TaxTMI 
TaxTMI 
2014 (1) TMI 1767
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....corporated on 14.5.1981, is in existence till date; had PAN; was regularly filing returns of income and assessed; had bank account and remitted through banking channel; had confirmed independently to the learned Assessing Officer and had provided relevant material; was issued share certificates whereby identity, genuineness and credit worthiness was fully established. 1.1. That the learned lower authorities erred in drawing adverse inference on account of filing of nil income return by the shareholder and I.P. address. 1.2. That summons having been also served by the Assistant Commissioner of Income-tax, New Delhi, non-appearance could not be used adversely against the appellant. 2. That the learned lower authorities grossly erred in holding remittance of Rs. 10 Lacs by M/s. Sky Web (India) Ltd., Delhi for share application as unexplained and income u/s. 68 of the appellant Company, when the applicant Company was incorporated on 6.8.1997, is in existence till date; had PAN; was regularly filing returns of income and assessed; had bank account and remitted through banking channel; had confirmed independently to the learned Assessing Officer and had provided rele....
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....ed by the Assistant Commissioner of Income-tax, New Delhi, inspector found the place as well as the owner admitting rented to Shri Rajneesh Jain. 5. That the learned lower authorities grossly erred in holding remittance of Rs. 25 Lacs by M/s. Natraj Agrotech Pvt.Ltd., Delhi for share application, as unexplained and incomeu/s.68of the appellant Company, when the applicant Company was incorporated on 24.9.2008, is in existence till date; had PAN; was regularly filing returns of income and assessed; had bank account and remitted through banking channel; had confirmed independently to the learned Assessing Officer and had provided relevant material; was issued share certificates whereby identity, genuineness and creditworthiness was fully established. 5.1. That the learned lower authorities erred in drawing adverse inference on account of filing of nil income return by the shareholder and I.P. address, audit report not filed despite service on the shareholder, etc. 5.2 That the learned lower authorities erred in drawing adverse inference on account of summons sent by the Assistant Commissioner of Income-tax, New Delhi remaining unserved with the remarks "left". It clearly shows t....
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....esolved to increase the capital, invited applications, considered resolution, held general meeting passed special resolution, took decision to allot, allotted, issued certificates and filed requisite forms to the Registrar of Companies in-accordance with law. No default was noticed. 8.1. That the learned Commissioner of Income-tax(Appeals) erred in holding against, for non-pursuance production of the principal officers of the 7 companies, when their identity was established and when the said companies independently responded and confirmed the share application money and the allotment. 8.2. That the learned Commissioner of Income-tax(Appeals) erred in drawing inference on the basis of part of the cross- examination of Shri Pramod Jain, declaring his affidavit as unbelievable self serving statement and ignoring the material document. 8.3. That the learned Commissioner of Income-tax(Appeals) grossly erred in holding the impugned share application money of Rs. 2.5 Crores as unexplained income of the appellant company when admittedly by no indiscriminating document or record or material was found in survey; the Revenue failed to find any undisclosed income or source of addition....
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.... We have also gone through the relevant provisions of law and related precedents thereto. In fact, only one issue related to addition on account of disallowance of share application money is involved in this case and all the grounds in respect of the same and sole issue . The facts apropos to the impugned issue are that survey u/s 133A of the Act was carried out in the business premises of M/s. ARL Infratech Ltd., Jaipur on 18-07-2011. The assessee company is engaged in the business of manufacturing of AC Pressures Pipes and AC Sheets Shri GRP Pipes. During the course of survey, the statement of Shri Pramod Jain, director of the company, was recorded. In answer to Question No. 15 and 16,, he stated that the assessee received bogus share application money of Rs. 2.50 crores from seven companies during the financial year 2008-09. All these details of the money received as share application money are as under:- S.N. Name and address of applicant Company IT PAN company Registration Amount Rs. Date 1. M/s. Interior Soft Solution (P) Ltd. 2087/7B-3, Gali No. 11, Prem Nagar, New Delhi-11008 U72200DL2009 PTC 186854 AAC10197H ....
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....established that the statements ofShri Pramod Jain were not voluntary as explained by him vide his letterdated27/07/2011 and 04/08/2011 alongwith his affidavit duly notarized. We have also drawn your kind attention towards the Board'sCirculardated10/03/2003 and the instructions dated 11/03/2003 issued by the Central Board of Direct Taxes. Hence, as requested the so called statements of Shri Pramod Jain is no material and deserves to be excluded from assessment record of the asssessee company. 2.1 That if still your honour want to rely upon the so called statement of Shri Pramod Jain, you are very kindly requested to produce Shri Pramod Jain for our cross examination. We submit any statement recorded on the back of the assessee cannot be used against the assessee. Such user shall be in violation of principles of natural justice. 3. That in the said reply dated 29/08/2011 vide para-6, it has been stated:(i)the assessee company received share application money from the stated companies by account payee cheque; (ii) each one of the said company is duly registered under the Companies Act and maintain regular and proper books of account duly audited by Statutory Auditors; (i....
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....t of the Orissa High Court and dismissed appeal of the Revenue when the assessee had given names and addresses and it was in the knowledge of the Revenue that the said creditors were income tax assesses, their index numbers were in the file of the Revenue. It held that the respondent could not doe anything further and that the respondent had discharged the burden that lay on it. 6.1 That in similar circumstance , the Hon'ble Rajasthan High Court, the Jurisdictional High Court, in the following case dismissed appeal of the Revenue. (i) CIT v. Shree Barkha Synthetics Ltd. (2004) 270 ITR 477(Raj.)- In the said case 6 out of 7 companies had furnished GIR/PAN and confirmations about their investments. Regarding individual investors, 9 out of 10 had confirmed the fact of making investments in the shares of the assessee and they were income tax assesses and the mode of receipt had been through banking channels. It applied the case of Orissa Corporation (P) Limited (supra). (ii) Shree Barkha Synthetics Ltd. v/s Asstt. CIT (2006) 283 ITR 377 (Rajasthan)- If the transactions are made through banking channels and once the existence of persons by name in the share applicatio....
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....cted further enquiries by issuing summon u/s 131 of the Act and the AO found that the parties are not genuine. Therefore, the couple of admissions made during survey that the enquires made by him, the AO has added this amount of Rs. 2.50 crores to the returned income by holding that identity and creditworthiness of these parties does not stand proved on record. 2.3 Aggrieved, the assessee went in appeal in first appeal and the ld. CIT(A) also followed the suit and confirmed this addition. 2.4 Before us, both the parties have reiterated their earlier stands. 2.5 Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under:- ''In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.) (ii) Barkha Synthetics Ltd. vs. ACIT (2....