TaxTMI 
TaxTMI 
2016 (11) TMI 651
X X X X Extracts X X X X
X X X X Extracts X X X X
....h cheque. It was asserted that summons sent to share applicants were served upon them, therefore, the identity is proved. Reliance was placed upon the decision in the case of CIT vs Kamdhenu Steel & Alloys Ltd. & Ors. (2014) 361 ITR 220 (Del.) and CIT vs Devine Leasing and Finance Ltd. 299 ITR 268(Del.). On the other hand, Shri A. Ramachandran, ld. DR, defended the addition made by the Assessing Officer by contending that identity of the share applicant was not proved by the assessee. 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that from the balance sheet of the assessee company, it was noticed that the assessee has issued Rs. 1,50,000/- fully paid up shares of Rs. 100 each, thereby taking the paid up capital of the assessee from Rs. 60 lakh to Rs. 1,50,00,000/-. The ld. Assessing Officer asked the assessee to furnish the details of share application money received from applicants along with their names address, PAN and copy of bank statements. As is evident from para 3.2 of the assessment order, the assessee vide letter dated 25/11/2010 submitted the details of share applicant along with details like name,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n and treat the subscribed capital as undisclosed income of the company. If the relevant details of address and identity of subscribers are furnished to the Department along with the copies of the share holder register, share application forms, etc. it would constitute proof or explanation by the assessee and thus the Department would not be justified in drawing an adverse inference only because the creditor/subscribers fails or neglects to respond its notices. This decision supports the case of the assessee. The relevant portion from the aforesaid order from Hon'ble Delhi High Court in the case of CIT vs Devine Leasing & Finance Ltd. order dated 16/11/2006 is reproduced hereunder for ready reference:- " 4. In Stellar Investment the Division Bench had observed firstly, that no question of law had arisen before it; secondly, that if some bogus shareholders had been detected their assessment could justifiably be re-opened; and thirdly that the amount of increased share capital could not be assessed in the hands of the company. The later two aspects undeniably possess the character of question of fact. Reference to Section 68 of the Income Tax Act (hereafter referred to as the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it would operate between the litigating parties. We are unable to concur with the argument of Mr.Aggarwal, learned Counsel for the assessed that the dismissal of an Appeal underSection 260A constitutes an expression of a judicial view on the questions of law which the appellant had proposed in the Appeal. In other words, Stellar Investment would have to be restricted to the facts that had occurred strictly in those Appeals and no further. We are in respectful agreement with the understanding of the Division Bench in Commissioner of Income Tax v. Dolphin Canpack Ltd. (2006) 204 CTR (Delhi) 50 as articulated in this sentence - In Steller Investment's case (supra) the issue which the Revenue proposed to raise, related to the propriety of the Tribunal taking resort to s. 263 in the case by ignoring the material fact that the AO had failed to discharge his duties regarding the investigation with regard to the genuineness and creditworthiness of the shareholders, many of whom were found to be students and housewives. Rejection of an Appeal under Section 260A is similar to the dismissal in liming by the Supreme Court of Special Leave Petition. This is also the view of the Calcutta Hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessed could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessed has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. This reasoning must apply a fortiori to large scale subscriptions to the shares of a public Company where the latter may have no material other than the application Forms and Bank transaction details to give some indication of the identity of these subscribers. It may not apply in circumstances where the shares are allotted directly by the Company/assessed or to Creditors of the assessed. This is why this Court has adopted a very strict approach to the burden being laid almost entirely on an assessed which receives a gift. 7. Sumati Dayal v. CIT-Bangalore a succinct yet complete precis on the essentials of income-tax liability can be discerned from t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 68 one should first turn to Gee Vee Enterprises v. Additional CIT and thence finally to the decision of the Full Bench of this Court in Sophia Finance. 9. In Gee Vee Enterprises the Division Bench had in the context of a challenge to the maintainability of the Writ Petition on the grounds of the availability of an alternative remedy laid down situations which would justify the invocation of Article 226 of the Constitution. The Bench had also opined that the intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the Income-tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessed has stated in his return and fails to make inquiries which are called for in the circumstances of the case. It was further observed that the AO is both an adjudicator as well as an investigator, and it is his duty to ascertain the truth of the facts stated in the Return if such an exercise is `provoked, or becomes `prudent. The Bench held that Section 263 which deals with the Revision of orders prej....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... need not be satisfied about the genuineness of the transaction. 