge of the revenue that the said share applicants were assessed to income tax, hence the burden was on the revenue to make further inquiry. The Tribunal placed reliance upon the decision of the Apex Court in the case of C.I.T. Vs. Divine Leasing Finance Co. wherein it has been held that when the assessee company had given the name of the share holders, the department was free to reopen their individual assessment in accordance with law.
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