TaxTMI 
TaxTMI 
2015 (6) TMI 179
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....ubmitted to her by the AO wherein the AO has clearly stated that the assessee has produced the directors of the companies investing in the share application of the assessee company and that those directors have confirmed the fact of having made investment in assessee company and have also explained the mode and manner of the investment made by them in the assessee company. That the Ld. CIT(A) has further failed to appreciate that the AO has accepted in the remand report that the source of investment made in the assesssee company have also been explained by the share holders in their statements recorded on oath by the AO. 5. That the appellant craves the right to amend, append, delete any or all grounds of appeal. 2. The brief facts of the case are that on receiving information from Investigation Wing that assessee company has received accommodation entries in the shape of share application money. AO issued a notice u/s. 148 dated 30.3.2009 to the assessee to file its return of income for the above mentioned assessment year within 30 days from receipt of the notice. The notice was sent by speed post and also through personal service at 212, Jaina Tower-I, District Centre, Jana....
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....ction 68 of the I.T. Act as unexplained credit of share application money in spite of the fact that assessee has fully been proved the identity, creditworthiness of the creditors and the genuineness of the transaction with the support of all necessary documentary evidence before the authorities below. But the revenue authorities has not properly appreciated the evidence filed by the assessee and made the addition in dispute. Ld. Counsel of the assessee further stated that as required by the AO, the Assessee has produced the Directors of the Companies in dispute who has invested the share application money in the assessee company and those Directors have confirmed the facts of having made the investment in assessee company and have also explained the mode and manner of the investment made by them in the assessee company by appearing before the AO. But these facts have not been appreciated by the authorities below and they have wrongly made the addition in dispute in the case of the assessee. Lastly, he stated that the issue in dispute is similar to the issue involved in the case of ITO vs. Neel Kanth Finbuild Ltd. in ITA No. 2821/Del/2009 (A.Y. 2006-07) in which the Coordinate 'E' B....
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....f the view that the objections raised by the Ld. DR has already been adjudicated and answered in favor of the assessee by the ITAT in the aforesaid case in which one of the Judicial Member was the party. The relevant para no. 15 of the aforesaid order is reproduced below:- "15. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, a perusal of the papers on record and the orders of the authorities below, as well as case laws cited, we hold as follows:- * The first objection of the Ld. DR is that the statement of facts have not been filed by the assessee, in Form No. 35, filed before the CIT(A). the CIT(A) has not treated the forms filed before him as defective. He admitted the appeal and adjudicated the matter on merits. The order of the Ld. CIT(A), is the impugned order appealed against before us. The Ld. DR wants us to hold that the order of the Ld. CIT(A) is illegal and against the law as there is a defect in Form No. 35. &nbs....
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.... "4. We have heard both the parties perused the record available with us specially orders passed by the revenue authority along with the documentary evidence filed by the assessee. We are of the view that the Assessing Officer during the course the assessment proceedings has made the following observation in the assessment order on the issues in dispute. "During the year under consideration, the assessee company has increased its share capital by Rs. 1,0,000/- having issued 11,00,000 equity shares @ 20/- each. From the perusal of details furnished by the assessee company, it was noticed that share application money of Rs. 15,00,000/- is claimed to have been received from the following two persons: Sl No. Name Amount Received (Rs.) Cheque No. And Date Drawn on Bank 1. M/s Paras Infotech (P) Ltd. E-71, Amar Colony, Lajpat Nagar, Delhi-24 5,00,000/- 000009 dated 25/13/2006 Kotak Mahindra Bank, Old Rajinder Nagar Delhi 2. Sh. V. K. Angami, R/o 21/2 Mile, Dimapur, Asam 10,00000 Amount received in Cash Share application money....
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....re round-tripping back to it, only disguised in the form of share application money, unsecured loan, gift etc. While most of the concerns/individual have obtained PAN from the department and are filing returns as well. what is shown in the return are not actual state of affairs. During the course of the assessment proceedings, the assessee company furnished a copy of the purported confirmation from the Director of the said company, namely Sh. Mukesh Gupta. The said Sh. Mukesh Gupta S/o Sh. R. D Gupta, RIo WZ-414, Naraina Village, Delhi, along with his associates, has given sworn statements u/s 131 before the Addl. Director of Income Tax (investigation), Unit-I, New Delhi. 1n the said statements they have admitted that the "companies" and other such concerns owned/controlled/managed by them are not carrying on any actual business activities. They have categorically admitted that they are engaged in the activity of providing accommodation entries, The deposits reflected in the bank accounts existing in the ruimes of the "companies" controlled by them actually belong to the persons approaching them for taking accommodation entries. These bank accounts existing in their names have b....
