TMI Blog2010 (12) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Appellant R.S. Singhvi and Narendra Rustogi for the Respondent ORDER C.L. Sethi, Judicial Member:- 1. The Revenue is in appeal against the order dt. 25th May, 2010 passed by the CIT(A) pertaining to the asst. yr. 2007-08. 2. The various grounds of appeal raised by the Revenue are directed against CIT(A)'s order in deleting the addition of Rs. 3,47,00,000 made under s. 68 of the IT Act, 1961 ('the Act') on account of share capital money credited in the assessee's account. 3. The facts of the case and the observations of the AO in making the addition are summarized as under:- The AO has observed that as per the report of the Asstt. Director of IT, Ghaziabad that the various amounts received from the share applicants had come from the non-existent companies. Since these companies were not found at the given address and the directors were also not found, the onus had not been discharged by the assessee with regard to the credit entries made on account of share application money. With regard to the various amounts of share application money received from different parties, the AO has elaborately discussed each entry in para 5 of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money received from various parties. On the basis of the above observations and facts the AO came to the conclusion that since adequate onus had not been established with regard to Rs. 3.47 crores which were introduced as share capital, this amount should be added under s. 68 of the IT Act. 4. Being aggrieved, the assessee preferred an appeal before the CIT(A). 5. After considering the various submissions of the assessee, AO's remand report and counter-reply by the assessee, the learned CIT(A) deleted the addition by holding and observing as under:- "Findings:- I have gone through the facts and circumstances of the case, observations of the AO, submissions of the Authorised Representative of the appellant, remand reports of the AO and the rejoinders filed by the Authorised Representative of the appellant. I have also gone through the various judicial pronouncements on the issue. The facts of the present case are similar to the asst. yr. 2006-07 and the additions made by the AO are also based on the report of the Asstt. Director of IT (Investigation Wing), Ghaziabad. The issue had been decided by me for asst. yr. 2006-07 after carefully considering the various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance has been placed by the AO, has been provided to the appellant. Even though, the AO has relied upon the report of the Investigation Wing, he has himself accepted that notice under s. 133(6) of the IT Act had been served on various parties in most cases. The AO has not been able to reconcile both the issues regarding the report of the Investigation Wing and the service of notice at the given address. The AO has also not conducted any independent enquiries to reconfirm the evidence of the Investigation Wing. (b) During the course of appellate proceedings the AO was asked to consider providing opportunity for cross-examination of the parties on whose statements the AO had relied upon. The AO has however not gone ahead to make any deeper investigations and has commented that by doing so it would amount to provide more opportunities to the assessee which were not justified. The Authorised Representative has argued that the statements of large number of parties were totally irrelevant and unreliable since these persons had no locus standi to comment on the existence of various companies. The Authorised Representative has further argued that even during the course of survey unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l pronouncements relied upon by the Authorised Representative of the appellant and the facts of the cases, it is clear that the AO has not provided proper opportunity of cross-examination to the appellant and has only relied upon the statements of the various parties who were at times not at all related to the various shareholder companies. The AO was provided opportunity to provide cross-examination even during the appellant proceedings, but the AO has not availed this opportunity stating that it would amount to providing more time and opportunity to the appellant for managing its affairs. The AO has not brought anything on record to controvert the various evidences establishing the identity of the share applicants. In my opinion the AO was not justified in making these additions only based on the statements given by the certain unrelated persons for coming to the conclusion that the various parties did not exist at the given address, without providing proper opportunity of cross-examination. (d) It is also important to keep in mind that during the course of remand proceedings the AO was directed to issue summons under s. 131/133(6) of the IT Act and the outcome of any such in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e RoC or from the banks on which the cheques were drawn. No such attempt however was made by the AO. In these circumstances we found no reason to disturb the finding of the fact recorded by the Tribunal.' (f) In another decision of the Delhi High Court in the case of CIT vs. Victor Electrodes Ltd. in IT Appeal No. 586 of 2010, dt. 12th May, 2010 [reported at (2010) 42 DTR (Del) 152 Ed.] similar view has been taken by the Hon'ble Delhi High Court that once the details of IT returns, bank statements etc. with regard to the various share applicants have been provided, the mere fact that parties were not produced before the AO was not good enough for making the addition. The Hon'ble Court has held that since the AO had not made any efforts to find out the latest addresses of the directors and details of these companies, the identity of the share applicants and the genuineness of the transactions were held to be genuine on the basis of records and details submitted by the assessee. The issue was decided in favour of the assessee and against the Revenue. (g) In the present set of facts also the AO has been provided various opportunities through remand proceedings to carry out any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company. In this regard, the apex Court had already decided the issue in the case of CIT vs. Lovely Exports (P) Ltd. (supra) and other decisions of CIT vs. Value Capital Services (P) Ltd. (supra), etc. and have also held that such addition cannot be made unless it is established that the unaccounted money originated from the office of the assessee. The assessing office was therefore free to take follow up action