11. Before applying the law to the facts of the present case, we should reflect on the manner in which the Division Bench dealt with the factual matrix in Dolphin Canpack. It observed that where a credit entry relates to the issue of share capital, the ITO is also entitled to examine whether the alleged shareholders do in fact exist or not. Such an inquiry was conducted by the AO in the present case. In the course of the said inquiry, the assessed had disclosed to the AO not only the names and the particulars of the subscribers of the shares but also their bank accounts and the PAN issued by the IT Department. Super added to all this was the fact that the amount received by the company was all by way of cheques. This material was, in the opinion of the Tribunal, sufficient to discharge the onus that lay upon the assessed. This is evident from the passage extracted from the order passed by the Tribunal earlier. In the absence of any perversity in the view taken by the Tribunal or anything to establish conclusively that the finding regarding the genuineness of the subscribers and the transactions suffers from any irr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad stated that both the subscribing companies were incorporated in Sikkim and their addresses were disclosed in the return of allotments; the subscribers thus stood identified. Their financial standing or capacity was not investigated by the Court. The decision in Commissioner of Income-Tax v. Achal Investment Ltd. (2004) 268 ITR 211 (Del) is also on the same lines. 13. 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 assessed it should not be harassed by the Revenues insistence that it should prove the negative. 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 AO for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner of Income-Tax v. United Commercial and Industrial Co. Ltd. . In C.I.T. v. Korlay Trading Co. Ltd. , certain shares purchased through a broker were lost. The assessed furnished the name of the broker, as also the date of the sale, amount of purchase money and sale money. The broker was found not to have maintained regular accounts. However, the Court refused to draw an inference adverse to the assesseds interests. Instead the Calcutta High Court observed that the ITO ought to have investigated the matter more thoroughly to controvert the claim of the assessed, and concurred with the conclusion of the Tribunal that the latter had discharged the initial burden that lay on it. The High Court set aside the decision of the Tribunal which had reversed the findings of the ITO as well as the CIT (Appeals) since the assessed had supplied the income tax file number of the creditor before it. The High Court noted that the mere filing of the income tax number was not sufficient to establish the identity and creditworthiness of the creditor and genuineness of the transaction. Although Orissa Corporation was referred to the decision of the Full Bench of this Court in Sophia Finance was not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax Act.CIT, West Bengal v. Anwar Ali [1970] 76 ITR 697 was decided by the Apex Court holding that, if there is no evidence on record except the explanation of the assessed, which explanation has been found to be false, it still does not follow that the receipt constitutes taxable income. This decision was followed by the Apex Court in Anantharam Veerasinghaiah & Co. v. Commissioner of Income- Tax, A.P. opining that the mere falsity of the explanation given by the assessed is insufficient without there being, in addition, cogent material or evidence from which the necessary conclusion attracting a penalty can be drawn. However, as has been noted in CIT v. Jeevan Lal Sah 1995 Supp (4) SCC 247 amendments were incorporated by Finance Act, 1964, intoSection 271 which had deleted the word deliberately in its Sub-section 1(c), thereby shifting the onus of proof onto the assessed, rendering Anwar Ali ineffectual. Nevertheless, in CIT v. Mussadilal Ram Bharose it has been enunciated by the Supreme Court that though the Explanation shifts the burden to the assessed to show absence of fraud, this onus is a rebuttable one. The burden is not discharged by the assessed tendering an incredible or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nection with Assessment Year 1985-86 the ITAT has extracted portions of the Orders of the CIT (A) and we must assume that it did so to adopt that reasoning. The ITAT has not articulated its own reasoning in respect of Ground No1 before it viz. deletion of the addition of Rs. 13,05,450/- on account of unexplained shares subscription; whilst it has done so with regard to the other ground viz. deletion of addition of Rs. 9,95,000/- made on account of unexplained loans. The ITAT has categorically held that the assessed has discharged its onus of proving the identity of the share subscribers. Had any suspicion still remained in the mind of the AO he could have initiated 'coercive process' but this course of action has not been adopted. In view of the concurrent finding pertaining to the factual matrix we find no merit in these Appeals which we accordingly dismiss. ITA NO. 880/2006 21. In respect of this assessed namely, General Exports & Credits Ltd., the ITAT has reversed the decision of the CIT(A) on the subject with which we are presently concerned. It is trite that the decision of the ITAT should not be interfered with by the High Court unless it finds it perverse and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the statement of law made by the ITAT to the effect that in case of share capital no additions could be made if it is established that the shareholders exist is not completely correct, and has not been so enunciated by this Court in Sophia Finance. 