AI Drafter 
TaxTMI 
TaxTMI 
2019 (10) TMI 125
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtech (P) Ltd. 45,00,000 2. Saar Enterprises (P) Ltd. 30,00,000 3. Blossom Advertisers (P) Ltd. 30,00,000 4. Kylsans Finance (P) Ltd. 30,00,000 5. Tulip Engineering (P) Ltd. 24,00,000 6. Impulsive Financial Services (P) Ltd. 30,00,000 7. Savitri Electricals (P) Ltd. 21,00,000 8. Pushpak Exports (P) Ltd. 30,00,000 9. Bliss Credits (P) Ltd. 30,00,000 10. KVF Securities (P) Ltd. 45,00,000 11. Gupta Impex (P) Ltd. 30,00,000 12. Sunrise Developers (P) Ltd. 37,50,000 13. FMEX Tours & Travels (P) Ltd. 30,00,000 14. Meerut Credits & Travels (P) Ltd. 30,00,000 15. Atlantic Vision (P) Ltd. 30,00,000 Total 4,80,00,000 1.1 That while sustaining the aforesaid addition the learned Commissioner of Income Tax (Appeals) has completely overlooked that there was no adverse material brought on record by the learned Assessing Officer to assume that credits by way of share capital represents unexplained cash credit and, burden which lay upon the assessee in terms of section 68 of the Act had not been discharged. Linked to Ground No.1 1.2 That the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant company be allowed. 2. Briefly stated facts of the case are that the assessee filed return of income declaring total income of Rs. 3,53,959/-. The assessment under section 143(3) read with section 147 of the Income-tax Act, 1961 (in short 'the Act') was completed on 24/12/2007, after making addition of Rs. 4,80,00,000/- under section 68 of the Act, along with 1% commission amounting to Rs. 4,80,000/-. On further appeal, the Ld. first appellate authority deleted the addition vide order dated 24/03/2008. On further appeal by the Revenue, the Tribunal in its order dated 26/03/2010 in ITA No. 2089/Del/2008 and CO No. 41/Del/2009, restored the matter to the file of the Assessing Officer with following directions: "65. In view of the above discussion, the matter is restored back to the file of AO with a direction to provide the assessee a reasonable opportunity of hearing to substantiate its claim that the share application money was in fact the money belonged to those very share applicants and those share applicants were genuine existing entities.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Assessing Officer and failure to do so by the assessee, it was liable for addition under section 68 of the Act. The relevant finding of the Assessing Officer is reproduced as under: "From the above, it emerges that all the information as furnished by the assessee, so far, is mere re-petition of what was furnished by the assessee either during the course of original assessment or during the appellate proceedings before the Ld. CIT(A). What was required is to produce the directors of the companies through whom the veracity of the documents furnished by the assessee during the course of assessment regarding the fact, that the share application or share capita 1 is genuine, as the persons contributing the same have capacity, the transactions have taken place, and that the identity of persons is fully established, could be verified by examining them. It may again be mentioned that the assessee was required and bias been given every possible opportunity to produce the directors so that, the veracity of the submissions of the assessee could be examined and the documents allegedly furnished by the assessee as claimed to be genuine and true, could be examined. When the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....additional evidences in terms of rule 46A of the Income Tax Rules, 1962 and prayed for allowing the assessee to produce the directors of those entities. The Ld. CIT(A) forwarded documents to the Assessing Officer calling for a remand report from the Assessing Officer. During remand proceeding, the Ld. Assessing Officer issued summons to the share applicant companies and in response, directors of 14 share applicant companies attended before him and their statements were recorded. From the copy of bank's statements and financials submitted by the directors of those entities in response to summons under section 131 of the Act during remand proceeding, the Ld. Assessing Officer concluded as under: (a) Money was credited in the bank accounts of most of the companies on the dates which are immediately prior to the date of transfer of share application money to the assessee company. (b) No business activity was carried out by the above mentioned share applicants during the year under consideration. (c) From perusal of the chart prepared above on the basis of financial submitted, shows that as on 31.03.2002 most of these companies have total assets worth much les....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ium rooted through accommodation entries, the assessee submitted that Sh. Amit Gupta was not director of the company during relevant time and, therefore, his statement cannot be relied upon. Further, it was submitted that, Mr. Amit Gupta retracted from his statement subsequently. The assessee also submitted that reliance on the statement recorded during the survey is not permissible as it is no evidence under the law. In support of the contention, the assessee relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. S Khader Khan reported in 352 ITR 480. 2.5 After considering remand report and rejoinder of the assessee, the Ld. CIT(A) made observations, which are summarized as under: (i) The director of one share applicant company, namely, M/s KVF Securities (P) Ltd. was not produced before the Assessing Officer in remand proceeding. (ii) The asset value of the share applicant companies was out of synch with the amount of share application money invested. (iii) Exact amount has been credited in the bank accounts of the share applicant companies prior to the transfer of fund to the assessee company for the purpose of share application ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are capital has been raised through banking channels (c) that all the share applicant companies were assessed with the same Assessing Officer and in their case the money raised by them as share capital has not been held as unexplained credit and thus any investment made out of their own money cannot be unexplained credit in the hands of the assessee company. (d) The investment is duly confirmed by each of the shareholders (e) The genuineness of transaction is proved through Form No. 2 i.e. allotment of shares and share certificates. (f) The creditworthiness of share applicants was duly explained by way of their bank statements, income tax returns and audited financial statements (g) No material much less incriminating was detected as a result of search or gathered during assessment to allege, observe or assume that share capital represented unexplained credit u/s 68 of the Act. (h) All the share applicants have confirmed their investment in independent confirmation under section 133(6) of the Act and no material to the contrary has been led to establish that such credit it unexplained credit 3.2 Further, regarding the observa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... relied on the following decisions: i) ITA No. 3299/Del/2011, AY: 2003-04, dated 08.10.2015, Income Tax Officer Vs. Tubecon (India) (P) Ltd.; 2) ITA No. 695/KOl/2017, AY 2012-13, dated 07.12.2018, Income Tax Officer Vs. Shlok Fashions (P) Ltd.; 3) ITA No. 1494/Kol/2017, dated 05.04.2019, M/s. Baba Bhootnath Trade & Commerce Ltd. Vs. Income Tax Officer. 