AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 340
X X X X Extracts X X X X
X X X X Extracts X X X X
....rcumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,30,00,000/- made u/s 68 of the Act in respect of unexplained credits introduced in the garb of share application money/share capital and share premium shown to have been received from six corporate entities. 4. On the facts and circumstances of the case and. in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 95,00,000/- made u/s 68 of the Act in respect of unexplained credits introduced in the garb of unsecured loans shown to have been received from three corporate entities. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 15,00,000/- made u/s 68 in respect of unexplained earnest money shown to have been received from two parties, by accepting the additional evidence without providing any opportunity to the AO. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 9,50,000/- made u/s 68 in respect of unexplained cash deposit in Bank account by accepting the additional evidence without providing any opportunity to the AO. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....para no. 5 to 5.16 from pages 13 to 21 of the impugned order. For the sake of convenience, we are reproducing the findings of the Ld. CIT(A) as under:- "5. I have gone through the above submissions of the appellant and considered the facts and evidences available on record. I have also perused the AO's order and have considered the case laws relied upon both by the AO as well as by the appellant. 5.2 It is an established prepositions that whenever there is a cash credit in the assessee's books of account, the onus is on the assessee to prove the three things namely, identity, creditworthiness and genuineness. If the assessee fails on any of these parameters the AO is bound to add such cash credit to the Income of the assessee. 5.3 In the facts of the case in hand it is seen that the appellant who is engaged in the business of real estate had during the year allotted 1,30,000 shares and collected Rs. 1,30,00,000 from the following 6 corporate entities: 1 MIs Zircon Exim Pvt. Ltd. Rs. 25,00,000 2 MIs Charminar Imp ex Pvt. Ltd. Rs. 20,00,000 3 MIs KPM Exim Pvt. Ltd. Rs. 20,00,000 4 MIs Rishikesh Trexim Pvt. Ltd. Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he website of Ministry of Corporate Affairs, copies of ITR acknowledgements for assessment year 2009-10 and 2010-11, copies of bank statements etc. Even the appellant provided the AO with addresses of these 6 entities and requested AO to issue the summons under section 131. The facts that the summons were issued by the AO and all the 6 entities did responded to these summons proves the fact that these entities are in existence and thus I hold that the identity of the shareholders is proved. 5.5 With regard to the creditworthiness and genuineness of the transaction, it is observed that the Balance sheet of all the 6 corporates were on record and were available with the AO. From the perusal of same it is seen that all the 6 corporates had sufficient assets and they had substantial investments in shares of different companies, of which around 20% of investments only is invested in the appellant company as will be evident from bellow mentioned table. Name of company Total of balance sheet as at 31.3.2009 Total Investment in equity shares as on shares in Total Investment in equity shares in assessee Zircon Exim Pvt. Ltd. 1,63,06,883.57 1,36,50,000 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the shareholders came to be in possession of the money. 5.8 In a judgment dated 30/01/2009 Hon'ble Delhi High Court in the case of CIT vs. Gangour Investment Ltd. (Income Tax Act No. 34/2007) has held that Revenue can make addition under Section 68 of the Act only if the assessee is0 unable to explain the credits appearing in its books of accounts. In the said case the appellant has duly explained the said credit entries in the form of various documentary evidences. The said documentary evidence contained details, which set out not only the identity of the subscribers, but also gave information, with respect to their address, as well as, PAN, Assessment particulars etc. Based on these facts, the Hon'ble Delhi Court dismissed the appeal of revenue. 5.9 In yet another decision as to the correctness of treating share application money on par with cash credit, the Hon'ble Delhi High Court in CIT vs. Value Capital Services P. Ltd. (2008) 307 ITR 334 (Delhi) found after referring to the two of the decisions of the Delhi High Court on the subject that in respect of share capital amounts, they cannot be assessed in the hands of the company, unless the Departm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....scribers is a company, then the details in the form of registered address or PAN identity etc, can be furnished. When the money is received by cheque and is transmitted through banking or other undisputable channels, the genuineness of the transaction will be proved. Other documents showing the genuineness of the transactions could be copies of the shareholders register, share application forms, share transfer registers etc. As far as credit worthiness or financial strength of the creditors/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers, showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharge the onus caste upon him. Thereafter, it is for the assessing officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aspects, there had to be some cogent reasons and materials for the assessing officer and he cannot go into the realm of suspicion. 5.13 In v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....closed income of the assessee. The appeal filed against the said decision, was dismissed by the Hon'ble Supreme Court in CC 12860/2007 dated 08/01/2008. 