CIT vs. Divine Leasing & Finance (SC)

The amount of share application money received by a Company from alleged bogus shareholders cannot be regarded as undisclosed income under S. 68 of I. T. Act for the simple reason that if the names of the alleged bogus shareholders are given to the AO, then the Department is free to proceed to re-open their individual assessments in accordance with law.

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Note: The judgement of the Delhi High Court against which the SLP was filed is reported in 299 ITR 268/158 TM 440.

CWT vs. Value Capital Services (Delhi High Court)

(1) In a case where it is alleged that persons contributing share application moneys are bogus, it is quite obvious that is very difficult for the assessee-company to show the creditworthiness of strangers. If the Revenue has any doubt with regard to their ability to make the investment, their returns may be re-opened by the department.

(2) In any case, there is an additional burden on the Revenue. It must show that even if the applicant does not have the means to make the investment, the investment made by the applicant actually emanated from the coffers of the assessee-company so as to enable it to be treated as the undisclosed income of the assessee-company.

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