The Tax Publishers2013 TaxPub(DT) 1865 (MP-HC) : (2014) 060 (I) ITCL 0143 : (2013) 356 ITR 0065 : (2013) 216 TAXMAN 0320 : (2013) 091 DTR 0346

Income Tax Act, 1961

--Income from undisclosed sources--Addition under section 68 Creditworthiness of share capital subscriber--During the course of assessment proceedings it was noted by assessing officer that assessee had raised share application money and creditworthiness of subscriber of subscriber-Sharjah company was not proved. However, identity of subscriber was proved by assessee. Assessing officer made addition under section 68. Held: Not justified. As assessee proved identity of shares subscriber providing share application money, burden of proving creditworthiness of said subscriber was to be established by revenue and not by assessee.

In Lovely Exports (P.) Ltd.'s case (supra) as the Apex Court has specifically held that if the identity of the person providing share application money is established, then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s A Ltd., Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P.) Ltd' s High Court has to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing & Finance Ltd.'s case (supra), considering the similar question held that the assessee-company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. [Para 16] As the Apex Court has considered the law in Lovely Exports (P.) Ltd.'s case and in view of law laid down by the Apex Court, the substantial questions framed in these appeals do not arise for consideration. Accordingly, all these appeals are dismissed.

Income Tax Act, 1961 Section 68

In the Madhya Pradesh High Court

Krishn Kumar Lahoti, Actg. C. J. & M. A. Siddiqui, J.

CIT v. Peoples General Hospital Ltd.

M.A.I.T. No. 27 of 2008 IT Appeal Nos. 89 & 90 of 2011

27 June, 2013

Appellant by : Sanjay Lal

Respondent by : C.S. Agrawal, A.P. Srivastava, Sumit Nema, A.P. Shroti and Sapan Usrethe

ORDER

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