TMI Blog2010 (5) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... asing Finance Ltd. The Assessing Officer also stated that unsecured loans were also alleged to be received from such entry provider as per the report of the Investigation Wing. The Assessing Officer further stated that the amount received by the assessee on account of share capital and unsecured loans was unexplained credit as per provisions of section 68, accordingly, entire share capital and unsecured loans received during the year were added under section 68. The Assessing Officer observed that amount credited in the bank account of the assessee company by the alleged shareholder and the creditors whose creditworthiness has not been proved, therefore, provisions of section 68 are clearly applicable. By passing order under section 144, entire amount was added to the income of the assessee. 4. In an appeal filed before the CIT(A), it was pleaded that sufficient opportunity was not given by the Assessing Officer for furnishing the requisite information, accordingly, the information and documentary evidence with regard to shareholder and loan creditors were filed before the CIT(A). The CIT(A) observed that assessee has submitted all the necessary documents with regard to addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stt. CIT [2006] 283 ITR 377 2 (Raj.). With respect to the decision in the case of CIT v. Himalaya International Ltd. [2007] 165 Taxman 187 (Delhi), as applied by the Assessing Officer, the CIT(A) observed that facts of case of Himalaya International Ltd. ( supra ) are different from the case of the assessee-company, insofar as in that case, the assessee had furnished only the list of shareholders and not their addresses. However, in the instant case, the CIT(A) observed that the assessee-company had filed substantial evidence proving the identity of various share applicants etc. The CIT(A) further stated that subsequent to the decision in the case of Himalaya International Ltd. ( supra ), there was decision by the Hon ble Supreme Court wherein SLP filed by the department against the decision of M/s. Divine Leasing Finance, Lovely Exports etc., was rejected by the Hon ble Supreme Court, thus it supersedes the decision of the Hon ble Delhi High Court in the case of Himalaya International Ltd. ( supra ) as relied on by the Assessing Officer. The CIT(A) referred to the decision of Hon ble Supreme Court in the case of Divine Leasing Finance Ltd. ( supra ) wherein SLP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e form of share capital and also in the form of unsecured loans. As per the learned DR, even during the remand proceed-ings share applicants did not appear before the Assessing Officer in spite of issue of notice to them and only information desired by the Assessing Officer were sent through post. The Assessing Officer has merely stated the information sent by the share applicants in the remand report and observed that mere establishment of identity cannot be sufficient to take the transactions outside the purview of section 68 of the Income-tax Act. As per the learned DR merely on the basis of documentary evidence with regard to the confirmation by shareholders and unsecured creditors filed during the course of remand proceedings, cannot be taken to prove the identity, genuineness and creditworthiness of share applicants and loan creditors, therefore, the CIT(A) was not justified in deleting the addition merely by relying on these documentary evidence and remand report. He further stated that in respect of the loan creditors not only identity is required to be proved but also genuineness of the transactions as well as creditworthiness of the loan creditors is equally important. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment. u Copy of Income-tax Return filed for assessment year 2003-04 is also enclosed. (3) Dasoar Construction (P.) Ltd. - It is a private company registered with ROC-Delhi (CGO) having Authorised Capital of Rs. 75,00,000 and Paid Capital of Rs. 59,41,200. The date of Incorporation of the company is 6-5-1996 and its CIN is U70101DL1996PTC078687. Copy of following documents is enclosed herewith for your verification : u Copy of company Master Details as appearing on ROC site as on today. u The company is assessed to tax vide PAN AABCA0936F. u Copy of Bank statement in respect of Punjab and Sind Bank in support of source of payment. u Copy of Income-tax return filed for assessment years 2003-04 and 2007-08 are also enclosed. (4) Kathuria Roll Mills Pvt. Ltd. - It is a private company registered with ROC-Delhi (CGO) having Authorised Capital of Rs. 1,50,00,000 and Paid capital of Rs. 1,18,35,000. The date of Incorporation of the company is 10-9-1999 and its CIN is U27106DL1996PTC115844. Copy of following documents is enclosed herewith for your verification : u Copy of company Master Details as appearing on ROC site as on today. u The company is assessed to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003-04 and 2007-08 are enclosed. (9) Associated Finlease Limited - It is a public company registered with ROC-Delhi(CGO) having Authorised Capital of Rs. 70,000,000 and Paid capital of Rs. 53,743,000. The date of Incorporation of the company is 26-10-1994 and its CIN is U65910DL1994PLC062379. Copy of following documents are enclosed : u Company Master Data as appearing on ROC site as on today. u The company is assessed to tax vide PAN AAECA3196Q. Copy of PAN letter issued by DCIT, Co. Circle 2(1) and copy of PAN card is enclosed. (10) Pawansut Holdings Limited - It is a listed public company registered with ROC-Delhi (CGO) having Authorised Capital of Rs. 30,000,000 and Paid capital of Rs. 29,990,000. The date of Incorporation of the company is 6-12-1984 and its CIN is L65929DL198PLC019506. Copy of following documents are enclosed : u Company Master Details as appearing on ROC site as on today. u Copy of Annual Return filed by company with ROC for AGM held on 21-8-2004. u Copy of Annual Return filed by company with ROC for AGM held on 29-9-2005. u Copy of Audited balance sheet of the company as on 31-3-2004 with all annexure. u Copy of bank statement in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the