S.68 IT Act | Whether Assessee Discharged Burden To Substantiate Identity & Genuineness Of Share Application Money Is 'Question Of Fact', Not Law: Gauhati HC
Kapil Dhyani
19 Dec 2024 5:15 PM IST
The Gauhati High Court refused to entertain an appeal with respect to genuineness of credit received by an assessee from share application money, holding that the same would require it to venture into factual matrix of the case which is beyond its jurisdiction under Section 260A of the Income Tax Act, 1961.
The appeal was preferred by the Revenue, following CIT(A) reversing the additions made by it on the strength of alleged share application money received by the Assessee. Its second appeal against the said order was dismissed by the ITAT (making HC the third appellate forum).
The dispute was essentially suspicion surrounding genuineness of the transaction in respect of share capital received by the Assessee from two entities.
Section 68 of the Income Tax Act requires Assessees to prove before the Tax authorities, the genuineness of transaction, identity of creditors and credit worthiness/ financial capacity of investors for making investment.
The Department contended that the assessee had not been able to establish the 'source of source' as regards the transaction in question. It was further submitted that under Section 68, the obligation stands with the assessee to explain the source of source.
A Division bench of Justices Lanusungkum Jamir and Kaushik Goswami held that whether the Assessee had discharged its burden is essentially a question of fact, which cannot be decided by the High Court under Section 260A.
“It is apparent that the appeal under Section 260A of the IT Act shall be maintainable only if it involves substantial question of law. It further appears that the provisions of second appeal as contained under Section 100 of Code of Civil Procedure, 1908 (hereinafter referred to as 'CPC'), is made applicable in respect of appeal filed under Section 260A of the IT Act,” it said.
The Court further noted that the ITAT had specifically held that the genuineness and creditworthiness of the transaction in question has been fully established by the assessee respondent.
“In our opinion, the aforesaid finding being a finding of fact, this Court cannot upset such finding of fact in this appeal filed under Section 260A of the IT Act. In fact, the first substantial question of law whether the learned Tribunal erred in law in holding that the assessee had discharged its burden of substantiation of the identity, creditworthiness and genuineness of the transaction involving receipt of share application money being essentially a question of fact is not a substantial question of law,” it said.
Reliance was placed on Hamida & Ors. vs. Md. Khalil (2001) where the Supreme Court held that the finding of fact recorded by the first appellate court based on evidence could not be interfered with by the High Court, that too in the absence of any substantial question of law that arose for consideration between the parties.
The Court also cited Karnataka Board of Wakf vs. Anjuman-E-Ismail Madris-Un-Niswan (1999) where the Top Court deprecated the practice of the High Court routinely interfering in pure findings of fact reached by the courts below without coming to the conclusion that the said finding of fact is either perverse or not based on material on record.
In view of the above, the appeal was dismissed.
Appearance: Mr. S.C. Keyal, Standing Counsel, CBDT, IT For the Appellants; Dr. A. Saraf, Senior Advocate, assisted by Mr. P.K. Bora, Advocate For the Respondent
Case title: Commissioner of Income Tax v. M/s Goldstone Cements Limited
Case no.: INCOME TAX APPEAL NO.08 OF 2022