22. It has been contended on behalf of the Revenue that the Rights Issue could not have been subscribed to by the aforementioned five Companies sans renunciation by the original shareholders. It has also be argued, and with merit, that the ITAT had not articulated the premise for arriving at the conclusion that the renunciation had taken place in a legal manner. We have also noticed that the Rights Issue were picked up only in 1989-1990. These factors are not relevant in these proceedings, even if there have been transgressions to the Companies Act. Support for this approach can be found from The Coco-Cola Export Corporation v. Income Tax Officer . The Apex Court observed that - If any remittance of foreign exchange had been made in excess of the prescribed limit from January 1, 1969, that will be for the Reserve Bank or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessed gives names and address of the creditors, who are assessed to tax and full particulars is furnished then the assessed has discharged the duty. If the Revenue merely issues summons Under Section 131 and does not pursue the matter further, the assessed does not become responsible for the same even if the creditors do not appear. Addition cannot be made under Section 68. No question of law, far less any substantial question of law arises for our consideration. We may however briefly reflect upon a submission made by learned Counsel for the Respondent to the effect that the assessed had, by its letter dated March 8, 1999 requested the AO to examine the Assessment Records of the share applicants whose GR Nos. had been supplied. It is not controverter that action was not taken by the AO, but it has justifiably been contended that this inaction was due to paucity of time left at that stage since the assessment had to be framed by March 31, 1999. It has been pointed out that several adjournments had been granted by the Assessment Officer on the asking of the assessed. The timing of the assesseds said letter is most suspect. Generally speaking, it is incumbent on the AO to manage....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which have been decided thereafter or cited before us now, but not taken note of in the said judgment would be added thereafter. Operative portion of that judgment reads as under : "2. Sec. 68 of the Act deals with unexplained incomes and is couched in the following language : TAXPUNDIT.ORG 'Sec. 68 Cash credits.-Where any sum is found credited in the books of an assessee maintained for any previous year, and assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.' 3.As per the provisions of this section, in case the assessee has not been able to give satisfactory explanation in respect of certain expenditure or where any sum is found credited in the books of accounts, the AO can treat the same as undisclosed income and add to the income of the assessee. The assessee is required to give satisfactory explanation about the "nature and source" of such sum found credited in the books of accounts. 4.It is a common knowledge that insofar as the companies incorporated under the Indian Com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d : '15. 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 assessed it should not be harassed by the Revenue's insistence that it should prove the negative. 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 AO for his perusal, all the informations contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tight-rope of ss. 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessed; if the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But, if the AO fails to unearth any wron....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... those judgments formulated the following propositions, which emerged as under : '18. In this analysis, a distillation of the precedents yields the following propositions of law in the context of s. 68 of the IT Act. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc. it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an 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 AO take such repudiation at face value and construe it, without more, against the assessee; (....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... can be proved by producing the bank statements of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. This judgment further holds that once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. Thereafter, it is for the AO to scrutinize 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 aforesaid aspects, there has to be some cogent reasons and materials for the AO and he cannot go into the realm of suspicion. 15. At this stage, we would like to refer to the judgment of the Bombay High Court in the case of CIT vs. Creative World Telefilms Ltd. (in IT Appeal No. 2182 of 2009, decided on 12th Oct., 2009). 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 AO to make proper investigation and reac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rial before the AO in regard to creditworthiness of the shareholders. Once the company had given the addresses of the shareholders and their identity was not in dispute, it was for the AO to make further inquiry. It was borne by the following discussion in the said judgment : '6. The questions raised in this appeal are squarely covered by several judgments of the Supreme Court and also the judgment of this Court passed in ASK Brothers Ltd. vs. CIT, wherein this Court following the judgments of the Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 and also n the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC) has ruled that it is not for the assessee to place material before the AO in regard to creditworthiness of the shareholders. If the company has given the addresses of the shareholders and their identity is not in dispute, where they were capable of investing, the