5.16 In the light of the above discussion, I am inclined to agree with the arguments and evidences provided by the appellant to substantiate that the transaction regarding Share capital received by it was a genuine transactions and the same was not an accommodation entry. I also do not find any evidence collected by the AO which could prove otherwise. Accordingly, the AO is not justified in treating the amount of share capital money received by the appellant as its undisclosed income. In view of our aforesaid discussion, I delete the addition of Rs. 1,30,00,000 made by the AO under Section 68 of the Income Tax Act, 1961." 7.2 We note that during the hearing, Ld. DR filed a copy of judgment dated 27.1.2014 in the case of CIT vs. Empir Buildtech Pvt. Ltd. of the Hon'ble High Court of Delhi wherien the Appeal of the Revenue was partly allowed and stated that the issue of deletion in dispute in the present case u/s. 68 of the I.T. Act is squarely covered by the aforesaid judgment of the High Court dated 27.1.2014, h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A) has decided the issue in dispute in favour of the assessee after appreciating the evidence filed by the assessee as well as various decisions rendered by the Hon'ble Supreme Court as well as Hon'ble High Court and the decisions of the ITAT Benches. We are of the view that the share application money received in the hands of the assessee company is properly explained by the assessee during the course of assessment proceedings as well as before the Ld. CIT(A) and even before us. Therefore, we find no infirmity in the impugned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting the ground no. 3 raised by the Revenue. 8. With regard to issue raised in ground no. 4 relating to deletion of addition of Rs. 95,00,000/- made u/s. 68 of the Act in respect of unexplained credits introduced in the garb of unsecured loans shown to have been received from three corporate entities is concerned, we find that Ld. CIT(A) has elaborately discussed/given the findings on the issue in dispute vide para no. 7 to 7.7 from pages 27 to 30 of the impugned order. For the sake of convenience, we are reproducing the findings of the Ld. CIT(A) as under:- "7. I have gone ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant couldn't produce these parties on the ground that since their accounts have been squared up therefore they are not been able to persuade them to appear before the AO, instead the appellant provided the addresses of these entities and requested the AO to issue the summons to them. 7.5 In my considered view the appellant by filing the copy of confirmation, copy of Income Tax Return, and by providing the latest addresses to the AO has discharged the initial onus cast upon him to prove the identity, genuineness and creditworthiness of its creditor. Therefore it was the task of the AO to make the enquiries by issuing summons or deputing inspector etc. or other and external or internal sources etc. before coming to the conclusion that the 3 corporate entities "Nere sham and bogus, which I am afraid AO has not done. It is not the case of the AO that payments have not been received through account payee's cheque, therefore when AO was having the full address and appellant was not having any control over the squared up creditors, the onus was on the AO to call for the respective details from them, if there was any doubt about the identity and creditworthiness of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns with supporting documents in respect of the three companies. He further submitted that the assessee vide letter dated 5.12.2011 & 21.12.2011 requested the AO to make direct inquiries from these three companies at his end by issuing summons u/s. 131 to them, while informing him that it had already repaid such loans to these three companies. He stated that the AO had neither issued summons to these three companies, nor carried out any inquiries from these three companies. Thereafter, the AO had made the addition in the hands of the Assessee. 8.3 In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), because the Ld. CIT(A) has rightly held that when the assessee had provided the AO with the latest address of the squared up cash creditor (as the assessee had no such control on them therefore they were unable to produce before the AO and no further enquiries have been done of any kind by the AO) Ld. CIT(A) found that even the basic step i.e. summons or query letter were not issued, to these cash creditor and not an iota of evidence has been collected and brought on record....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale of Rs. 35,00,000/-. The AO had made addition of Rs. 15,00,000/- in the hands of the assessee. On the specific direction of the Ld. CIT(A), the assessee had furnished the details of sale / purchase made in FY 2009-10 and also the P&L A/c for the FY 2009-10. After verification, the Ld. CIT(A) had deleted the addition. 9.3 In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), because the Ld. CIT(A) has rightly held that AO was not justified in making addition of Rs. 15,00,000 on account of earnest Money, particularly when the property which was reflected as part of the inventory as on 31.03.2009 and the same is sold in the subsequent year for Rs. 35,00,000 and profit on the same has duly been reflected in and profit and loss account for assessment year 2010-11. Hence the addition of Rs. 15,00,000 made on account of earnest money was rightly deleted. Therefore, we find no infirmity in the impugned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting the ground no. 5 raised by the Revenue. 10. With regard to issue raised in ground no. 6 relating t....