TaxTMI 
TaxTMI 
2016 (3) TMI 206
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....where a mechanism has been formed to introduce unaccounted money in the books of accounts with the help of accommodation entry providers which has been exposed by deep and detailed investigation carried out by the Investigation Wing of the Department. 3. That on the facts and circumstances of the case and in law the Ld. CIT(A) failed to appreciate the facts that the assessee company failed to prove physical identity and existence of the share applicant, 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the judgment of the Supreme Court in the case of M/s Lovely Exports (P) Ltd. is not applicable where share application money is not received in a public issue." 3. Though revenue has raised four grounds of appeal however in substance revenue is contesting the deletion of addition u/s 68 made by AO on account of share application money received by the assessee of Rs. 58,00,000/- . 4. The brief facts of the case are that the assessee is private ltd company and during the year the assessee has received share application money of Rs. 58 lacs from the following companies: 1. Warsi Overseas (P) Ltd. 5,00,0....
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....see has proved with documentary evidence the identity, creditworthiness and genuineness of the transaction. The learned Commissioner of Income-tax (Appeals) was also of the view that the assessee has already requested to verify further details by issue of notice u/s 133(6) which came back un-served and further as per the Inspectors report such company were also not found in the existence. Further, the share applicants company has independently submitted the conformation regarding share application money along with necessary documents directly to the AO. Regarding the notice un-serviced as well as the Inspector's Report the assessee could not be found fault with. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals) revenue is in appeal before us. 6. It was contended by the ld DR before us that the learned Commissioner of Income-tax (Appeals) has relied on the orders of the Hon'ble Supreme Court in the case of Lovely Export Pvt. Ltd. 216 CTR 195 (SC) cannot be extended to this situation whether accommodation entry profits make investment in the assessee company and further the decision of the Hon'ble Supreme Court is not applicable whether share applicants mo....
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....t and Profit & Loss account, copy of certificate of incorporation, copy of share certificates and copy of ROC website showing the name of the above companies etc. in support of its claim at the assessment stage. It is argued by the Id. AR that in the above background, the assessee had discharged its onus of establishing the identity and credit worthiness of the shareholders and the genuineness of the share transactions and the impugned addition made by the AO merely on the ground that Principal Officer of the shareholder companies could not be produced before the AO is illegal. Further, it is argued that the although in the assessment order the AO has relied on certain enquiries/investigations made by the Investigation Wing, the appellant was not provided with any material in this regard and no opportunity of cross-examination was granted to the appellant. Perusal of the impugned assessment order shows that the above objections were also raised by the Id. AR before the AO during the assessment proceeding. It had also been argued before the AO that the material collected at the back of the assessee cannot be used against the assessee unless opportunity of cross-examination is provid....
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....probable, the onus will shift to the revenue to disprove it and the assessee's explanation in such case cannot be rejected on mere surmises. Further, it was held in Khandelwal Constructions v. CIT (1997) 227 ITR 900 (Gau.) that since the satisfaction of the AO is the basis for invocation of the powers u/s 68, such satisfaction must be derived from relevant factors on the basis of proper inquiry by the AO and such inquiry must be reasonable and just. 6.1.3 It is also settled law that it is mandatory for the AO to confront the assessee with any material collected by the AO at the back of the assessee, and in case of statement of third party recorded at the back of the assessee, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc. will be rendered on unreliable and additions made on the basis of such material/statement etc. shall be rendered illegal. Reference in this regard can be made to the decisions in the case of R.B. Shreeram Durga Prasad 176 ITR 169 (SC), 125 ITR 713 (SC), Jindal Vegetable (order of Hon'ble Delhi High Court in ITA no. 428 of 2007, 174 Taxmann 440 (Raj.) and Laxman Bhai Patel (orde....
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....60/2007 arising out of ITA no. 788/2006 of the High Court of Delhi) and CIT v. General Exports Ltd. (SLP no. 21349/2007 arising out of ITA no. 880/2006 of the High Court of Delhi) . Following the aforesaid decision of the Apex Court in CIT v. Lovely Exports (P) Ltd. (supra), the Hon'ble Mumbai High Court in the recent judgement in the case of CIT v Creative World Telifilms Ltd. (order dated 12.10.2009 in ITA(L) no. 2182 of 2009) has held as under: " The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgement of the Apex Court in the case of CIT vs. Lovely Exports (P) Ltd. reported in (2008) 216 CTR 195 (SC) wherein the Apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee has given the details of name and address of the shareholders, their PAN/GIR number and had also given the cheque number, name of the bank. ....