TaxTMI 
TaxTMI 
2016 (4) TMI 213
X X X X Extracts X X X X
X X X X Extracts X X X X
....er called 'the Act') on 21.11.2007 and later the case was selected for scrutiny through CASS. The Assessing Officer completed the assessment u/s 143(3) of the Income Tax Act, 1961 at an income of Rs. 76,46,970/- after adding Rs. 76.00 lacs on account of share capital as unexplained sum u/s 68 of the Act. The Ld. CIT (A), on appeal, deleted this entire addition. Now, the department is in appeal against the deletion by the Ld. CIT (A). 3. It is seen from the records that during the year, the assessee company had shown receipt of share application money/share capital of Rs. 76.00 lacs from the following companies in its books:- S. No. Name and address of the person form whom taken Amount in Rs. 1 M/s Chitpurni Credit & Leasing Pvt. Ltd. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... application forms d) Confirmation of shareholders with regard to share capital subscribed by them 6. The Ld. CIT(A) has observed that the Assessing Officer could not prove with certainty that the investors/entities were entry providers and that the transactions entered into by the assessee were bogus. He has observed that the Assessing Officer has not effected any inquiries to bring out any fact which could suggest that the parties have given accommodation entries to the assessee and that the money received from these parties was assessee's own undisclosed income routed back to the assessee in the guise of share application money. The Ld. CIT(A) also pointed out that the Assessing Officer had simply relied on the information provided by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ictional High Court has observed as under:- 'There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the Assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of public issue, the company concerned cannot be expected to know every details pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubscriber fails or neglects to respond to its notice; (6) the onus would not stand discharged if the creditor/subscriber denied of repudiated the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee; (7) the Assessing Officer is duty- bound to investigate the credit worthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation." 10. With regard to the issue of share application money, while dismissing the SLP filed by the Department, the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd. (216 CTR 195) observed as under: "Can the amount of share money be regarded as undiscl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....documents furnished by the assessee. The Income-tax Appellate Tribunal concurred with the views taken by the Commissioner of Income-tax (Appeals)." 12. In the case of Anu Industries Ltd. vs ACIT (2009) 19 DTR (Del), Delhi ITAT observed as under:- "We have considered the rival contentions and found that identity of the share applicants are not in dispute. The Hon'ble Supreme Court in case of Divine Leasing & Finance Ltd. (supra) has held that if the share application money is received by the assessee company even from the bogus shareholders whose names are given to the AO then the Department is free to proceed to, reopen their individual assessments in accordance with law. Accordingly, addition made under s. 68 which was deleted by the Ho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces, respectfully following the decision of the Hon'ble jurisdictional High Court as also Hon'ble Supreme Court referred to supra, the addition made by the AO and confirmed by the learned CIT(A) in regard to the alleged bogus shareholders represented by the increase in share capital of the assessee cannot be treated as unexplained cash credits in the hands of the assessee. Respectfully following the decision of the Hon'ble Supreme Court we direct the Assessing Officer to delete the addition made under s.68. However, the Department is free to proceed to reopen the individual assessments of the share applicant in accordance with law. We direct accordingly." 13. It is seen that in the present case, the identities of the share applicants are....