TaxTMI 
TaxTMI 
2018 (3) TMI 1029
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.... trading in steel and had filed its return of income for the Asst Year 2010-11 on 27.9.201 declaring total loss of Rs. 50,533/-. The assessee company appeared from time to time and produced books of accounts along with supporting evidences before the ld AO which were duly examined and verified. The ld AO observed that the share capital of the assessee company had increased by Rs. 1,00,00,000/- during the year under appeal. The ld AO added the same as unexplained cash credit as no evidences were produced by the assessee at the time of assessment. The assessee stated before the ld CITA that the requisition in respect of share application money was received was made at the fag end of the assessment proceedings by the ld AO and as such the necessary documents and evidences filed by the assessee could not be verified by the ld AO. The assessee had submitted the details of persons (i.e 5 companies) from whom share application monies were received, their addresses, their income tax returns, their balance sheets, their profit and loss accounts, their PAN cards, their bank statements and statement of accounts of the assessee as per the books of the respective companies before the ld AO. The....
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....ngredients of section 68 of the Act viz., identity, creditworthiness and genuineness of transactions have been proved beyond doubt. All the share applicants were indeed income tax assessees and they had in turn duly reflected the amount invested in assessee company as investments in their respective balance sheets. It was submitted that the ld AO in the remand report did not find any infirmity in the documents furnished by the share applicants. But the ld AO still proceeded to verify the source of source of share applicants by serving notice u/s 133(6) of the Act which were also duly served through the Inspector of Income Tax. It was pleaded that the assessee cannot be faulted upon for the second layer of share applicants not responding to the notice issued u/s 133(6) of the Act. It was pleaded that the assessee had duly discharged its onus in terms of section 68 of the Act and no addition could be validly made under that section in the hands of the assessee. It was further pleaded that the ld AO cannot resort to make any verification of the source of source and cannot draw adverse inference on the assessee company if the necessary details were not furnished by a third party. The a....
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.... by the Hon'ble Supreme Court in the case of Lovely Exports (P) Ltd. 216 CTR 195 that addition on account of share capital cannot be made in the hands of the recipient company. The ITAT, Kolkata Bench, following the judgement of the Apex Court in the case of Lovely Exports (P) Ltd. has adjudicated at ITA No. 1985/Kol/2010 in the case of ITO vs Indian Forms Centre (P) Ltd. has held - "We observe that the transactions are duly recorded in the audited books of accounts of both the assessee-company as well as aforesaid share applicant companies, who purchased shares of the assessee-company. Therefore, no addition on account of unexplained cash credit is warranted in the case of the assessee on the given facts and circumstances as discussed above. In view of the above, in our considered opinion, the action of the AO is contrary to the decision of Hon'ble Apex Court in the case of CIT vs. M/s Lovely Exports (P) Ltd. (Supra)." The Hon'ble ITAT, Kolkata, in the case of ITA vs Savera Suppliers (P) Ltd. ITA No.12/K/2010 has held that - "As It is noticed from the assessment order that the assessee has placed before the AO copies of return of income/ balance ....
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....see has to prove the source of source of share applicants. He argued that in the instant case, the assessee had duly discharged its complete onus by furnishing the requisite details. In case if the ld AO has got some doubts, he should have verified the same from the AO of those share applicants. We find from the plain reading of section 68 of the Act, the duty cast on the assessee is to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share application money from five share applicants. The nature of receipt towards share application money is well established from the entries passed in the respective balance sheets of the companies as investments. Hence the nature of receipt is proved by the assessee beyond doubt. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity of share applicants, genuineness of transactions and creditworthiness of share applicants. In the instant case, we find that the identity of share applicants is proved beyond doubt by the assessee by furnishing the name, address, PAN of share applicants together with the copies of balance sheets and I....