Addition u/s 68 for not producing shareholders details deleted as in public issue company not expected to know every detail of subscribers-High Court
ABCAUS Case Law Citation:
ABCAUS 2198 (2018) (02) HC
Important Case Laws Cited/relied upon by the parties:
Divine Leasing & Finance Ltd. (2007) 207 CTR 38
Brief Facts of the Case:
The assessee had reported receipt of share premium and call in arrears pertaining to public offer of issue made ten years back to both existing shareholders and the general public. The call arrears were reflected in the assessee’s books for several years and in the relevant assessment year the arrears were paid off.
The Assessing Officer found it unusual that amount in crores stood outstanding for almost 10 years and suddenly, it gets paid up. The Assessing Officer asked the assessee to establish the identity of the shareholders and the genuineness of the investments made.
The assessee provided few particulars and stated that its books had been assessed by the Central Excise Authorities and also that its plant and offices were plagued by strikes.
The Assessing Officer conducted a survey under Section 133(6) and on the basis of the report received held that the assessee failed to discharge the primary onus of furnishing full details of the receipts and names and addresses of the payers and accordingly he brought to tax the amount under Section 68.
Both the CIT and the ITAT were of the opinion that though the features of the case were unusual and the call arrears were liquidated after 10 years, equally the assessee was a public limited company and could not be expected to keep track of its individual shareholders and their details.
Both the authorities noted that the assessee had 50,000 shareholders and that the difficulties it expressed, during the course of assessment and appellate proceedings were genuine.
The ITAT also found that there was no reason to doubt that its Directors would deposit their own money, nor was there any evidence on record in the names of share holders distantly related to any of the Directors. It was not been disputed that the share holders had paid calls in arrears / share premium in the earlier years and accepted.
ITAT also concurred with the CIT(A) that in the case of public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers.
Observations made by the High Court:
The Hon’ble High Court opined that while initially the addition based upon the Assessing Officer’s assessment of the facts were premised upon the unusual feature of liquidation of the arrears after a substantial period, the fact equally remained that the assessee was placed under certain difficulties and therefore, unable to explain these transactions. Moreover, the assessee was a company with large shareholding.
As such the Hon’ble High Court declined to interfere with the findings of fact concurrently made by the Appellate Authorities
Appeal was dismissed.