TaxTMI 
TaxTMI 
2016 (4) TMI 585
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....he course of assessment proceedings, the assessee furnished all the details relating to the share application money as well as preference share capital., i.e., according to the assessee, it has discharged the initial burden placed upon it u/s 68 of the Act. It appears that the revenue has conducted investigation in the hands of some of the companies from whom the assessee had received share application money as well as the preference share capital. It appears that the directors of those companies had deposed that they were providing only accommodation entries only. Based on those statements, the AO assessed the cash credits in the hands of the assessee in both the years. The Ld CIT(A), however, deleted the addition on the basis of orders passed by the Tribunal in the hands of the sister concerns of the assessee, viz.,M/s Chat Computers Ltd (ITA No.3859/Mum/2009 dated 22-07-2011) and M/s Netscape Software Ltd (ITA No.3852/Mum/2009 dated 19-10-2011) and also the decision rendered by the Tribunal in the assessee's own case relating to AY 2005-06 & 2006-07 passed in ITA No.1715 and 3858/Mum/2009. Aggrieved, the revenue has filed these appeals before us. 4. We have gone through the ord....
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....lication to whom shares were yet to be allotted. It has further been stated by the Ld. A.R. that the issue of share application money being taxed by the Ld.A.O. and which were received from several Kolkata based companies was also a subject matter of appeal before Hon'ble ITAT, Mmnbai in appellant's own case for A.Y.2005-06 & 2006-07 as well as in two other related cases viz. Chat Computers Ltd. and Netscape Software Ltd. in ITA Nos. 1715 and 3858/M/09 dated 25.01.2012 , ITA No.3859/M/09 dated 27.7.2011 and ITA No.3852/M/09 dated 19.10.2011 respectively. It has been stated that under similar circumstances where statements of various individuals were recorded by the Investigation Wing at Kolkata and where no opportunity was given to the appeellants to cross examine the share applicants during the course of assessment proceedings, Hon'ble ITAT deleted the additions made u/s.68 of the LT. Act on the ground that the entire share application money were received through account payee cheque/draft and the share application money was found in the bank account of the investing companies through account payee cheques and not through any cash transaction. Hon'ble ITAT furth....
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....case cited supra. Further in view of the decision of hon'ble Gujarat High Court in case of Rajeh Babubhai Damania (supra), we see no reason for giving the A.O. any further innings to fill up the lacunas or lapses in the assessment which would cause a great injustice to the assessee. 15. In view of the above discussion and the facts and circumstances of the case, the share application money cannot be treated as income of the assessee company until and unless it is proved beyond doubt that the assessee's own money has come back through some closely related applicant. Once the identity of the applicant. is disclosed and found as correct then, even if the said transaction is suspected by the revenue authorities, the same cannot be treated as income of the assessee company which is a public limited company. Accordingly, we delete the addition made by the Assessing Officer and confirmed by the CIT(A) on this account. However, we may clarify that our findings on the issue are based on particular facts of this assessment year and therefore, would not affect the respective rights of the parties for the other assessment years. " 10. In the case of Netscape Software Ltd.(supra),....
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....satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinise 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 have to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. " 15. The Hon'ble Bombay High Court in the case of CIT Vs. Creative World Telefilms us. 333 ITR 100 (Bom) 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. The Hon'ble Court further observed that if the assessee had given the details of names and addresses of the shareholders, their PAN / GIR numbers and had also given the cheque numbers, name of the bankers. The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the share-holders. The Hon'ble Court followed the....
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....veracity of the repudiation. In the case of a public issue, the company concerned cannot be expected to know every detail 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 the information contained in the statutory share application documents. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income-tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company. " ....................................................................... ...................................................................................... 21. The Hon'ble Delhi High Court in the case of Divine Leasing (supra) has laid down that if the Assessee satisfies prima fade the three ingre....
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....n only to verify the suspicion of any concealment of income. The Assessing Officer, during the course of assessment proceedings asked the assessee to produce the said directors for cross examination. It is evident from the letter of the Assessing Officer dated 01.10.2008 as well as dated 16.9.2008 that the Assessing Officer did not summon these directors to be present in the office of the Assessing Officer for the purpose of cross examination by the assessee; but on the contrary, the assessee was asked to produce these directors for cross examination purpose. This is a gross violation of principles of natural justice when the' Assessing Officer asked the assessee to produce the directors for availing opportunity of cross examination. The Assessing Officer relied upon the statement of the directors of the investing company recorded during the investigation proceedings by the ADIT(Inv) Unit 1, Kolkata. Instead of ensuring the presence* of these persons for giving opportunity to the assessee to cross examine, the Assessing Officer asked the assessee to produce them, which in our considered opinion is an absolute unjust and opposite to the rule of law and what procedure demands. Th....