AO shall investigate. It is not for the assessee company to establish but it is for the Department to enquire with the investor about their capacity to invest the amount in the shares. Therefore, we are of the view that the substantia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee is a privarte 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 vs. P. Mohanakala (2007) 210 CTR (SC) 20 : (2007) 291 ITR 278 (SC). In that case, the assessees 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 evidence indicated that the donor was to receive suitable compensation from the assessees. The AO held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the books of account of the assessee, as their income applying s. 68 of the Act. The assessee did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The CIT(A) confirmed the assessment. On further appeal, there was a difference of opinion between the two Memb rs of the Tribunal and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. 22. We would like to refer to another judgment of the Division Bench of this Court in the case of CIT vs. Value Capital Services (P) Ltd. (2009) 221 CTR (Del) 511 : (2008) 307 ITR 334 (Del). The Court in that case held that the additional burden was on the Department to show that even if share application did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such findings, addition could not be made in the income of the assessee under s. 68 of the Act. 23. It is also of relevance to point out that in CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC) where the increase in subscribed capital of the respondent company accepted by the ITO and rejected by the CIT(A) on the ground that a detailed investigation was required regarding the genuine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act enjoined the assessee to offer an explanation about the nature and source of the sum found credited in his books and if the explanation was not satisfactory, the amount can be credited and charged to income-tax as income of the assessee. Since the assessee, though tried to explain the genuineness of the credit on the basis of letters of confirmation, it could not be explained as to how the transaction was materialized when the companies were not in existence and the amount was paid by cheque only on the date on which the amount was credited to the account of the company. It was for the assessee to discharge this burden............" (B) Calcutta High Court in CIT vs. Kundan Investment Ltd. (2003) 182 CTR (Cal) 608 : (2003) 263 ITR 626 (Cal) held as under : "..........Under s. 68, the ITO is empowered to lift the veil of corporate identity and find out as to whether the apparent is real. It is the assessee on whom the onus lies. Unless sufficient materials are produced, the onus does not shift on the Revenue. But once the materials are scrutinized and the result of the scrutiny is communicated to the assessee, the onus shifts from the Revenue to the assessee. Then the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sclosed sources', (iv) the firm has to esta lish that the amount was actually given by the lender, (v) the genuineness and regularity in the maintenance of the account have to be taken into consideration by the taxing authorities, (vi) if the explanation is not supported by any documentary or other evidence, then the deeming fiction credited by s. 68 can be invoked. In these circumstances, we are of the view that simply because the amount is credited in the books of the firm in the partner's capital account it cannot be said that it is not the undisclosed income of the firm and in all cases it has to be assessed as an undisclosed income of the partner alone. In these circumstances, we are of the view that the Tribunal was not justified in holding that the cash credits of Rs. 11,502 in the account of Shri Kishorilal, one of the partners, could not be assessed in the hands of the firm and in deleting the same. Since the matter was not considered by the Tribunal on the merits, the Tribunal would be free to hear the arguments of both the parties and decide afresh in view of the observations made above. Accordingly, the reference is answered in favour of the Revenue and against ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the light of human probabilities.............." (Emphasis, italicised in print, supplied) 26. With this discourse on the legal position, we advert to the cases at hand. In these appeals, there is a common thread which runs through all these cases insofar as nature of transaction is concerned. As would be seen when we discuss the facts of this case, the share applicants are all companies incorporated under the Ind an Companies Act, either public limited or private limited companies. Since these companies are incorporated under the provisions of Indian Companies Act, their identity, at least on papers, is established. Here, they are assessed to income-tax as well. These companies have PANs and are filing regular IT returns. The assessee companies which have received share application money from such applicants have produced documents in the form of PANs, IT returns copies of the bank accounts through which the funds were transferred by way of credit entries, deposits in the accounts of such applicants, etc. by furnishing such kinds of proofs/documents, the assessees have been able to discharge their initial burden. Notwithstanding the same, as per the AO(s), the applicants were b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with the RoC. 3.The share applicants have filed their respective confirmations. 4.The companies are genuine existing shareholders. 5.The investments have been made by them by account payee cheques. 6.AO's remarks that the share applicants are "entry providers" have no basis. 