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TMI Blog2010 (11) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by the Investigation Wing who deposed that the companies were not doing any actual business other than giving accommodation entries. 2. On the fact and circumstances of the case, the Ld.CIT(A) has erred in deleting addition of Rs.1,36,21,250 received as share application money in the form of stock from different entities ignoring the fat that - (a) amount received by way of stock/cheques is unexplained as assessee failed to discharge the onus cast on it to prove identity and creditworthiness of the creditors/share applicant and the genuineness of the transaction. 3. The facts of the present case are distinguishable to that of M/s Lovely Exports (P) Ltd. 2. Ground no.1 pertains to deletion of addition of Rs.3,99,00,000 made u/s 68 of the I.T. Act on account of induction of fresh share capital and Rs.2,00,000 concerning commission from undisclosed sources. 3. In its return of income, the assessee declared total income of Rs.1,54,228. In the assessment proceedings, as per assessment order, the details called for were submitted by the assessee. The books of account, i.e., ledger and cash book, were produced. They were test checked, statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which he was a director were those whose sole nature of business was providing of entries in various forms. 5. Considering in view of the said statement, entries in the books of account of the assessee, the AO added the amount of Rs.3,99,00,000 to the total income of the assessee u/s 68 of the I.T. Act observing that the explanation regarding the source thereof was not satisfactory. The amount of Rs.2 lakhs was added towards commission allegedly paid in cash obtained in these entries. 6. By virtue of the impugned order, the CIT(A) deleted the addition. 7. Before us, the Ld.DR has argued that the CIT(A) has erred in deleting the addition of Rs.3,99,00,000; that this addition had rightly been made by the AO u/s 68 of the Act on account of the induction of fresh shares; that the CIT(A) has also erred in deleting the addition of Rs.2 lakhs on account of commission obtained from undisclosed sources; that the CIT(A) has failed to consider that the action taken by the AO was based on the information received from the Investigation Wing of the Department, which was to the effect that the assessee company had received bogus accommodation entries from different entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with narration of all the entries therein and reconciliation statements have been obtained and are placed on record." 10. The AO, however, in making the addition, solely placed reliance on the statement of Mahesh Garg (supra), which too, was not confronted to the assessee. Interestingly, for doing so, the AO made the following observations: The statements given by 'Entry Operators' before the Addl. DIT (Inv.) are statements which have been recorded on oath. The Income Tax Act provides for recording of such statements and using the same for assessment purposes. Income Tax assessment proceeding are not criminal proceedings. These are civil proceedings. Hon'ble Appellate Courts and Authorities have held thus, 'In civil cases a matter is judged on the basis of the preponderant probabilities in the case while in criminal matters the guilt must be established beyond reasonable doubt'. The statements are neither concocted nor have been obtained by using third degree methods. If these do not command any significances in assessment proceedings [which are civil proceedings], then, of what use is the relevant provision of the Income Tax Act? Otherwise, is it being implemented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The statement of Sh. Mahesh Garg (Entry Operator) was recorded on oath by the Addl. DIT (Inv.), Unit-I, New Delhi on 3 dates. The pages on which the statement was recorded were scanned and were forwarded along with the Report on Accommodation Entries [ on computer readable compact disc. Drive]. Printouts of relevant pages of the statement are annexed as Annexure-I to this order and may be read as a part of this order. It is clearly seen that Sh. Mahesh Garg has stated that all Entries / Companies in which he was a Director were those sole nature of business was providing of Entries in various forms. 5. Another contention which was put forward in this case and in all other cases of identical nature was that how is it proved that the assessee company generated cash to pay to the 'Entry Operators' for taking cheques in lieu of that cash? Well, the answer to this is very much obvious. Immediately before the clearance of the respective cheques from the bank accounts of the 'Entry Operators' there appear cash deposits of same amount. The source of these cash deposits has been examined by the 'Entry Operators' to be the same Entities/companies/ Individuals in whose names the cheq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sure would be 'dead capital'? The great detective Sherlock Holmes used to solve mysteries which other could not? How? Simply by applying 'common sense'. How does one belive the truth in the report from Inv. Wing. Simple. By applying common sense logic. There is no other way by which the trust in the Inv. Wing Report can be appreciated. If the report is not appreciated then no Assessing Officer would find any reason to make addition u/s 68 in this regard and neither will any Appellate Authority find reasons for sustaining the additions made." 11. The CIT(A), by virtue of the impugned order, deleted the addition, observing that the assessee, by filing all the evidences called for, had duly discharged its onus of proving the identity and creditworthiness of its creditors and the genuineness of the transactions. 12. Pertinently, it was seen by the CIT(A) that as per the certificate issued by the independent firm of companies, M/s Sober Associates and the 23 creditors companies remained the shareholders of the assessee company. The AO had not brought any material on record to support the allegation that the assessee company had paid cash to the alleged entry providers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra, Inderjeet Singh (HUF) and Smt. Dilip Kaur. Smt. Dilip Kaur is the mother of Shri Inderjeet Singh Batra. 17. As per the AO, the assessee did not provide any information to prove that identities of the applicants of share application money; that it was not known as to which of the items constitute the closing stock stated to have been taken over by the assessee; that the assessee did not provide the complete inventory or the supporting bills representing the purchase of items taken in the stock. On this basis, the AO added to the income of the assessee company, an amount of Rs.13621250. The CIT(A) deleted this addition also. 18. Ld.DR has contended that in deleting the addition, the CIT(A) has failed to consider that the amount received by the assessee by way of stock/cheques remained unexplained; that the assessee was unable to discharge its onus of proving the identity and creditworthiness of the creditors and the genuineness of the transactions. 19. Ld.Counsel for the assessee, on the other hand, has placed reliance on the impugned order. 20. In this regard, it is seen that the assessee had taken over the business of three concerns, as above. B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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