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....e above share applicants have been considered, but have not been found to be sufficient in view of the facts and circumstances of the case. The assessee's contention is that the onus on it stands discharged in view of the above documents filed by it in support of the identities of the share applicants. This rather simplistic contention of the assessee has no legal basis. The Hon'ble High Court of Delhi in the case of CIT v. Mls Himalaya International Ltd. (rendered on 30.07.2007 in ITA 1509 of 2006) has clearly held that the onus is all the assessee to establish the identity & creditworthiness of the subscribers of shares as well as the genuineness of the transaction The following observations made by the Hon'ble High Court in the case of CIT Vs. Divine Leasing and Finance Ltd., General Exports and Credits Ltd., Lovely Exports (P) Ltd (299 ITR 268) in para 2 I of the judgment, should lay to rest any further lingering doubts on the import of the section 68 vis a vis the question of share capital " But we hasten to clarify that the statement of law made by the ITA T to the effect that ....
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....e of the onus would be even stringent when the very credentials of the 'director' of an investor company "are suspect because of the fact that he has admittedly been running on accommodation entry racket through the medium of many "companies "floated by him. It is now proposed to consider the purported evidence sought to be relied upon by the assessee in the light of the facts and circumstances of the case. (1) As discussed above, simply furnishing the PAN or assessment particulars is not enough. The so-called evidence in the form of return of income etc. Does not facilitate cross verification. While on the purported "confirmation "filed on behalf of the investor "company", its address is mentioned as Ë -71, Amar Colony, Lajpat Nagar, Delhi", the summons sent at the above address has been received back undelivered with postal remarks "no such company". The acknowledgement of return etc., by themselves, are not sufficient to prove the true identity of a person or to disclose a true address. This is not a case where some legal proceedings are shown to have been made in the hands of the said "company" at the said addresses and they are shown to have attended the proceedings....
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....ship between the promoters/directors and the shareholders. The closely-held companies are permitted to accept the subscriptions of share capital or deposits onlyfrom the friends or relatives of the promoters/directors and such companies arc not allowed to accept subscriptions or deposits from the general public. The shares are, therefore, subscribed by a small number of persons who are known to the promoters or are related to them by family members. As such, there should have been no difficulty on the part of the assessee to produce the socalled investor, had the whole apparatus not been merely a conduit to plough back tlie unaccounted money of the assessee-company in the garb of share application money. There is no reason why a genuine investor would evade inquiries into its affairs. The investors are at least supposed to produce the original share certificates. It is also hard to believe the assessee's contention that it has had no contact with the so-called share- holder in the light of the fact that a genuine contributor in the share capital would not abandon his investment 4(3) Mere payment by account- payee cheque is not sacrosanct nor can it make a non-genuine transactio....
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....d share applicants and the genuineness ofthe transactions. Considering the totality of the circumstances, it is obvious that the "transaction" was only a camouflage. The total amount of Rs. 5,00,000/- stated to have been received From the said .. investor company" represents the assessee's own unaccounted money which has sought to be introduced into its business in the garb of share application money. Thus, keeping in view the totality of the facts. the amount of Rs. 5,00,000/- is added back to the income of the assessee company u/s 68 of the IT Act. Share Capital of Rs. 10,00,0001- received from Sh. V.K. Angatnt (4) As per the details filed, the assessee has also received a sum of Rs. 10,00,000/- from Sh. V K. Angami, R/o 21/2. Mile, Dimapur, Assam.The entire amount of Rs. 10,00,000/- has been received in cash. Notice u/s 133(6) was sent to Sh. Angami on 06.09.2007, calling/or the the following: (5) (a) Confirmed copy of account of the assessee in his books of accounts for the year under consideration (6) (b) Source o.f investment in share capital of the assessee company with copies of the hank statement. Copy ofhis Balance Sheet/ Statement of Affairs as on 3....
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....under Order 19 Rules 1,2 of CP. C as observed by Supreme Court in Sudha Devi V MP Narain AIR 1988 (SC) 1381. (1988) 2 SC) 422. In view' of the same, furnishing of an affidavit in itself and that too at a time when it was not even required under any law of the land reflects that evidence was being created artificially/ superfluously in anticipation of it being required in the course of assessment proceedings. Therefore. affidavit of alleged "investor" which has been filed suo-mote is not even admissible evidence, specially when no evidence in support of [he assertions mode therein is forthcoming. The documents filed in the form of the schedule tribe certificate and the voter card are just cord are just photocopies, which are not attested by on)' competent authority. Further, the name os appearing in the said certificate is " M Khrietuo S/o Vizokhol ,. and that appearing on the voter cord is only "Khrieto S/o Vizukhol ", Neither the affidavit, nor the written submission Filed by the assessee is accompanied by any evidence whatsoever (or even description of the sources of income or the Sh. Angami) in support of the creditworthiness of the "investor ". A bare assertion that ....
