TaxTMI 
TaxTMI 
2016 (1) TMI 303
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....153A of the Act on 4.5.2007 admitting the same income as in the original return. The case was selected for scrutiny and notices u/s 143(2) & 142(1) of the Act were issued. During the course of assessment proceedings, the A.O. noticed that during the financial year relevant to assessment year 2003-04, the assessee received share application money of Rs. 25,84,904/-. In addition to the share application money, the A.O. further noticed that the assessee has received an amount of Rs. 8,00,540/- as advance from customers towards sale of flats. During the course of assessment proceedings, the A.O. summoned the alleged subscribers of the share capital and recorded their statement. The summary of the investigation and inferences drawn from the statements recorded from the subscribers to the share capital was furnished to the assessee and asked to explain why these bogus share capital and advances from customers towards sale of property shall not be treated as unexplained cash credit u/s 68 of the Act. In response to the said show cause notice, the assessee submitted that it has accepted the share application money from the close relatives and friends of the Directors of the company and fur....
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....ngs or even during the appellate proceedings. Therefore, relying upon the Hon'ble apex court decision in the case of Sumati Dayal's case, held that the assessee has not discharged the burden of proving the creditworthiness and genuineness of the transactions, therefore, confirmed the additions made by the assessing officer. As far as the flat advance is concerned, the CIT(A) held that the assessee has received the advance from the customers in cash and also there is a unsigned letter found during the course of search in the assessee's office premises cancelling the booking of advance. Therefore, it is highly improbable that any prudent person would ever allow such leverage to the principles to give unsigned letters for cancellation of booking of flats. Therefore, for the reasons stated above, the CIT(A) confirmed the additions made by the assessing officer and dismissed the assessee's appeal. 4. Aggrieved by the CIT(A)'s order, the assessee is in appeal before us and raised the following grounds: "1. The order dt. 23.11.2009 passed by the Learned Commissioner of Incometax (Appeals), Visakhapatnam is unjust and uncalled for. 2. The Learned Commissioner of In....
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....urt in the case of CIT Vs. Stellar Investments are distinguished in the recent judgement of Delhi High Court in the case of CIT Vs. Focus Exports Pvt. Ltd., therefore, he urged to confirm the CIT(A)'s order. 7. We have heard both the parties and perused the materials available on record. We also gone through the case laws relied upon by the parties. The A.O. made additions to the share application money on the ground that the assessee has not proved the creditworthiness and genuineness of the transactions. However, the A.O. did not doubt the identity of the persons, because during the assessment proceedings, these persons were examined. The assessing officer stated that the alleged subscribers to the share application money do not have sufficient means to subscribe to the share capital, which was revealed when the statements were recorded from them. Therefore, the A.O. was of the opinion that just by filing the names and addresses of the persons is not sufficient to prove the initial burden cast upon the assessee u/s 68 of the Act. The assessee on the other hand contended that once the initial burden is discharged by filing the names and addresses of the persons, there is no n....
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....s free to proceed to reopen the individual assessments in accordance with law. But it cannot be regarded as undisclosed income of the assessee company. 10. An identical issue came up for consideration before the coordinate bench of this Tribunal in the case of DCIT Vs. Pragati Fertilisers Pvt. Ltd ITA 694/Vizag/2004 wherein the coordinate bench of this Tribunal held in favour of the assessee as under: "In this regard, the Ld. Counsel for the assessee has submitted that this issue is squarely covered by the judgement of the Apex court in the case of CIT Vs. Lovely Exports (P) Ltd (216 CTR 195 SC) and the judgement of the Madras High Court in the case of CIT Vs. Electro Polychem Ltd (294 ITR 661) in which it was categorically held that if the share money is received by the assessee company from the alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to open individual assessments in accordance with law, but it cannot be regarded as undisclosed income by the assessee company. Copies of the judgement are placed on record. In light of these judgements, we find force in the contention of the assessee. Accordingly, we....
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....hey could not buy the flats and request for cancellation. Therefore, in our case, the company returned the advances collected from customers which cannot be regarded as unexplained credit. The A.R. further argued that the A.O. is not justified in making addition in the hands of the assessee company without examining the parties when the details were furnished by the assesse. On the other hand, the D.R. supported the order of the CIT(A). 14. We have heard both the parties and perused the materials available on record. The A.O. made the additions to the advance collected from customers on the sole reason that during the course of search proceedings, certain unsigned letters from these customers were found in the premises of the assessee company. Therefore, the A.O. was of the opinion that the assessee has routed his own money in the form of advance from customers, hence, made the additions. The assessee's contention is that this is being the first year of the operation of the company the assessee company cannot generate undisclosed income in the first year of its operations. The assessee further contended that it is a common practice in this line of business that customers will ....