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....rough account payee cheques. Therefore, when al1 the documentary evidence contradicts the statements of the directors recorded by the investigation unit of the department then such statements alone cannot be taken as the basis much less a good or proper basis for any addition. 6.5 It is settled proposition of law that the statement recorded during the course of investigation without corroborative evidence has no evidentiary value. It is pertinent to mention that the statements recorded in this case are not under search or survey or assessment proceedings therefore the same cannot be used against the assessee without following the due process of corroboration and cross examination. Even otherwise, the statement without cross examination and corroborative evidence cannot be used against the assessee. 6.6 As pointed out by the ld AR of the assessee the credibility of the statements is also not free from doubt as it appears that all the statements are prepared by the department in an identical fashion and manner before those were got signed on. different dates. It is apparent that certain identical mistakes are appearing in those statements allegedly recorded on different dates. ....
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....on whose statements, the Assessing Officer relied upon, amounts to denial of opportunity and would be fatal to the proceedings. The Hon'ble Delhi High Court has observed in para 7 as under: "7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the Principles of natural justice in as much as seized material is not provided to an assessee nor is crossexamination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following the approach adopted by us in SMC Share Brokers Ltd. (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration. " 8 Similarly, in the latest decision, the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra), after considering all the relevant decisions on the issue including the decision of the Hon'ble Supreme Court in the case of Lovely Exports P Lt....
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....elefilms Ltd. (in L T. A. No. 2182 of 2009 decided on October 12,2009) [2011J 333 ITR 100. The relevant portion of this order is reproduced below: "In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable'. In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the-assessee to the Assessing Officer . In the above circumstances. the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to costs. " (emphasis supplied) 16 The court thus clearly held that once documents like PAN card, bank accoun....
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....ate limited company where the shareholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstance, the assessee cannot feign ignorance about the status of these parties. 21 We may also usefully refer to the judgment of the Supreme Court in the case of CIT Y. P. Mohanakala /[2007] 291 ITR 278. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the legal position contained in section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of section 68 of the Act suggests that (iJ there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books, or (b) the explanation offered by the as....
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....re capital, as there was a device of converting black money by issuing shares with the help of formation of an investment which was reversed by the Tribunal, this court held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This view was confirmed by the apex court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263. 24. Having taken note of the legal position in detail, we now proceed to decide each appeal on the application of the aforesaid Principles. I T. A. No. 2093 of 2010 and I T. A. No. 2095/2010" 9. It is clear from the decision of the Hon 'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra) that once the assessee filed copy of PAN, Acknowledgement coy of the return of income of the investing companies, their bank accounts statements for the relevant period; then even the parties were not produced in spite of the specific directions of the Assessing Officer, the addition could not be sustained as the primary onus was discharged by the assessee by producing the PAN, balance sheet, copy of the a....
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....h law, but the same cannot be regarded as undisclosed income of the assessee. In this view of the situation, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) vide which addition made on account of share application money has been deleted. " 34. Having regard to the decisions noted above, we are of the view that the addition was rightly deleted by the Commissioner of Income-tax (Appeals) and the Tribunal. Requisite documents were furnished showing the existence of the shareholders from bank accounts and even their income- tax details. From bank accounts of these shareholders, it was found that they had deposed certain cash and source thereof was questionable. The Assessing' Officer should have made further Probe which he failed to do. Moreover, the remedy of the Department lies in reopening the case of these investors and the addition cannot be made in the hands of the assessee.' Thus in view of the above observation of hon 'ble High Court when requite document were produced and available with the AO to establish that no cash was deposited in the bank accounts of the investing companies then without 'further probe to Prove contrary the ....
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....ts is highly misplaced and improper. When the stand of the revenue is in total contraction of the material on record then in view of the latest decision of the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra), We are of the considered opinion that the issue can be decided on merit and need not to be remand to the record of the AD because at the time of the order for the AY 2005-06, the coordinate Bench of the Tribunal was not having the benefit of the decision of the Hon'ble Delhi High Court in the case cited supra. Further in view of the decision of Hon 'ble Gujarat High Court in case of Rajeh Babubhai Damania (supra), we see no reason for giving the A.O. any further innings to fill up the lacunas or lapses in the assessment which would cause a great injustice to the assesse; 15. In 'View of the above discussion and the facts and circumstances of the case, the share application money cannot be treated as income of the assessee company until and unless it is proved beyond doubt that- the assesse's own money has come back through some closely related applicant. Once the identity of the applicant is disclosed and found as correct then, even....