TaxTMI 
TaxTMI 
2010 (1) TMI 936
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....e issue in these appeals were basically on account of share application money received by the assessee in I.T.A. No. 1927/Del/2009 and the 2nd issue was in respect of the sale proceeds of the shares in I.T.A. Nos.1927/Del./2009, 1928/Del/2009and I.T.A. No. 1929/Del/2009. The 3rd issue was against the action of the Ld. CIT(A) in deleting the addition made by the A.O. on account of unexplained expenditure in respect of the commission for arranging the share application money and the sale proceeds of the shares which have been treated as unexplained income of the assessee. It was the submission by the Ld. D.R. that there was an error in the figures as mentioned in the grounds of appeal in I.T.A. No. 1927/Del/2009 in so far as in ground No.1, the amount against the share application money was shown at Rs.18 lacs but the same was to be read as Rs.10 lacs and in respect of the sale proceeds of shares, the amount was shown as Rs.10 lacs and the same was to be read at Rs.18 lacs. He requested that the typographical error may be corrected to which the Ld. A.R. had no objection. Consequently, the prayer is accepted. 3. It was the further submission by the Ld. D.R. that in the cours....
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.... shares had been sold through brokers. It was the further submission that even for the Assessment Year 2003-04 and 2004-05 when the brokers' addresses were verified, it was found that the brokers did not exist at the specified addresses. It was the submission that the CIT(A) had deleted the addition without giving any specific reasons thereto. It was the submission that the CIT(A) had given a finding in relation to the share application money and had clubbed his findings in respect of the sale proceeds of the shares along with the findings in respect of the share application money and had deleted the same. It was the further submission that the addition made by the A.O. on account of the alleged commission paid for obtaining the hawala entries had also been deleted by the CIT(A). It was the submission that the order of the CIT(A) was liable to be reversed. 4. In reply the Ld. A.R. submitted that the assessee had in the course of assessment proceedings, provided the copies of the PAN of the share applicants as also the copies of the income tax returns. It was the further submission that the statement of the persons being Shri Mukesh Gupta, Shri Rajan Jassal and Shri Trilok....
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..... 2897, 2898/Del/2008 wherein the tribunal had followed the decision of Hon'ble Supreme Court in the case of Lovely Exports referred to supra and had deleted the addition of the share application money on the ground that the assessee had produced the confirmation of the share holders indicating details of addresses and PAN and particulars of cheques through which the amount was paid towards share application money. It was his further submission that the share application money has been received from the persons whose identity was proved. The details have also been produced before the A.O. and the Ld. CIT(A). He further drew our attention to pages 37-43 of the Paper Book, which was the copy of the evidence in respect of M/s. M V Marketing Pvt. Ltd. who was one of the share applicants for an amount of Rs.5 lacs. He further drew our attention to pages 44- 50 of the Paper Book, which was the copy of the evidence produced in relation to Ethnic Creations Pvt. Ltd., which was one of the share applicants. At page 51-69 is the evidence in respect of M/s. Shradha Construction Pvt. Ltd. and at page 70-86 is the evidence in respect of Fair N Square Exports P. Ltd. and page 87- 90- which was th....
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.... tribunal in the case of Dhingra Global Credence Pvt. Ltd. in I.T.A. No. 2927/Del/2009 dated 31.12.2009 would apply wherein it has been held as follows: "As rightly contended by the learned DR, the assessee being a private limited company, the basic structure of a private limited company is such that a private limited company cannot make an invitation for issue of shares to the Public. Private Limited Co. is/are prohibited from making any invitation to the public to subscribe for any shares in the company. This provision is contained in Section 3 of the Companies Act, 1956 whereby sub-clause (iii) of sub-section (1) of section 3 defines a "private company". The primary document to hold that the amount was received by way of share application itself is missing i.e. the application for allotment of share itself. As per the balance-sheet of the assessee company, as per its profit and loss account for the year ended 31.3.2004, there were neither any business nor any income. It only incurred administrative expenses of Rs.24,356/- and the unabsorbed losses stood at Rs.51,512/-. Neither there was any business plan nor any instance which affect the profitability of the company to....
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....bmitted by the Ld. A.R. that the decision did not apply to the facts of the assessee's case and each case has to be decided on the facts of its own. 6. We have considered the rival submissions. In respect of the share application money received by the assessee, it is noticed that the assessee has received the share application money from M/s. M V Marketing Pvt. Ltd. and M/s. Ethnic Creations P. Ltd. A perusal of the evidence produced in respect of each of the share applications is considered. Page 37 of the Paper Book is the confirmation letter dated 12th October 2004 of M/s. M V Marketing P. Ltd. This letter has been issued by one Shri Mukesh Gupta as Director of M/s. M V Marketing P. Ltd. This letter does not contain any seal of the company and the address is shown as WZ134 Plot No.170, Vishnu Garden, New Delhi. Page 38 is the copy of the letter of allotment of distinctive numbers of shares which is the letter issued by the assessee. Page 39 is the copy of the share application form in respect of M/s. M V Marketing P. Ltd. dated 17.05.2000. Page 43 is the copy of PAN allotted to M/s. M V Marketing P. Ltd. vide letter dated 01.11.2000. However, it is also noticed here th....
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....the Paper Book and which bears the date 12th October 2004, talks of Shri Mukesh Gupta as Director of M/s. M V Marketing P. Ltd. In these circumstances, it cannot be said that the identity of this share applicant is said to be proved. Now coming to the 2nd share applicant namely M/s. Ethnic Creation P. Ltd., it is noticed that here it is noticed that the confirmation has been signed by one Shri Mukesh Gupta, copy of which has been filed for the Assessment Year 2002-03 wherein investment as on 31.03.2001 has been shown at Rs.46 lacs. The Annexure to the balance sheet and the P and L account are also missing. It is further noticed that the return in the case of Ethnic Creation P. Ltd. has been signed by Shri Rajesh Gupta. The name of Shri Mukesh Gupta does not appear anywhere except in confirmation letter without any company seal on the letterhead of Ethnic Creation P. Ltd. dated 12th October 2004. It is noticed that the PAN has been communicated to the assessee vide a letter dated 25.10.2000 from the CIT PAN Computer Operations whereas the share application made on 17.05.2000 itself contain the PAN. It is also noticed that the registered office address of M/s. Ethnic Creation P. Ltd.....
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....as that of M/s. M V Marketing P. Ltd. and Ethnic Creations P. Ltd. Interestingly in the Paper Book at page 89-90 is a copy of e-filing extract showing PAN details of performance of Trading and Investment P. Ltd. another one of the purchasers of the shares from the assessee which is showing that M/s. Performance Trading and Investment Pvt. Ltd. is holding two PAN being AAEFP3615J and AAACP5233B and the copy of the return of M/s. Performance Trading and Investment P. Ltd. is not available. Thus, a perusal of the evidence produced also does not show any evidence to prove the purchase of shares from the assessee. Same is the situation in respect of the purchasers of shares for the Assessment Year 2003-04 and 2004-05. Thus, it cannot be said that the assessee has discharged the onus cast upon it to prove the identity, genuineness or creditworthiness of the share applicants and the purchasers of the shares held as investment by the assessee company. However a perusal of the assessment order shows that the assessee has not been given adequate opportunity to produce the share applicants and the purchasers of the shares. This is because summons u/s 131 had been issued on 29.11.2007 to the s....