AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 998
X X X X Extracts X X X X
X X X X Extracts X X X X
....2010. Later on, the case was selected for scrutiny. 4. During the course of assessment proceedings the AO noticed that the assessee had received share application money as per following details: Name/Address of the Parties Amount of Shares issued Share Premium Total Amount 1. Bhavani Portfolio Pvt. Ltd. 400000 46,00,000 50,00,000 2. Thar Steels Pvt. Ltd. 400000 46,00,000 50,00,000 3. Vidhyut Mkt. & Foods (I) Ltd. 1100000 1,26,50,000 1,37,50,000 19,00,000 2,18,50,000 2,37,50,000 He further observed that a specific information had been received from the Investigation Wing of the Department, New Delhi that the assessee had received accommodation entry of Rs. 50,00,000/- each from M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. which were managed by Sh. Tarun Goyal, who was an entry operator and indulged in giving accommodation entries. He asked the assessee to furnish various details like copy of bank account alongwith copy of confirmation and to prove the identity/genuineness/creditworthiness of the persons from whom share application money was taken. The assessee filed the confirmation a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the matter to the ld. CIT(A) and furnished the written submission which has been incorporated by the ld. CIT(A) at para 2.1 of the impugned order which read as under: "The appellant during the previous year relevant to the A.Y.2008-09 received the share application money from certain corporate investors through account payee cheques as per details below:- Name of the Investor Company Share Application Money Received Share Capital Share Premium M/s Bhawani Portfolio Pvt. Ltd 50,00,000/- 4,00,000/- 46,00,000/- M/s Thar Steel Pvt. Ltd. 50,00,000/- 4,00,000/- 46,00,000/- M/s Vidyut Marketing & Foods (I) Ltd. 1,37,50,000/- 11,00,000/- 1,26,50,000/- Total 2,37,50,000/- 19,00,000/- 2,18,50,000/- While framing the assessment the Id A.O. admitted the share application money received from M/s Vidyut Marketing & Foods (I) ltd. but did not accept the share application money received from M/s Bhawani Portfolio Pvt. Ltd. & M/s Thar Steels Pvt. Ltd. in whose case the following documents were filed in support of the genuineness of the share application money received:- Particulars Bhawani Portfolio Pvt. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er who in turn provides cheques of equal amount. d) In para 7 of the assessment order the Id. A.O. has observed that as per the investigation conducted by the Investigation Wing, M/s Bhawani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. are the entry providers. The assessee has not proved credit worthiness of these parties on account of failure to produce them for verification of transactions. Hence the onus has not been discharged by the assessee. Before the abovementioned reasons for disallowance of Share Application Money of Rs. 100 lacs are rebutted, the appellant brings to your kind notice the following facts:- The Id. A.O. conducted an enquiry u/s 133(6) of the Income Tax Act, 1961 with all the share applicants during the assessment proceedings. The notices were duly served to M/s Bhawani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. and they replied to the Id. A.O. having accepted investing in shares of the appellant company. They also filed relevant evidences in support of their statement. However the Id. A.O. has not mentioned this fact in the assessment order and simply skipped it conveniently. He ought to have considered the outcome of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther deposits in their bank accounts and those accounts are regularly maintained. The creditors were also assessed of tax. Thus not only identity of creditor but even their capacity to advance funds has been proved on record. " The relevant portion from the judgment in the case of M/s Uma Polymers is reproduced as under:- "In respect of share application money received from investors, the assessee company has to prove only existence of person in whose name application is received. No further burden is cast on the assessee to prove whether that person himself has invested the said money or some other person has made the investment in his name. If the assessee has submitted the return and given detailed particulars of his investment like GIR No. etc. the same was entitled to proper weight. Having regard to information collected by the A.O. from the bank of the creditors, identity of the creditors was fully established. The creditors were also found to be assessed to tax. Thus, further investigation of the matter, in instant case, was not necessary. If any shareholder was found to have unexplained investment, then addition of such investment was required to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....#39;ble ITAT New Delhi which deals with all the aspects of admissibility of share application money is enclosed vide P.No.6l-71. On going through all the above cases it may be summarized as under:- - The onus on the assessee is limited to identification of the subscriber of the shares. - If A.O. is in possession of any information which creates doubts on the genuineness of the transaction relating to share application money and the shares allotted, onus is on the A.O. to prove it. As the appellant vide P.No. 1-36 has discharged its onus regarding genuineness, identity and credit worthiness of the subscribers of the shares, the onus was shifted to Id. A.O. These documents filed confirmed the correctness, genuineness and truthfulness of the transaction appellant had with the subscribers to the share capital and vindicated its stand; all the inquiries conducted by the Id. A.O. only further confirmed it. No negative evidence was collected by the Id. A.O. to support the information he alleged to have