TaxTMI 
TaxTMI 
2015 (12) TMI 764
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....r, Delhi. Rs.5,00,000/- (ii) M/s. Aurochem Estate Pvt. Ltd. U-75, Main Vikash Marg, Shakarpur, Delhi. Rs.5,00,000/- (iii) M/s. Indian Hosiery Pvt. Ltd. B-114, Shakarpur, Delhi. Rs.5,00,000/- (iv) M/s. Shaily Builders Pvt. Ltd. U-75, Shakarpur, Delhi. Rs.5,00,000/- In support of the evidence for credit of these Rs. 20 lakhs in its books, the assessee had filed the copies of income tax returns of these companies for AY 2007-08 along with their balance sheet etc. & bank statements. The AO made detailed inquiries from the bank and from the assessee by issuing summons to the directors of the aforesaid companies. The AO observed that for proving a credit in books u/s 68, the three main ingredients to be proved are identity, creditworthiness and genuineness of the transaction. And he noted that the deposit of cash in the bank accounts of these four companies either on the same date or immediately prior to the date on which the amount of cheque was debited to its account which, according to him, clearly called for serious examination as to the creditworthiness and genuineness of transaction. For this purpose, the AO issued summons along with a letter dated ....
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....y opinion the latest judgement of the Hon'ble Delhi High Court in the case of CIT vs Oasis Hospitalities Pvt Ltd. dated 31st January, 2011 has dealt with the issue at length and after examining the various judgments has settled certain parameters to decide an issue like this. After analyzing the provisions of the Companies Act, Section 68 of the IT Act and the judgements delivered in the cases of CIT vs Divine Leasing & Finance Ltd. 299 ITR 268 (Del), CIT vs. Sophia Finance Ltd. (1994) 205 ITR 98 (Del)(FB), CIT vs. Dolphin Canpack Ltd. 283 ITR 190, CIT vs. Lovely Exports Pvt Ltd. 216 CTR 195 it was held that the initial burden is upon the assessee to explain the nature and source of share application money received by the assessee. The Court further observed in case the investor/shareholder is an individual some documents will have to be filed or the said shareholder will have to be produced before the AO to prove his identity. If the creditor/subscriber is a company then the details in the form of resolution or PAN Identity, etc. can be furnished. As regards the genuineness of the transaction to be demonstrated, the Court held that by showing that the assessee had in fact rece....
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....The copy of the bank statement of the share subscriber wherein the transaction is reflected as well as its balance sheet showing investment in the appellant company on its assets' side establish the creditworthiness of the party while the genuineness of the transaction is borne out by the fact that the transaction was through banking channels. In this regard, reference is made 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 AO, 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. Reference is also made to the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Dwarkadhish Investment P Ltd in ITA No. 911/2010 vide order dated 02.08.2010. The relevant paras of this judgement of Hon'ble Delhi High Court i.e para No.6, 7 & 8 are reproduced herein below:- "In our opinion, as section 68 of the Act, 1961 ....
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....d that the ld. CIT (A) has not rightly appreciated the facts on which the AO based his decision for treating the receipt of Rs. 20 lakhs as deemed income of the assessee u/s 68 of the Act and underscored the fact that the creditworthiness of the creditors and genuineness of the transaction has not been proved. Therefore, he pleaded that the order of the CIT (A) be set aside and that of the AO be restored. 6. On the other hand, the ld. AR submitted that during the assessment proceedings, the assessee submitted the following documents before the AO :- (i) PAN of all four investing companies; (ii) Name and address of all four companies; (iii) Copy of Income Tax Return for AY 2007-08 of all the four companies; (iv) Audited Balance Sheet & Profit & Loss account with allannexures. The ld. AR further submitted that the AO raised the question of genuineness of the transaction and creditworthiness of the investing companies and in this regard, the assessee had submitted the following documents to prove the genuineness of the transaction and creditworthiness of the creditors :- (i) Copy of application for shares of all four companies, which ....
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....ity, creditworthiness and genuineness of the transaction has provided the details in respect of the said shareholders with the PAN Nos., copies of audited balance sheet & P&L account, copies of assessment orders, names and addresses of all four companies, bank statements. However, the AO was not satisfied by the aforesaid documents produced by the assessee and held it to be undisclosed income of the assessee u/s 68 of the Act on the reasoning that the lender companies had the same address and same auditor, so they were only name lenders. However, on appeal before the ld. CIT (A), he took into consideration various judicial pronouncements and relied on the finding of the Hon'ble Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd dated.31.01.2011 wherein the Hon'ble High Court held that, "once the documents like PAN or bank account details were given by the assessee the onus shifts to the AO and it is upto him to reach the shareholders and the AO cannot burden the assessee merely on the ground that summons issued to the investors were returned." Thereafter the ld. CIT (A) referred to the judgment of Delhi High Court in the case of CIT vs Value Capital Servic....