observations that even in respect of bogus shareholders, no addition is warranted in the hands of the assessee-company and the department is at liberty to look into the individual assessment of shareholders, who have applied for shares. As per the learned AR no person namely Mr. Mahesh Garg or any other person was involved as pointed out by Assessing Officer. The assessee-company has inquired about such allegation with the said company who has also confirmed that they do not know any person named Mr. Mahesh Garg as alleged by Ld. Assessing Officer. The company or any of its director never met such person and has no knowledge of such person. They have categorically denied any relation with this man. Hence, in such a situation, it is quite clear that the reopening of the case on this ground is wrong and does not sustain in law and on facts of the case. It was further submitted that the investor is a corporate assessee which is incorporated under the Companies Act, 1956 as such the identity of the shareholder is proved. The share capital has been received by company through account payee cheque as such the creditworthiness of the shareholder is also beyond doubt. The shareholder i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v. SMC Share Broker Ltd. [2007] 288 ITR 345 1 (Delhi) wherein it was held that in the absence of third party being made available for cross-examination, his statement could not be relied upon to the detriment of the assessee. Further reliance was also placed on the decision of Hon ble Supreme Court in the case of Kishan Chand Chela Ram v. CIT [1980] 125 ITR 713 2 wherein it was held that without any clarification and cross-examination, no evidence or material is admissible to the detriment of the assessee. He further submitted that during remand proceedings, full details were furnished by the shareholders along with confirmation, bank statement, their PAN etc. and after examining the same, the Assessing Officer has given finding with regard to correctness of the identity of the share applicants and unsecured creditors. Nowhere Assessing Officer has brought any material by conducting independent enquiry to the effect that any accommodation entry was provided to the assessee. Reliance was also placed on the decision of the Hon ble Allahabad High Court in the case of Nathu Ram Premchand v. CIT [1963] 49 ITR 561 , wherein it was categorically observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of share application money, share capital and other unsecured loans from various parties, their identities stand proved beyond any doubt. Thereafter, he applied the proposition of law laid down by the Hon ble Supreme Court in the case of Lovely Exports (P.) Ltd. ( supra ) and Divine Leasing Finance Ltd. s case ( supra ), wherein it was laid down that no addition is warranted in the hands of the assessee-company receiving the share application money and the department is at liberty to reopen individual assessment of share applicants as per law. The CIT(A) also observed that the case of Himalaya International Ltd. ( supra ) as relied upon by the Assessing Officer was distinguishable on facts insofar as in that case the assessee-company has only furnished list of shareholders and not their addresses. In the instant case, the CIT(A) observed that the assessee has furnished full information along with detailed addresses of shareholders, loan creditors etc. The CIT(A) further observed that in view of the decision of Hon ble Supreme Court rejecting the SLP in the case of Divine Leasing Finance Ltd. ( supra ), CIT v. Shipra Retailers (P.) Ltd. [IT Appeal No. 576 (SC) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue being in consonance with the decision of the Hon ble Supreme Court in the case of Lovely Export (P.) Ltd. ( supra ), is found to be in order and is upheld. In view of the proposition of Hon ble Supreme Court in the case of Lovely Exports (P.) Ltd. ( supra ), the revenue shall have the liberty to initiate proceedings in accordance with law in case of share applicants if they doubt the share applicants and the lenders. Accordingly, the decision of CIT(A) for deleting addition made on account of share capital is being upheld. 14. Recently, Hon ble Delhi High Court in the case of Intex Technology India Ltd. [IT Appeal No. 1239 (Delhi) of 2009] and Narender Bansal [IT Appeal No. 1245 of 2009, dated 28-4-2010], confirmed the action of the CIT(A) and the Tribunal wherein by applying the verdict of Hon ble Supreme Court in the case of Lovely Exports (P.) Ltd. ( supra ) addition on account of share capital was deleted. Hon ble Punjab Haryana High Court vide its order dated 30-3-2010 in case of CIT v. Shree Dadu Auto (P.) Ltd. [IT Appeal No. 704 of 2009], dismissed the appeal of the revenue on similar ground by observing that view of Hon ble Supreme Court in var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hawani Overseas (P.) Ltd. [IT Appeal No. 378 of 2010, dated 30-4-2010] confirmed the action of the Tribunal for deleting similar addition on account of share capital, wherein by following the decision in the case of Divine Leasing Finance Ltd. ( supra ) and Lovely Exports (P.) Ltd. s case ( supra ), similar additions were deleted by the CIT(A) and the same was confirmed by the Tribunal. 16. In view of the above discussion, we do not find any reason to interfere in the order of CIT(A) insofar as it related to deletion of addition on account of share capital. Furthermore, the learned DR could not controvert the finding recorded by CIT(A) with regard to share capital/share application money. No ground has also been taken by the department to allege that any additional evidence was accepted by CIT(A) for deleting the addition on account of share capital, for which opportunity was not afforded to the Assessing Officer. We, therefore, do not find any reason to interfere in the finding of CIT(A) for deleting addition on account of share capital and alleged commission for obtaining the same. Accordingly, this part of CIT(A) s order is upheld. 17. In respect of loan creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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