TaxTMI 
TaxTMI 
2018 (2) TMI 107
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....acts and in the circumstances of the case, the Ld. Clt(A) erred in confirming addition of Rs. 2,37.00.000/- wade a1s 68 of the Income Tax Act, 1961 in respect of share application money received by the appellant company Ay holding that the same are not genuine 2. On the facts and in the circumstances of the case, the LA. CIT(A) erred in confirming addition of' Rs. 2,37,00.000/- made u/s 68 of the Income Tax Act. 1961 without appreciating the fact that the appellant has proved the identit) and credit worthiness of the subscribers and genuineness of the transaction. 3. On the facts and in the circumstances of the case, the IA. C1T(A) erred in confirming addition of Rs. 2,37,000/- treating the same as commission paid for the share application money received by the appellant company. 4. The appellant prays that addition made of 2,39,37,000/- may be deleted." 3. Briefly stated facts are that the AO noticed from the accounts of the assessee that it had received share application money from various parties during the year under consideration, which he required to explain in term of section 68 of the Act. The issue summons under section 131 of the Act and ....
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....ompany's books of accounts. This statement of the director of the company is not acceptable in view of non-service of summons u/s. 131 sent through RPAD by the undersigned and report from Investigation Wing after survey as discussed above Hence, the amount of Rs. 2,37,00000/- is added to the total income shown received from share application money and found non-genuine u/s 68 of the I.T. Act,1961. Further, the assessee has taken these share application money by paying commission @ 1% and hence, 1% of total undisclosed income taken under Sec 68 which comes to 237,000/- is also added u/s 68 of the IT Act, 1961. Further the assessee has taken this share application money by paying commission @ 10% and hence, 1% total undisclosed income taken under sec 68 which comes to 2,37,000/- is also added under section 68 of the IT Act. Penalty proceedings under section 271(1)(c) are separately initiated." Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of the AO by observing in Para 8 as under: - "8. I have very carefully considered the findings of the Assessing Officer, the submissions as made by the appellant, the report as called for from the Asse....
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....here are deposits in the bank account prior to withdrawal albeit through cheques. The three tests to be applied to determine the genuineness of credit in the books under s. 68 are (1) identity of the subscriber, (ii) capacity of the subscriber and (iii) genuineness of the transaction. The provisions of section 68 incorporate the rule of burden which is placed on the assessee in respect of matters on which he alone is familiar. This burden will not easily shift on mere furnishing of certain material for the reason that the assessee being a private company has every likelihood having better familiarity with the party with whom he is dealing. Admittedly, with respect to all these companies the appellant company was unable to produce them; on his part the Assessing Officer had issued summons but they were returned un-served. Factually) none of these 10 companies in whose names the amounts have been received by the appellant company are available, nor have they been made available. The companies themselves are found riot to be functioning in the addresses given. Thus, it has to be stated that even the identity of some of these companies particularly that of MIs Mahashakti Vyapar Pvt. Lt....
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....rtain companies the documents and bank statements as furnished do not accord with the claims as made. It has to be stated here that mere supply of PAN or copies of bank statements does not discharge the burden which is cast on the appellant under the provisions of section 68 of the Act. As held by the Delhi High Court in CIT v. R.N. Portfolio (1') Ltd. (2013) 87 DIR 102, the duty of an assessee does not cease by merely furnishing name, address, PAN, Hank statement etc. It has been held by the Delhi High Court in the said case that if during proceedings the Assessing Officer cannot contact the share applicant, or that information provided becomes unverifiable, or that there are further doubts in pursuit of such details, the onus shifts back to the assessee. The 1(1gb Court has made the finding taking into consideration the fact that these are private companies, the share applicant are known and surely their relationship is closer than arms length. It has been held in the case of CIT vs. Titan Securities Ltd (2013) 089 DTR 8jDclhi) that if there is material found to discredit and impeach the stand taken by the assessee, and there is a link to establish that they are accommodation....
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....icants for appearing before the CIT(A); with Receipt No under which letters were sent and Confirmation from Indian Postal Department, Speed Post evidencing the delivery of the letters to the Share applicants / allottees at the Addressee Regd Office and confirming the existence of the Correct Address of the Share Applicant 1-30 1. Letter by SHCPL to DacconImpexPvt. Ltd 1-2 2. Proof of Delivery of letter from SHCPL to DacconlmepxPvt Ltd 3 3. Letter by SHCPL to Maradona Holdings Pvt. Ltd 4-5 4. Proof of Delivery of Letter from SHCPL to Maradona Holdings Pvt. Ltd 6 5. Letter by SHCPL to MahasaktiVyapar Pvt. Ltd. 7-8 6. Proof of Delivery of Letter from SHCPL to MahasakliVyapar Pvt. Ltd 9 7. Letter by SHCPL to Fidelity Marketing Pvt. Ltd 10-11 8. Proof of Delivery of Letter from SHCPL to Fidelity Marketing Pvt. Ltd. 12 9. Letter by SHCPL to SreedebCommercial Pvt. Ltd 13-14 10. Proof of Delivery of letter from SIICPL to Sreedeb Commercial Pvt. Ltd. 15 11. Letter by SHCPL to NelscopeDealcomm Pvt. Ltd. 16-17 12. Proof of delivery of Letter from SHCFL to NetscopeDealcommPvt. Ltd 18 ....
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.... Share Applicants. 31. Acknowledgment andAnnexures of Deposition before CIT(A) dated 21/11/2008 m case of DacconTmpex Pvt. Ltd 76-109 32. Acknowledgment and Annexures of Deposition before C1T(A) dated 21/11/2008 in case of Maradona Holdings Pvt. Ltd. 110-109 33. Acknowledgment and Annexures of Deposition before C1T(A) dated 21/11/2008 m case of MsihasaktiVyapaarPvt Ltd. 139-175 34. Acknowledgment and Annexures of Deposition before ClT(A) dated 24/1 1/2008 in case of Fidelity Marketing Pvt. Ltd 176-205 6. In view of the above, the learned counsel for the assessee stated that during statement certain directors of these companies stated that the share application money invested by the respective companies is accommodation entry, were never confronted to the assessee till the stage of adjudication by the CIT(A). The entire basis of addition is only those statements and that the summon issued under section 131 of the Act sent through RPAD, return unserved. The learned Counsel for the assessee stated that for FY 2005-06 the assessee filed complete details in respect of share application money by the application and not disputed by the AO. ....
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....O or CIT(A) despite the fact that the same was available with the authorities below before finalization or adjudication of the issue. We find that the AO proceeded to discredit the investors of the assessee, which is completely erroneous. The AO was looking for proof beyond doubt and proceeded on an element of suspicion that the amounts of investments are really those of the assessee, which have been ploughed back by the assessee. But the settle principle of law is that any amount of suspicion however, it strong might be, is no substitute for proof. Suspicion is not sufficient enough to lead to the conclusion that the investments received by the assessee company are all manipulated receipts and on that basis he can record a finding that the explanation of the assessee is not satisfactory. According to us, so long as the proof and identity of the investor and the payment received from him is through a doubtless channel like that of a banking channel, the receipt in the hands of the assessee towards share capital or share premium does not change its colour. The money so invested in the assessee company would still be the money available and belonging to the investors. The consistent ....
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....68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd.(supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to ....