TaxTMI 
TaxTMI 
2015 (5) TMI 473
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....of share applicants along with their confirmations. The A.O. observed that the confirmations were not supported by copies of income tax returns, copies of P & L account and bank statements evidencing the transactions. The A.O. further observed that as per the information received from DIT (Investigation), the amounts received from the persons were in fact accommodation entries, therefore, the assessee was asked as to why the provisions of Section 68 be not applied in this case and the assessee was also directed to file copies of income tax returns, bank statements, P & L account etc. and in response, the assessee filed copies of bank accounts of two share applicants From the perusal of the bank statements, the A.O. observed that before issuing of cheque in the name of assessee company, there was simultaneous deposits in the bank account. The A.O. further noted that copies of ITR provided by assessee related to Assessment Year 2004-05 and the assessee was communicated about this fact. However, assessee did not file the relevant income tax returns and did not submit any explanation, therefore, the A.O. relying upon various case laws, made addition of Rs. 31 lacs u/s 68 of the Act. ....
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....re application money is received by the assessee company from alleged bogus share holders whose names are given to the AO then the department is free to proceed in their individual assessment, but it cannot be regarded as undisclosed income of the assessee company. On this issue another decision of Delhi High Court in case of CIT vs. Value Capital Services (307 ITR 334) cited above by the appellant is also quite relevant wherein the court inter alia observed that there is additional burden on the revenue in as much as even if the applicant does not have the means for the investment, it must show that the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Further the following observation of the jurisdictional H.C. in case of CIT vs. Divine Leasing and Finance Ltd. ( 207 CTR 38), which has been quoted with approval in the case of Dwarkadhish Investment (Supra) are also quite relevant viz. "In this analysis a distillation of the precedents yields the following propositions of law in the context of section 68 of the IT Act. The assessee has to prima facie prove (1) the identity ....
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....at as the assessee had failed to establish the genuineness of the transaction (as the deposit of same or almost the same amount before the transaction case doubt over its genuineness) and creditworthiness of the shareholders in the form of their income tax return for relevant A Y, computation of income, balance sheet etc. Therefore the share capital for Rs. 31 Lacs has been treated as unexplained cash credits u/s 68 of the IT Act by the AO. In view of the fact that the assessee has filed the copy of PAN, Copies of Income Tax Return & cheque details through which the transactions have been effected and other details filed with the Registrar of the Companies regarding allotment of shares to the investors. it cannot be said that the identity of the subscriber is not established. In fact merely because the ITR, P & L A/c & balance sheet for A Y 2006-07 in case of the share applicants have not been furnished by the assessee does not get to disprove the identity of the shareholders in view of the details furnished on record. On this issue reliance is also placed on the decision of the Jurisdictional High Court in case of CIT vs. Winstral Petrochemicals P. Ltd. 41 DTR Del 139, where in co....
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....t of SC in case of CIT vs. Lovely Exports P. Ltd. 216 CTR 195 in coming to the above decision. It is observed in the facts of the case that the Assessing Officer has simply referred to certain information received from Investigation Wing wherein two of the subscribers companies to the share capital have been found to be providing accommodation entries. These statements / information which have been collected at the back of the assessee have not been confronted and neither any cross-examination has been provided to the assessee. The AO has also rejected the confirmation & other documents of share applicants without examining the share holders whose identity and existence cannot be doubted in view of the documentary evidences filed by the assessee. In this connection the observation of the jurisdictional High Court in case of Dwarkadhish Investment (Supra) are quite relevant where the court has observed that it is the revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not prove the" source of source". Reliance is also placed on the decision of Delhi H.C. in case of CIT vs. Ashwani Gupta ( 322 ITR 396) and CIT vs.....
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....enuineness and creditworthiness of share applicants. 5. Ld. A.R. on the other hand invited our attention to para 8 of Ld. CIT(A)'s order and submitted that the documents listed at (a) to (i) were provided to A.O. and these documents were sufficient to establish the identity of the share applicants. Ld. A.R. further submitted that only PAN details were sufficient to establish the identity of the share applicants. The genuineness of transactions were proved as the transactions were made through banking channels. It was submitted that initial burden was discharged by assessee and the A.O. had to come back with his objections on the documents before making additions u/s 68. Ld. A.R. relying upon a number of case laws as placed in the paper book running into 52 pages, specifically on the case law of CIT(A) Vs Gangeshwar Metal Pvt. Ltd. 214 Taxman 243 submitted that Hon'ble High Court has discussed the case law of Nova Promoters and has decided the issue in favour of assessee. Ld. A.R. also placed his reliance on the case law of CIT Vs Vinstal Petro Chemicals Pvt. Ltd. 330 ITR 603 Del. Ld. D.R. in his rejoinder submitted that no bank statement / copies of I T Returns relating to t....
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....counts. Moreover, the fact remained that A.O. had the information that the share applicants were engaged in the business of providing accommodation entries and therefore, the ratio of Nova Promoters and Finlease 342 ITR 169 is squarely applicable in this case. Therefore, in the absence of proper explanation of credits, the only option available with the A.O. was to make addition u/s 68 of the Act. The assessee cannot be allowed relief simply holding that assessee had discharged its onus by filing certain documents and the A.O. had failed to take further action. Moreover, we find that when assessee filed documents without copies of bank statements and copies of return this fact was brought to the notice of assessee by A.O. as noted by him on the first page of his order. The assessee was directed to file copies of bank statements P &L accounts, balance sheets and copies of returns vide order sheet entry dated 05.12.2008. When on 24.12.2008, the assessee filed copies of income tax returns, the A.O. brought to the notice of assessee that the returns relate to earlier year but assessee did not file the relevant returns. Similarly regarding query of A.O. that assessee had received accomm....