TaxTMI 
TaxTMI 
2011 (8) TMI 1148
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....the unaccounted cash deposit Accounts in the names of persons who were found not traceable." 2. The facts, in brief, relating to the above issue are that during the previous year relevant to assessment year under appeal, the assessee-company claimed to have received share application money of ₹ 25,00,000/- against issue of 2,50,000 shares @ ₹ 10/- per share from the following parties through banking channel, the details of which are as under :- Sl. No. Name & Address of share applicants PAN No. Shares applied for Rate per share(Rs.) Amount received with application (Rs.) 1. Signet Merchandise (P) Ltd. 71, Raj Kr. Mukherjee Road, Kolkata-700 035. AADCS7277F 50000 10 5,00,000 2. Novoflex Cable Care System P.Ltd.71, 52, Weston Street, Kolkata-700 012. AAACN9315J 50000 10 5,00,000 3. Maheshwari Merchants (P) Ltd. 32, Ezra Street, Kolkata-700001 AABCB6860C 50000 10 5,00,000 4. Stardox Vinimay (P) Ltd. P.Ltd.71, 52, Weston Street, Kolkata-700 012. AAECS0352C 100000 10 10,00, 000 25,00,000 250000 All the share applicants are assessed to income-tax and the transactions were through banking channels. During the course of assessment proceedings, ....
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....ischarged the onus on it. Further, in view of the court cases quoted by the Ld. A/R, the share capital raised by the appellant cannot be treated on the basis of the A.O.'s order, as the undisclosed money of the assessee u/s 68 of the Income tax Act, 1961. Reliance is placed on M/s Offshore Finvest Ltd. Vs. ITO I.T.A.No. 1272/Kol/2009, I.T.A.T. 'B' Bench, Kolkata Order dated 09-04-2010. In this case the Tribunal had allowed the appeal by relying on the decision of the Apex Court in CIT vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC). In conclusion and in the light of the above etc. the appeal goes in favour of the appellant and is treated as allowed." Hence this appeal by the department. 4. At the time of hearing before us, the Ld. Departmental Representative supported the order of the A.O. He submitted that the ld. C.I.T.(A) erred in deleting the addition of ₹ 25,00,000/- made on account of unproved cash credit u/s. 68 of the Act. He further submitted that the ld. C.I.T.(A) while deleting the addition has ignored the fact that the share capital/application money received by the assessee has originated from the unaccounted cash deposit accounts in the names of persons who w....
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....as assessee's undisclosed cash purely on surmise and conjecture was arbitrary and bad in law. Relying on the following decisions of Hon'ble Apex Court as well as coordinate Benches of I.T.A.T., Kolkata, copies of which have been filed before us, the ld. A/R stated that identical issue was considered in those cases and the Tribunal deleted the addition made on account of unexplained share application money :- CIT vs. Lovely Exports (P) Ltd. [216 CTR 195 (SC)] ITO vs. Dipajyoti (P) Ltd. [ITA No. 1277/Kol/2008, order dated 28/1/2009] Offshore Finvest Ltd. vs. ITO [ITA No.1272/Kol/2009, order dated 9/4/2010] ITO vs. Roseberry Mercantile (P) Ltd. [ITA No.2119/Kol/09, order dt.18/5/10] ITO vs. Sancheti Projects P. Ltd. [ITA No. 179/Kol/2010, order dated 26/11/10] He, therefore, submitted that the ld. C.I.T.(A) has rightly deleted the addition of ₹ 25,00,000/-, which should be upheld. 6. We have heard the learned representatives of the parties and perused the material placed on record. The assessee-company during the year under appeal raised its share capital by way of receiving share application money against 2,50,000 shares aggregating to ₹ 25 lakhs from four parties,....
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....n the paper book. Considering the above, in our opinion, the existence/ identity of these share applicant companies and the genuineness of the transaction cannot be doubted. 6.1. As far as the creditworthiness or financial strength of the share applicant/ subscriber is concerned, that can be proved by producing the bank statement of such subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once it is proved by documents, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the A.O. to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. We observe that although the A.O. has doubted circulation of assessee's undisclosed money through various layers which finally returned to the assessee, but no cogent material except suspicion could be brought on record and he also could not point out any discrepancy between issue of cheques against share applications and remittance thereof through his bank account. To discredit the documents produced by the assessee on the aspects, there have to be some cogent reasons and mate....
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....ed by the Commissioner (Appeals) and the Tribunal. Requisite documents were furnished showing the existence of the shareholders from accounts and even their income-tax details. From bank accounts of these shareholders, it was found that they had deposited certain cash and the source thereof was questionable. The Assessing Officer should have made further probe which he failed to do. Moreover, the remedy with the Department lay in reopening the case of the investors and the addition could not be made in the hands of the assessee." 6.2. In this connection, we may refer some other judicial pronouncements to hold that the assessee's case is not a fit case where provisions of sec. 68 of the Act can be attracted. The Hon'ble Rajasthan High Court has held in the case of Barkha Synthetics Ltd. vs. ACIT [2005] 197 CTR 432 (Raj.) that the principle relating to burden of proof concerning assessee is that whether the matter concerns the money receipts by way of share application from investors, through banking channels, assessee has to prove existence of persons in whose name the share application is received. Once the existence of investor is proved, it is no further burden of the assessee t....
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....rther held that if any of the shareholders is found to have made unexplained investment, then addition of such investment is required to be made in the hands of the shareholders and not in the hands of the assessee. Accordingly, it was held that the A.O. was not justified in treating the investment made by the several shareholders in the assessee-company as bogus and to make addition u/s. 68 of the Act. 6.4. The Hon'ble Apex Court has considered the similar issue in the case of CIT vs. M/s. Lovely Exports (P) Ltd. (supra) and held as under :- "Can the amount of share money be regarded as undisclosed income under s. 68 of I.T. Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the A.O., then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment." In the case under consideration before us, as stated above, the assessee has furnished the details of shareholders with complete address and PAN. In response to notice u/s. 131, as s....