obtained from the Investigation Wing, New Delhi. Under these circumstances the Id. A.O. should have accepted the sum of Rs. 100 lacs received as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion and Shri Tarun Goyal statement are not in assessment file. All the inquiries conducted by the Id. A.O. only proved the genuineness of the share application money received by the appellant. c. The observation that the assessee routed his unaccounted money in books through share application money is without any finding. On the contrary all the inquiries conducted by the Id. A.O. only proved the genuineness of the share application money received by the appellant. d. The observation of the Id. A.O. that the appellant has not proved credit worthiness of M/s Bhawani Portfolio Pvt. Ltd. and Thar Steels Pvt. Ltd. as appellant did not produce them for verification is again incorrect as at first place the appellant was never asked to produce these share applicants as it is apparent from the copy of the order sheet finding place in the paper book. Secondly, appellant had no onus to produce the parties as held by various courts as discussed above. Thirdly, the inquiries conducted by the Id. A.O. did not support the accommodation entry theory; rather it proved the genuineness of the share application money and truthfulness of the documents filed by the appellant in its su....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., (5) the Department would not be justified in drawing adverse inference only because the creditor/subscriber fails or neglects to respond to its notices, (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the A.O. take such repudiation at face value and construe it, without more, against the assessee and (7) The A.O. is duty bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and the veracity of the repudiation. In the case of a public issue, the 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 A.O. for his perusal, all the information contained in the statutory share application documents. A delicate balance must be maintained while walking the tight rope of sections 68 & 69 of the Income Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee. If the A.O. harbors doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubscribers and they confirmed that they had invested in the share capital of the company, no addition u/s 68 of the Act could be made and the Revenue was free to reopen the assessment of the shareholders if their creditworthiness was in doubt. He further observed that in the assessee's case the confirmation of the two parties M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. and the fact that they replied alongwith copies of their Income Tax Returns and Bank Statements in response to the notices issued u/s 133(6) of the Act issued by the AO which established the identity of these two companies. He further observed that the perusal of the assessment records revealed that the AO had deputed Inspector to Central Circle-IV to obtain balance sheets alongwith schedules of the aforesaid two companies which was complied with by the Income Tax Inspector on 08.12.2010 and the Balance Sheet so obtained reflected the investments made by those companies in the shares of the assessee company, but the aforesaid fact had not been discussed by the AO in his assessment order. The ld. CIT(A) categorically stated that the aforesaid two companies were filing their Income Tax Returns and the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the onus placed upon him and thereafter it was for the AO to scrutinize the same and in case he had any doubt about the veracity of those documents to prove the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspect, there has to be some reason and material for the AO and he cannot go into the realm of suspicion. The ld. CIT(A) observed that the assessee provided the requisite documents to prove the identity and capacity of the share subscriber and the genuineness of the transaction but the AO, other than relying on the information received from the Investigation Directorate had not brought on record any material to establish that there was any discrepancy in the details filed by the assessee or that the share application money received from M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. was actually the assessee's undisclosed income. The ld. CIT(A) deleted the addition made by the AO u/s 68 of the Act. The reliance was placed on the following case laws: CIT Vs Creative World Telefilms Ltd. (Del) CIT Vs Value Capital Services (P) Ltd. 307 ITR 334 (Del) 8. Now the department is in appeal. The ld. DR st....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arefully gone through the material available on the record. In the present case, it is an admitted fact that M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. invested in the share capital of the assessee and shares were allotted to them. This fact is evident from the details furnished in Form No. 2 to the Registrar of company vide receipt dated 27.02.2008, copy of which is placed at page nos. 32 to 36 of the assessee's paper book. The assessee received the share application money from the said companies who disclosed this fact in their respective balance sheet which is clear from page no. 8 of the assessee's paper book wherein the said investment has been mentioned in the Balance Sheet of M/s Bhavani Portfolio Pvt. Ltd. and page no. 24 of the assessee's paper book wherein the similar investment has been disclosed in the case M/s Thar Steels Pvt. Ltd. The investors also furnished the copies of their confirmation letters which are placed at page nos. 13 & 29 of the assessee's paper book, both the parties are regularly assessed to income tax and furnished the copies of the acknowledgment of filing their Income Tax Returns for the relevant assessment year which are placed ....