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....acts and circumstances of the case, observation of the A.O. as contained in the Assessment Order, submissions of the AR of the appellant and judicial pronouncements on this issue. During the year under consideration, the appellant company had increased its Share Capital by Rs. 1,I0,00,000/- by issuing 11,00,000 equity shares of Rs. 10/-each from various parties. The Assessing Officer, in the Assessment Order has added the Share Application Money received from 2 parties, namely Mls Paras lnfotech Pvt. Ltd. (Rs. 5,00,000/-). Shri V.K. Angami (Rs. 10,00.000/-) as unexplained cash credit. in the hands of the appellant company. The addition in respect of first company was made on the basis of information received from the Investigation Wing of the Department and on the statement of Shri Mukesh Gupia given before the officers of the Investigation Wing. whereas the addition in respect of Sh. V. K. Angarni was made as the said payment was received in cash and was not supported by any immediate source of the said cash. The Assessing Officer had issued summons to the principal officer of the company uls 131 of the l.T. Act during the course 01' assessment proceedings for producing ....
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....llant has also relied upon the Hon'ble Supreme Court judgement in the case of CIT Vs. Orissa Corporation 159 ITR 78 (SC) wherein it is held that in case the creditor does not appear in response to summon issued u/s 131. no adverse inference can be drawn. Hon'ble Delhi High Court in the case of CIT vs. Pradeep Gupta 207 CTR 115, which has also been relied upon by the Delhi IT A T in recent judgement in the case 0 f Babita Gupta ITA No. 2897/06, wherein it is held that in the facts of the case before us it may be seen that from the very beginning Ld A. 0. had shifted entire burden Upon the assessee and no material was brought by him to prove his allegation that the impugned amount represented assessee company's undisclosed income. Therefore, on this ground alone the entire addition deserves to be deleted and may kindly be held so. In the Assessment Order, the AO has not given any details about the enquiry conducted by him on the basis of which it was held that the said parties were involved in the business of providing accommodation entry. The Honble Delhi High Court in the case J.T. (India) Exports and another vs. UOI and another (2003) 262 ITR 269 (Del-FB) has hel....
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....the investor. In support of this, the appellant has relied upon the case law of Shri Barakha Synthetics Ltd. Vs. ACIT (2006) 155 Taxman 239 (Raj.) wherein it has been held that once the receipt of the confirmation letter from the creditor is proved and the identity and the existence of the investor has not been disputed, no addition on account of share application money in the name ofsuch investor can be made in the assessee's hands. "In respect of the share application money received from investors, the assessee company has only to prove that the existence of the persons in whose name share application is received. No further burden is cast upon the assessee to prove whether that person himself has invested the said money or some other person made investment in his name." The appellant has also relied upon the judgement of Hon'ble Supreme Court in the case of CIT Vs. Lovely Export 299 ITR 268 (SC) which has confirmed the order or the Delhi High Court. It has been held that once' the identify of the share holder have been established. even if there is a case of bogus share capital, if cannot be added in the hands of the company unless any adverse evidence is not r....
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....of the case and judicial pronouncement on this issue, cited supra, it is seen that the appellant's case is covered by the above judgments. After going through the facts of the case and the judicial pronouncements on this issue, I am of the opinion that the appellant has discharged the initial onus of establishing the bona-fide of the transactions and the AO was not justified in ignoring various evidences provided to him by the appellant. It is seen that the Assessing Officer had not done any investigation / enquiry, during the course of assessment proceedings. The Assessment Order has been framed by the Assessing Officer only on the basis of the information received from the Investigation Wing of the Department. without making any further investigation. Nothing adverse has been brought on record by the AO to establish that the Share Application Money received by the appellant. represented its own undisclosed income. Further, if there was doubt about the source of investment or the said investors, then additions should have been made in the case of those parties and not in the hands of the appellant company. The appellant has relied upon the decision of Hon'ble Supreme....
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....lace between the assessee and the creditor. It is not the business of assessee to find out the source of money of creditors. Similar observation has also been given in the case of Hastimal 49 ITR 273 (Madr) and Daulatram Rawatmal (1973) 87 ITR 349 (SC). Ld. First Appellate Authority has cited various decisions rendered by the Hon'ble Supreme Court of India as well as the Hon'ble Jurisdictional High Court in the impugned order and finally has held that the assessee has substantiated the transaction regarding share application money received by it was genuine transaction and the same were not accommodation entries. He did not find any evidence collected by the AO which could prove otherwise and deleted the additions in dispute. As regard to the addition of Rs. 12,500/- made on account of commission which was presumed to have been allowed by the assessee for obtaining the Hawala entry in dispute, the ld. CIT(A) observed that the Assessing Officer was not able to brought anything on record that it was assessee's own money which was rooted in the form of share application money and has rightly deleted the same. 7. Keeping in view all the facts and circumstances , we are of the ....