against the various share applicants since it has various details of PAN, CIN, details of bank accounts etc. which is enough to proceed and take action against the share applicants. The additions made in the hands of the appellant therefore cannot be sustained in view of the facts of the case and the settled position of law with regard to share application money. The facts and circumstances of the case have been accepted by the AO to be similar to asst. yr. 2006-07, in his remand report. This ground also therefore gets covered, apart from the latest decisions on this issue by the Hon'ble Delhi High Court, referred to earlier. The issue has been decided in favour of the appellants in the cases of CIT vs. Winstral Petrochemicals (supra) and CIT vs. Victor Electrodes ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to cross-examine those persons, the AO failed to provide copies of the statements recorded behind the back of the assessee nor granted an opportunity of cross-examination. He further submitted that all the details and particulars about the share applicants such as their addresses as recorded in the IT returns, PAN, details of bank accounts and the mode of payment of money have been duly furnished before the AO against which the AO has not been able to bring out any material or evidences to the contrary. He therefore, submitted that in the light of the various decisions of the jurisdictional High Court, the learned CIT(A) has rightly deleted the addition. 9. The rival contentions of both the parties have been considered and materials on record have been perused. 10. In this case, the AO has treated the share application money received by the assessee to be the undisclosed income of the assessee on the basis of report given by the Investigation Wing that during the course of survey conducted by Investigation Wing, the share applicant companies were found to be non-existence at the addresses given and their directors were also not found at the given addresses and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Dwarkadhish Investment (P) Ltd. in IT Appeal No. 911 of 2010 decided on 2nd Aug., 2010 [reported at (2010) 45 DTR (Del) 281 Ed.], held as under:- "6. In our opinion, as s. 68 of the Act, 1961 has been interpreted as recently as 2008 by a Division Bench of this Court in Divine Leasing and Finance Ltd. (supra) after considering all the relevant judgments, we do not have to reconsider all the judgments referred to by Mr. Salmi which are prior in date and time to the aforesaid judgment. In fact, a SLP filed against the said Division Bench judgment was dismissed by the Supreme Court by way of a speaking order in Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308. The Supreme Court in Lovely Exports (P) Ltd. (supra) has held as under:- '2. Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per norms fixed by the bank. Therefore, identity of the creditors can be said to have been proved by the assessee and Department has not been able to rebut the same. In that case, before the Hon'ble High Court, it has also been held that genuineness of the transactions can be proved by showing that the money in the books had been received either by account payee cheque or by draft or by any other mode, which condition is satisfied in the present case before us. It is not in dispute that the assessee has received the share application money by account payee cheque and details of the bank account of share applicants as well as of the assessee have been duly furnished. Therefore, in the light of the above-referred decision of Hon'ble Delhi High Court, we hold that the assessee has been able to discharge its initial burden to prove the identity of the creditors and genuineness of the transaction. The same cannot be rejected merely because the creditors or share applicants could not be found at the address given and it would not give the Revenue the right to invoke s. 68 of the Act. Therefore, in the light of the proposition laid down by the Hon'ble Delhi High Court in this case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, adopted by him. 9. There was no legal obligation on the assessee to produce some director or other representative of the applicant companies before the AO. Therefore, failure of assessee to produce them could not, by itself, have justified the additions made by the AO, when the assessee had furnished documents, on the basis of which, the AO, if he so wanted, could have summoned them for verification. No attempt was made by the AO to summon the directors of the applicant companies. The addresses of these companies must be available on the share applications, memorandum and articles of association and their IT returns. If the AO had any doubt about identity of the share applicants, he could have summoned the directors of the applicant companies. No such attempt was, however, made by him. Therefore, the CIT(A) and the Tribunal, in our view were justified in holding that the identity of share applicants and the genuineness of the transactions had been established by the assessee." 13. In this decision, in the case of CIT vs. Victor Electrodes Ltd. (supra), it has been clearly laid down by the Hon'ble Delhi High Court that there is no legal obligation on the assessee to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erify the genuineness of these documents by summoning the record of RoC or Department of Company Affairs. If he entertained any doubt about the genuineness of these documents, nothing prevented him from summoning the record from these authorities. If the AO so desired, the genuineness of the PAN cards and PAN details could easily have been verified by him from the record available with the Department. The assessee company also furnished written confirmations from the applicant companies. All the share applicants were duly served with the notices under s. 133(6) of the Act. In these circumstances, the finding of CIT(A) and Tribunal that the identity of the subscribers stood duly established from the documents produced by the assessee, cannot be said to be perverse and does not call for interference by this Court. 9. The finding of fact recorded by the Tribunal, which is the final fact-finding authority, cannot be said to be perverse merely because some of the applicants had a common address and the Inspector deputed by the AO to make field inquiries did not find five applicants functioning at the addresses provided to him. There is no legal bar to more than one companies being r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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