TaxTMI 
TaxTMI 
2018 (10) TMI 2055
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....at a premium of Rs.240/- to each of the parties. The assessing officer received information from investigation wing of the Department that both the above said companies are managed and controlled by a person named Shri Shirish Chandrakanth Shah and the enquiry conducted by the investigation revealed that the group of companies belonging to the above said person are providing only accommodation entries and hence there was no genuine business activity. 3. Hence, in order to examine the genuineness of transactions, the assessing officer issued notices u/s 133(6) of the Act to both the parties specified above. Both the parties responded to the notices and furnished copy of bank statements, income tax acknowledgement, audited financial statements, ledger account of the assessee, copies of share certificates. They explained their sources as receipts on sale of shares and securities. 4. The AO examined the bank statements of both the parties and noticed that they have entered into transactions amongst their group concerns only. Further the funds were seen received from other group concerns only. Accordingly, the AO took the view that the claim of creditworthiness of these two share appl....
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....ms were seized from him. The AO took the view that the facts available in various case laws are distinguishable, i.e., the identity of share applicants were proved in those cases. The AO took the view that the share applicants, in the present case, merely exist on paper. 7. The AO relied upon the decision rendered by Hon'ble Delhi High Court in the case of CIT vs. Oasis Hospitalities P Ltd (2011)(331 ITR 119), wherein the Hon'ble High Court held that the burden to prove the nature and source of share application money received still lies upon the assessee only. It was held that the assessee should discharge initial burden of proof and is required to prove (a) Identity of shareholder; (b) genuineness of transactions and (c) credit worthiness of shareholder. Once the initial burden is discharged, the observations of Supreme Court made in the case of Lovely Exports (P) Ltd (supra) would suggest that the department is free to proceed to reopen the individual assessments in case of alleged bogus shareholders in accordance with the law and is not remediless. 8. The AO also placed reliance on the decision rendered by Hon'ble Supreme Court in the case of CIT vs. P Mohanakala ....
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....hree main ingredients. 12. The Ld A.R, on the contrary, submitted that the share applicant companies are listed companies having huge amount of share capital and they are also assessed under Income tax Act. Further, both the companies have responded to the notice u/s 133(6) of the Act issued by the assessing officer. Hence the identity of the share applicants, are proved. These companies, in response to the notices issued by the AO have furnished copies of their audited financial statements, which show that they were having enough funds to make investments in the assessee company. Hence the credit worthiness of the share applicants also stands proved. These share applicants have also furnished copies of their bank statements in order to show that the transactions have been done through banking channels. Accordingly the genuineness of the transactions also stands proved. Further both the share applicants have furnished affidavits confirming the transactions. Accordingly the Ld A.R submitted that the assessee has discharged the initial burden of proof placed upon its shoulders u/s 68 of the Act by proving identity of the share applicants, genuineness of transactions and creditworthi....
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....ly responded to the notices and have furnished relevant details like copy of bank statements, copy of acknowledgement of return of income, copy of audited accounts, ledger account copies, copies of share certificates. It is also pertinent to note that the AO did not find fault with any of the documents furnished by these parties. Only in respect of transactions found in the bank statements of these share applicant companies, the AO has commented that the funds have come from other companies belonging to the same group. Ultimately, the AO has placed reliance on the statement given by Shri Shirish Chandrakant Shah and held that the assessee has failed to prove the three main ingredients. 15. The Ld CIT(A) has noticed that both the share applicant companies are doing business and have also filed its tax returns regularly. They have also paid taxes on the income declared by them. Accordingly, the Ld CIT(A) held that the assessee has discharged onus placed upon it, as observed by Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd (supra). Accordingly the Ld CIT(A) held that the peculiar facts of the case may have caused suspicion in the mind of the AO, but there is....
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....e revenue could not controvert the finding given by Ld CIT(A). 17. We notice that the Ld CIT(A) has also taken support of the decision rendered by Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (333 ITR 119), wherein the decision rendered by Hon'ble Supreme court in the case of lovely exports P Ltd (supra) was also discussed. The Hon'ble Delhi High Court has held that the assessee is required to prove the three ingredients mentioned above in respect of share application money also. The Hon'ble Delhi High Court further held that once the assessee discharges the onus placed upon its shoulders, thereafter, it is for the Assessing Officer 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 have to be some cogent reasons and materials for the assessing officer and he cannot go into the realm of suspicion. 18. In the instant case, admittedly, the assessing officer has failed to probe the matter further. He has not found fault with the documents furnished by the share applicants to prove th....
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....as to costs." 21. The facts available in the present case are, in our view, better than the facts available in the case considered by the Hon'ble Bombay High Court (referred supra). In the instant case, the notices issued by the AO u/s 133(6) of the Act have been responded by both the share applicants. Both the parties have furnished all the details that were called for by the assessing officer. The details so furnished by them proved their identity and creditworthiness and also the genuineness of transactions. However, the assessing officer did not examine them at all nor did he carry out any further enquiry to disprove those documents. 22. Before us, the Ld A.R placed reliance on the decision rendered by Hon'ble Bombay High Court in the case of M/s Acquatic Remedies P Ltd (supra). Following observations made by Hon'ble jurisdictional Bombay High Court with regard to the three ingredients are worth extracting here :- (b). So far as the identity is concerned, we find that the persons who invested in the shares of the respondent-assessee had PAN numbers allotted to them which was made available by the respondent to the Assessing Officer. Besides, the shareholders had....
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....by the decisions of this Court in Gagandeep Infrastructure Pvt. Ltd. (supra). Besides, before the Delhi High Court in Nipun Builders and Developers (supra), the identity of the shareholders was not established as the summons sent were returned with a remark 'no such company" and the same was confirmed by the Inspector of the Income-Tax Department. No PAN of the shareholder was also submitted before the Assessing Officer. It was in the above context, that the Delhi High Court decision was rendered. Thus, completely different facts from the present case, where even affidavits of the shareholders were filed who on oath stated that the investment in the respondents was made from their Bank Accounts. Thus, the initial burden was discharged by the respondent in respect of creditworthiness of the investor and nothing has been shown by the Revenue to doubt the same and/ or steps taken and result thereof. Thus, this objection of lack of creditworthiness of the shareholder also does not survive. (d). So far as the genuineness of the investment by the shareholders is concerned, Mr. Mohanty placed reliance upon the statement dated 9th September, 2010 of Kamlesh Jain who was an employee, as....