2011 (8) TMI 1148

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....ceived by the assessee has originated from 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 Rs. 25,00,000/- against issue of 2,50,000 shares @ Rs. 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 th....

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....annual accounts, relevant bank statement, acknowledgements of filing of Income Tax Return of the investing parties the appellant had primarily discharged 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 Rs. 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 ....

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....e sources of money for investments made towards share application. All the procedures before launching share application have been duly complied with by the assessee and in such circumstances, treatment of share application money received by the assessee from share applicants 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 Rs. 25,00,000/-, which should be upheld. 6. We hav....

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....e genuineness of the transaction could be copies of the share allotment advice, intimation to ROC in prescribed return form, etc. So far as the present case before us is concerned, as discussed above, all these documents were furnished before the lower authorities and also filed in 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 ....

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.... it pertinent to reproduce the observation of their Lordships of Hon'ble Delhi High Court in the case of CIT vs. Oasis Hospitalities P. Ltd. [(2011) 333 ITR 119 (Del)] as under :- "Held, dismissing the appeal, that the addition was rightly deleted 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 mone....

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....is received. No burden is cast on the assessee to prove whether that person himself has invested or some other person has made investment in his name. The burden to prove that the money did not belong to him but to some body else is on the revenue. It was further 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 assessmen....