2016 (4) TMI 853

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....ncome Tax Act, 1961 at an income of Rs. 24,00,000/- after adding Rs. 24.00 lacs on account of share capital as unexplained sum u/s 68 of the Act. The Ld. CIT (A), on appeal, deleted this 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. 24.00 lacs from the following companies in its books:- S. No. Name of the Company Amount 1 M/s Rabik Exports Ltd. 3,00,000 2 M/s Ethnic Creations Pvt. Ltd. 3,50,000 3 M/s Satwant Singh Sodhi Construction Pvt. Ltd. 3,00,000 4  M/s SGC Publishing Pvt. Ltd. 4,00,000 5 M/s Arun Finvest Pvt. Ltd. 3,50,000 6 M/s FNS Consultancy Pvt. Ltd. 4,00,000 7 M/s Tashi Contractors Pvt. Ltd. 3,00,000   Total 24,00,000   4. The Assessing Officer has observed in his assessment order that on perusal of the bank account of all the seven investors, it was seen that there were huge cash deposits in the bank accounts before and after the issuance of cheques in favour of the assessee. The Assessing Of....

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....has also proved the creditworthiness or the financial strength of the subscriber/creditor. It has offered an explanation about the nature and source of money found credited in its book of account as envisaged u/s 68. He submitted that once the identity of share applicant/shareholders is proved, there is no case for addition in the hands of the assessee company. If there was any doubt about the creditworthiness of share applicant/s, necessary action should have been taken in the hands of share applicant/s. He submitted that there was no reason left for the A.O. to draw any adverse inference. 9. We have heard the rival submissions and carefully perused the relevant material placed on record. It is seen that the AO has not verified the details furnished by the assessee and I.T. records of the shareholders/investing companies. The averments of the assessee before the AO were not controverted by the AO. The assessee has discharged its burden of providing basic details which were required for verification to fulfill the conditions viz. identity of the creditor, creditworthiness of the creditor and genuineness of transaction as laid down by higher judicial authorities for examining the....

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....ts 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 undisclosed income under s. 68 of IT 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 AO, 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." 11. The Hon'ble Delhi High Court in the case of CIT....

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....share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO. Further the Hon'ble Supreme Court has categorically held that the Revenue is free to proceed to reopen the individual assessments of such alleged bogus shareholders. The decision of the Hon'ble jurisdictional High Court in the case of Value Capital Services Ltd. (supra) has also categorically held that there is additional burden on the Revenue to show that even if the applicant does not have the means to make the investment, but the investment made by the applicant should be shown to have emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. It is noticed that the Revenue has not been able to specifically show that the investments had emanated from the coffers of the assessee in this case. In these circumstances, 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 assess....