TaxTMI 
TaxTMI 
2012 (11) TMI 333
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....eturn declaring income of Rs. 52,71,342/- filed on 24.11.2006 by the assessee, manufacturing M.S. pipes and GS pipes, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act) issued on 3rd October, 2007. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee received an amount of Rs. 26,20,000/- by way of share application money from the 23 persons mentioned in para 3 of the assessment order. To a query by the AO, seeking details of genuineness of the share application money, the assessee did not respond. Even when notice u/s 133(6) of the Act were issued to the aforesaid persons, most of the notices were returned unserved by the postal authorities. To a further query by the AO, asking the assessee to produce 23 persons, the assessee submitted only their affidavits along with copy of the bank accounts. Since these affidavits were not notarized while the bank account revealed deposits in cash on the date of giving the money or a day before and there being no other transaction in their bank accounts, the AO concluded that the assessee failed to establish the....
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....cant has between established beyond doubt by the appellant. The AO did not consider the identity proved on account of non production of the party. In this regard it is noticed that in case of P.K. Sethi Vs CIT (2006) 286 ITR 318 (Gau.), it was held by the Honble High Court that the identity of the creditor is proved when a creditor is shown to be an income tax assessee. Further the Hon'ble Delhi High Court in the case of CIT Vs Pratham Projects and Finlease Ltd. vide ITA No. 628/2010 in its order dated 11.05.2010 has held as under: "We find that the Commissioner of Income Tax as well as the Income Tax Appellate Tribunal had considered the question on facts and had accepted the submissions of the assessee that the said amount was received from various companies as and by way of share application money. Since the confirmation letters, copies of Income-tax returns, Pan Number and certificate of the incorporation of the companies were placed on record by the assessee, the identities of the share applicants had been established. Moreover, the payments had been received through normal banking channels and there was nothing to doubt the creditworthiness of the said applicants. Thus,....
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....heless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself." In the case of M/s Monnet Ispat and Energy Ltd. Vs DCIT it was found that the share application money was received by banking channel and that the assessee* had produced confirmatory letters the creditor was assessed to tax and the PAN had been given in the certificate filed. It was held by the Hon'ble Delhi High Court that the assessee had- completely discharged the identity of the creditor, creditworthiness and genuineness of the transaction. In the case of CIT Vs Diamond Products Ltd. (2009) the Hon'ble Delhi High Court held that the AO is not permitted to examine the source of source, once the assessee has establish that the creditor is genuine and creditor's identity and genuineness has been established. After considering the totality of all the facts and circumstances a....
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....es and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessee. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or preserve or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." The Hon'ble Delhi High Court in the case of CIT Vs Value Capital Services Pvt. Ltd. 307 ITR 334 has held that: "Even if the share applicant did not have the sources to make the investment the onus is on the revenue to show that such....
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....produced confirmation letters from the share applicants, the payments had been received thought account payee cheques and, that too, from the applicant's accounts. The applicants were all registered companies and their identities were clearly established. It is an these circumstances that the Commissioner of Income tax (Appeals) as well as the Income tax Appellate Tribunal deleted the addition made by the Assessing Officer. Consequently, we see no reason to interfere with the findings recorded by the Tribunal" To the instant case no evidence has been brought on record by the AO to prove that the share application money emanated from the coffers of the applicant. The AO has not made any enquiries from the concerned parties nor did he examine the assessment records of the share applicant. Relying on the various documents placed on record and the principle laid down by the Hon'ble Supreme Court in the case of M/s Lovely Export Pvt. Ltd. which is directly on the issue of share capital and in view of the decisions cited above the addition on account of share capital cannot be sustained. The AO has no where proved that documents in support of the identity of the party have not been....
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....dresses and PAN of the aforesaid investors. One of the share applicants Sh. Sunil Gupta categorically stated before the AO that he had applied for shares .The AO, apart from issuing notices under section 133(6) of the Act, did not pursue the matter further. There was no effort made to pursue the other investors. In those circumstances, the assessee could not do anything further. In the premises, it cannot be said that the assessee did not discharge the burden that lay on them[CIT vs. Orissa Corporation Ltd.,159 ITR 78(SC)] 5.1 In this regard, we may refer to the decision of the Hon'ble Apex Court delivered in the case of CIT Vs. Lovely Exports 216 CTR 195. In this case it was held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. 5.2 Following the aforesaid decision, while adjudicating an identical issue,Hon'ble Jurisdictional High Court in the case of C.I.T. vs. Dwarkadhish Investment P Ltd. in ITA No. 911/201....
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....ement of filing of income tax returns of the companies, their bank account statements for the relevant period, i.e. for the period when the cheques were cleared. However, the parties were not produced in spite of specific direction of the Assessing Officer instead of taking opportunities in this behalf. Since the so called Directors of these companies were not produced on this ground coupled with the outcome of the detailed inquiry made by the investigation wing of the department, the Assessing Officer made the addition. This addition could not be sustained as the primary onus was discharged by the appellant by producing PAN number, bank account, copies of income tax returns of the share applicants, etc. We also find that the Assessing Officer was influenced by the information received by the Investigating Wing and on that basis generally modus operandi by such entry operators is discussed in detail. However, whether such modus operandi existed in the present case or not was not investigated by the Assessing Officer. The appellant was not confronted with the investigation carried out by the Investigation Wing or was given an opportunity to cross examine the persons whose stateme....