3.6 In support of the proposition that statement recorded under section 133A in the course of survey has no evidentiary value, the Ld. counsel relied on following judicial pronouncement: i) 328 ITR 384 (Del) CIT v. Dhingra Metal Works ii) 300 ITR 157 (Mad) CIT v. S. Khader Khan Son , affirmed by the Apex Court in the case of CIT v. S Khader Khan Son reported in 352 ITR 480 (page 341 of JPB) iii) 263 ITR 101 (Ker) Paul Mathews and Sons v. CIT iv) 2 SOT 402 (Coch) Kurunnem Velil Financiers (P) Ltd. v. DCIT v) 394 ITR 383 (Raj) CIT vs. ARL Infrateh Ltd. vi) 256 ITR 730 (Raj) CIT v. Mool Chand Salecha vii) 97 ITD 3 61 (Ahd) Ashok Manilal Thakkar v. ACIT 3.7 The learned counsel summarizes the aspects of the share capital raised by the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsel, the facts and circumstances of the case of the assessee being identical to the facts of the case, the addition in dispute made in the case of the assessee under section 68 of the Act needs to be deleted. 3.10 The Ld. DR, on the other hand, relied on the order of the lower authorities and submitted that the assessee failed to discharge its burden under section 68 of the Act and thus, the Ld. CIT(A) is justified in sustaining the addition. He submitted that facts of M/s. Lakshmi Float Glass Ltd. (supra) relied upon by the assessee are different. 3.11 We have heard the rival submissions and perused the relevant material on record. As far as facts of the instant case mentioned above, there is no dispute between the parties. The only dispute is whether in the facts and circumstances and the evidences brought on record, can the share application money received by the assessee, be held as its own money introduced back by way of accommodation entries. The lower authorities to support their contentions have relied on two sets of evidences, i.e., the first set of evidences are statements recorded during the course of the search/survey proceedings and, the second set of the eviden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he investment in assessee company. The lower authorities have also failed to corroborate the statement of those persons that cash was deposited in their bank accounts and, thereafter, cheques have been issued to the assessee. The Assessing Officer has failed to substantiate this claim of cash deposit in the bank account of those persons or share applicant companies. In such circumstances, the Ld. CIT(A) is not justified in relying the statements of those persons given before the Investigation Wing, and that too without any cross-examination and corroborating material on record. 3.13 Further, the Ld. CIT(A) has relied on statement of Sh. Amit Gupta, recorded during the course of survey proceedings under section 133A of the Act at the premises of the assessee. Sh. Amit Gupta stated that the company obtained share application money through accommodation entry but, later on, he retracted from his statement. No material corroborating the statement was found in survey proceeding from the premises of the assessee. Further, the assessee has submitted that Sh. Amit Gupta was not director in the assessee company at the time of receipt of share application money and, therefore, his stateme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been filed by the share applicant companies admitting the investment made in the assessee company. The directors of the company except one company, attended before the Assessing Officer along with necessary financial statements and other documents of their companies. In case of that one company also, representative appeared before the Assessing Officer in second round of assessment proceedings. During the remand proceedings, the directors of share applicant companies have confirmed the fact of the share application money paid to the assessee. The Tribunal in first round of proceeding, remitted the matter back to Ld. CIT(A) to verify whether the money invested in share application belonged to those companies and those companies are genuine existing company. The assessee produced Directors of those companies who not only admitted that investment was made out of their own money but also filed all documentary evidences in support thereof. Relevant part of statement of Sh. Pankaj Khetan (available on page 203 of the paper book-II) is reproduced as under: "Q. No. 7: What is the source of money which has been invested by you in South East Impex Pvt. Ltd.? Ans: The co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unsel relied upon the decision of this court in CIT Vs. Jansampark Advertising & Marketing Private Ltd. (2015) 56 Taxmann 286 (Del.) and submits that whereas the assessee might have established the identity of the investor, it failed to establish the genuineness of the investor or the creditworthiness of the share applicants and under the circumstances the impugned order is inconsiderable. This court has considered the submissions. It is no doubt correct that Section 68 casts an initial burden upon the assessee to disclose the identity of the applicant/investor as well as the genuineness of the transaction. In this case, it is evident that the discussion of the facts by the CIT(A) and the ITAI, has resulted from the materials on record. The AO shall undoubtedly be justified as to the identity of the share applicants. This Court is however unpersuaded by the revenue submission that the genuineness of the transaction or the creditworthiness of the assessee had to be established in the given facts of this case. The factual narration by the CIT(A) which was affirmed by the ITAT unequivocally point to the assessee disclosing materials such as the bank accounts, the share partic....