7.The assessee company is not accountable for the share applicants depositing cash in their accounts before investing by cheques. 8.AO's remarks "not a genuine taxpayer" are of the Department and the share applicant in which the assessee has no role to play. 9.The assessee has no means to produce the shareholders physically. 10.The postal remarks on the communications to the share applicants were not made available to the assessee company. 11.The report of the Directorate is one sided. 12.The proposal of the AO to t eat the credits received as share application money runs contrary in law to the judgment of the Hon'ble Supreme Court in the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287." 30. The AO was not convinced with this explanation. He was of the view that though contentions appeared go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e light of the aforesaid, Mr. Sahni referred to the judgments on onus which have also been taken note of above by us. 32. Before we deal with the same, let us find out the raison d'eter behind the orders of the Tribunal in deleting the addition, as CIT(A) had confirmed the orders of the AO agreeing with his reasons. The order of the Tribunal is very brief and appeal was allowed following the judgment of the apex Court in the case of CIT vs Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 and CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del) of this Court. The entire discussion can be traced in para 3 of the impugned order : "3. We have considered the rival submission. A perusal of the order of the Hon'ble Supreme Court in the case of Divine Leasing & Finance Ltd. (supra), referred to supra, is in regard to SLP filed by the Revenue against the order of Hon'ble jurisdictional High Court and the Hon'ble Supreme Court has specifically with a speaking order dismissed the SLP. The Hon'ble Supreme Court in the various decisions referred to by the learned Authorised Representative has categoricall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pers and/or genuineness of the transactions, when he found that investing companies are not available at given addresses or that the issuance of the cheque representing share application money or preceded by the deposit of cash in the bank account of these investment companies. 35. The important question which arises at this stage is as to whether on the basis of these facts, could it be said that it is the assessee which has not been able to explain the source and receipt of money. According to the assessee, he had given the required information to explain the source and was not obligated to prove source of the money. It is the submission of the assessee that even in case there is some doubt about the source of money in giving into coffers of the share applicants which they invested with the assessee, it would not automatically follow that the said money belongs to the assessee and becomes unaccounted money. According to us, the assessee appears to be correct on this aspect. We feel that something more which was necessary and required to be done by the AO was not done. The AO failed to carry his suspicious to logical conclusion by further investigation. After the registered let....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut any additional material to support such a move. We are reminding ourselves of the following remarks of a Division Bench of this Court in its decision dt. 2nd Aug., 2010 in the case of CIT vs. Dwarkadhish Investment (P) Ltd. (IT Appeal No. 911 of 2010) [reported at (2010) 45 DTR (Del) 281 : (2011) 239 CTR (Del) 478-Ed.] in the following words : "Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the 'source of source'. (Emphasis, italicized in print, supplied) 37. We are conscious of the malice of such kind of pernicious practice which is prevalent. In CIT vs. Divine Leasing & Finance Ltd. (supra), this Court had eloquently highlighted the same in the following manner : "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 excoria....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from the point of view of such companies (like the assessees herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscriber to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgments in laying down that the Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholder in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export (supra) which holds the fields and is binding. 40. In conclusion, we are of the opinion that once adequate evidence/material is given, as stated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d with the facts of the present appeal, we find that the ld. Assessing Officer has disbelieved the genuineness of the subscription received by the assessee as share application money, more specifically when the assessee provided the list of share subscribers, their PAN, source of the funds, therefore, mere suspicion is not enough to sustain the addition u/s 68 of the Act. Summons were issued to shares subscribers by the Assessing Officer and the same were not returned back, meaning thereby, the same were served upon them. The ld. Assessing Officer if was still apprehensive nothing prevented him to take the legal recourse available with him. The assessee also filed confirmation from share subscribers. The bank accounts of share subscribers were produced which establishes their identity. The existence of share holders is not in doubt, their identity is established and they invested the money in purchase of shares. The onus cast upon the assessee has been established, therefore, following the aforesaid judicial pronouncements from Hon'ble higher forum, in our view, addition cannot be sustained. The decision from the Hon'ble High Court is binding upon the Tribunal. The annual r....