MADHYA PRADESH HIGH COURT - COMMISSIONER OF INCOME TAX VS PEOPLES GENERAL HOSPITAL LTD,
M.A.I.T. NO. 27/2008
27 JUNE, 2013

Core Fact of the Case: ………..In this case return was filed on 13.10.2003 in which income was declared as nil. The assessment order was passed on 01.03.2006 by which the Assessing Officer made an addition of Rs. 21,27,50,403/- and assessed the income of the respondent at Rs. 21,27,50,403/-. The aforesaid addition was made on the ground that one M/s Alliance Industries Limited, Sharjah had made share subscription to the capital of respondent. The assessing officer doubted creditworthiness of M/s Alliance Industries Limited, Sharjah and directed addition of the amount of share subscription provided by the aforesaid Company to the assessee.……….The Assessing Officer held thus:-……………"On going through the above details furnished by the assessee, it is clear that although they indicate the identity of the NRI Company and the mode of transfer of money to the assessee but evidently lack in proving creditworthiness of the NRI Company. The transactions shown by the assessee through the banking channels ipso facto do not establish the financial capacity of the NRI Company. Further, it cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct.

Summarised Judgment : ………. 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., we have to see only in respect of the establishment of the identity of the investor.

The Delhi High Court also in Divine Leasing & Finance Ltd. (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.

As the Apex Court has considered the law in Lovely Exports (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs.

Analysis : The above judgment says that, “…………….. The Delhi High Court also in Divine Leasing & Finance Ltd. (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………..”. In the case of JSM also banking details have been made available and nothing adverse is recorded.