SWAGAT SYNTHETICS P LTD Vs. ITO

JUDGEMENT

(1.) This is an appeal by the assessee against the order of Commissioner (Appeals), Ajmer, for assessment year 1997-98. The appellant agitated on various grounds which are being discussed and decided in this order.

(2.) Ground No. 1 is general and the ground regarding quashing of the order is not being pressed by the learned counsel.

(3.) Ground No. 2Share application money added under section 68.During the year under appeal the assessee-company increased the subscribed share capital and received share application money from 8 shareholders. The assessing officer had made an addition of Rs. 1,30,000 for unexplained share application money in the names of 8 persons under section 68 of the Income Tax Act. The learned Commissioner (Appeals) had confirmed the same. The Commissioner (Appeals) observed that the case of CIT v. Stellar Investment Ltd.,1991 192 ITR 287(Delhi) had already been considered by the Full Bench of the Delhi High Court in the case of CIT v. Sophia Finance Ltd.,1993 205 ITR 98 . The learned Commissioner (Appeals) observed that the Full Bench of the Delhi High Court in the case of Sophia Finance Ltd. has held that section 68 is very widely worded and the credits of share application money fall within the mischief of this section. The ratio of the decision is that if the shareholders are identified and it is established that they have invested money in the purchase of shares, then the amount received by the company would be regarded as capital receipt. The Hon'ble Supreme Court has affirmed the decision of the Hon'ble Delhi High Court in the case of CIT v. Steller Investment Ltd., 2001 251 ITR 263(SC) . The learned Commissioner (Appeals) observed that the Hon'ble Supreme Court has not dealt with the scope of enquiry and applicability of section 68 in respect of the credits of share application money. The Hon'ble Supreme Court had affirmed the judgment of Hon'ble Delhi High Court in the case of Steller Investment Ltd. on the ground that Tribunal in that case had drawn its conclusion on facts, and, therefore, no interference was called for. From the perusal of the brief judgment, the Commissioner (Appeals) observed that probably the Full Bench decision of the Hon'ble Delhi High Court in the case of Sophia Finance Ltd. (supra) was not brought to the notice of their Lordships of the Hon'ble Supreme Court. He is of the opinion that in the circumstances of the case the decision of the Hon'ble Supreme Court in the case of Steller Investment Ltd. had not changed the legal position laid down by the Hon'ble High Court in the case of Sophia Finance Ltd. with regard to the scope of enquiry and applicability of section 68 in respect of credits of share application money.