TaxTMI 
TaxTMI 
2014 (2) TMI 751
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....od (A.Y. 2007-08) claimed that a sum of Rs. 1.8 crore had been received by it towards shares, as application money. The amount in dispute is Rs. 80 lakhs. The Assessing Officer (AO) asked the assessee during the assessment to explain the amounts received from three applicants viz. M/s. Hub Services P. Ltd. (Rs. 25,00,000/-); M/s. R.S. Associates P. Ltd. (Rs. 30,00,000/-) & M/s. Transaction India P. Ltd. (Rs. 25,00,000/-). The AO asked the learned AR of the assessee to file details regarding genuineness of the transactions, identity and creditworthiness with regard to share application money received. The assessee in response thereto filed photo copies of the following documents: (i) Share Applications containing the details of pay orders; (ii) Undated confirmations; (iii) Undated affidavits of the companies from whom share application money was received; (iv) Undated copy of Resolution; (v) Memorandum and Article of Association; (vi) Acknowledgement of return for Assessment Year 2005-06; (vii) PAN Cards in respect of Hub Services P. Ltd. and Transaction India P. Ltd. 3. The AO asked the assessee to furnish copies of bank accounts for the F.Y. 2006-07 of all three share applicant....
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....ction. The assessee was asked to show cause how the amount of Rs. 80,00,000/- claimed to have been received by it as share application money from the share applicants should not be treated as its income under Section 68 of the Act. 5. The AO considered the assessee's contentions and observed that the mere furnishing of particulars was not enough. The creditors were not only to be identified, but moreover, there should also be some evidence of their creditworthiness. There should also be proof of genuineness of transaction. Furnishing of the income-tax file number was not sufficient to prove the genuineness of cash credit. Since the assessee had failed to discharge its onus to prove the identity and creditworthiness of the creditors and genuineness of transaction, the AO came to the conclusion that the assessee had failed to discharge its onus. As regards affidavits filed of the three parties, the AO observed that the statements made in affidavits can be treated as unreliable if there is other material discrediting the deponents. The affidavit could also be rejected if the assessee failed to produce other supporting evidence when called upon to do so. The AO, therefore, rejected ....
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....fore, when A/c No.1002014026499 was opened on 31st March, 2007, the Pay Order could not be made from the bank account of M/s. Hub Services P. Ltd. with Mahameda Urban Cooperative Bank Ltd., Noida. Similarly the Bank account of M/s. R.S. Accessories P. Ltd. bearing No.1002014026502 was also opened on 31st March, 2007, whereas the amount of Rs.30,00,000/- was received by Pay Order No.011785 dated 29th September, 2006. This Pay Order cannot be made from the account of M/s. R.S. Accessories P. Ltd. as on the date of Pay Order the said account was not in existence. As regards pay order of Rs.25,00,000/- in the name of Transaction India P. Ltd., it was issued on 29.09.2006. As per the information received from the Bank A/c Nos. 2002014026258 & 10020140025746 were opened during the F.Y. 2006-07. The pay order was made from the A/c No.1002014026258 on 29.09.2006. On this date the amount of Rs.25,04,000/- was deposited out of which pay order of Rs.25,03,125/- was made. From these facts it is evident that in first two cases the pay orders have not been made from the Bank Account of the said parties. In the case of third party i.e. M/s. Transaction India P. Ltd. the pay order was made after d....
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....iled photo copies of undated photo copies of affidavits of the share applicants, undated copy of Resolution, and undated confirmations. On one hand the assessee files confirmations and affidavits and on the other hand the parties are not found at the addresses when the assessing officer issues summons to them. The logical conclusion is that the assessee do not wants to produce them before assessing officer for best reasons known to him. Thus it is a case where conduct of the assessee and human probabilities has to be taken into account while deciding the issue. The logical conclusion flowing out of above facts is that undated confirmations and affidavits must have been obtained by the assessee when pay orders were received from these entities. Therefore, the contention of the assessee that share application money was genuinely received by the assessee is not proved." 8. The assessee contends that the Tribunal fell into error in holding that the addition made was on account of accommodation entries. It was urged that neither the AO nor the CIT (Appeals) had drawn the correct inferences. It was submitted that the AO was adversely influenced by the fact that the bank account partic....
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....ment. Likewise, the decision of the Madras High Court in the case of CIT v. Electropolychem Ltd., (2007) 294 (ITR) 661 (Mad) has been relied on. 11. In this case, the AO had sought for details of the bank accounts of the share applicants. The assessee's grievance is that he drew adverse inference from the details furnished to him, without giving an opportunity to it to rebut any queries which could have arisen. Particularly, the assessee sought to urge that the AO did not take into account the correct bank statements for the relevant period and took note of only a part of it. It was argued that in the remand report furnished to the CIT (A), full particulars were made available and he considered it proper to grant relief to the assessee, which was then overturned by the ITAT. 12. It is a fact that during the pendency of the first appeal before the Commissioner (Appeals), a remand report was called for by the latter. The remand report contains certain important facts and conclusions, which are extracted below: "(f) Now, see the financial worth of the alleged three applicant companies from whom the assessee is alleged to have received the share application money. Despite repe....
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....es P. Ltd. 3,27,000/- 2,000/- M/s Transaction India P. Ltd. 10,00,000/- 3,79,000/- The assessee company claimed to have received the share applicationmoney from the above said three companies as under: . 1 . M/s Huba Services P. Ltd Rs.25,00,000/- 2. M/s RS. Accessories P. Ltd. Rs.30,00,000/- 3. M/s Transaction India P. Ltd. : Rs.25,00,000/- From the above facts can it be said that the above said companies were of such a worth in investing substantial amount in the share capital of a Private Limited company and that too without any hope of receiving any dividends thereon. Even the assessee company (Onassis Axles Pvt. Ltd) is not showing enough profit. As per P L account, the Net profit for assessment year 2006-07 has been shown at Rs.1,97,707/- and for 2007-08 at Rs.2,47,734/-. No shrewd businessman will invest such a huge amount in the share capital of a private limited company. Can ¡t be accepted that after investing such a huge amount, the investor company will not contact the investee company? Thus the contention of the assessee as mentioned in its reply dated 08.11.2010 that "Since the said three applicants are in no way related to the....