TMI Blog2012 (2) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal filed on 17.03.2009 by the assessee against an order dated 12th January, 2009 of the learned CIT(A)-VI, New Delhi, raises the following grounds:- 1 On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts. 2(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming an addition of Rs.16,50,000/- as income from undisclosed sources. (ii) That the above-said addition was made ignoring the material and evidences brought on record by the appellant in support of his contention and by indulging in surmises, conjecture and without bringing any adverse material on records. (iii) That the CIT(A) has erred both on facts and in law in confirming the addition on account of share capital despite the fact that the assessee has discharged his onus by establishing the identity of the shareholders. 3. That the above-said additions are untenable in the eye of law, having been made on the basis of the material collected at the back of the assessee without providing copy of the same and providing opportunity to rebut the same. 4. On the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M/s Shimmer Marketing Pvt. Ltd. 4,50,000.00 3. Ms. Jainco Metals Pvt. Ltd. 4,50,000.00 4. M/s Rapid Impex Pvt. Ltd. 3,00,000.00 Total: 16,50,000.00 2.1 Though the assessee submitted PAN and copies of the acknowledgements of filing of returns along with their confirmations and bank details of the aforesaid companies, the assessee did not produce either the directors or the books of account of the said companies, as directed by the AO. In this situation, since the assessee failed to establish identity and creditworthiness of the aforesaid four companies nor established genuineness of the transactions, the A.O. added the amount of Rs.16,50,000/- 68 of the Act. 3. On appeal, the learned CIT(A) upheld the addition in the following terms:- 6.3 I have carefully considered the submissions made by learned AR and my observations on the issue are as under:- i) During the year under consideration, the appellant has raised the share Capital of Rs.32 lacs. During the assessment proceedings, the Assessing Officer asked for the details of the additions made to share capital and issued notices u/s 133( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the case was finalized arbitrarily. In this regard, I find that as far as M/s. Rapid Impex Pvt. Ltd. and MIs. Jainco Metals (P) Ltd. are concerned, the Assessing Officer had sent the notice u/s 133(6)on the given addresses. However, in case of M/s. Jainco Metals (P) Ltd., the notice was received back and in case of M/s. Rapid Impex Pvt. Ltd. there was no response. Hence, the A.O. required the appellant to produce the parties concerned alongwith books of account. However, the same was not done. The appellant has submitted that time given was very short. However, I find that the proceedings were going on and the addresses were submitted by the appellant itself and since there was no response, the Assessing Officer rightly required the presence of the (concerned parties. The appellant has nowhere indicated that what efforts have been made by him and why the same had failed. iv) I further find that the Ld. A.R. has raised objection on the reliance placed by the Assessing Officer on the statement of Sh. S.H. Malik. However, I find that in this regard, what the Assessing Officer did was to apprise the appellant about the facts emerging from the statement of Sh. S.H. Malik. A copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee, then it Is for the Income-tax Officer to be satisfied whether the said explanation is correct or not. It is in this regard that enquiries are usually made in order to find out as to whether, firstly, the persons from whom money is alleged to have been received actually existed or not. Secondly, depending upon the facts of each case. the Income-tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he Is identified, in order to determine whether that depositor is a mere name-lender or not. Be that as it may, it is clear that the Income-tax Officer has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of share application money. The use of the words "any sum found credited in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile inviting our attention to details placed on page 11 to 20 of the paper book contended that the assessee submitted all the relevant details viz. confirmations of the investors, and copies of acknowledgments of filing returns along with PAN and cheque number to the A.O. Since the assessee discharged the primary onus establishing identity of the aforesaid four companies, no such addition can be made in view of decisions in CIT Vs. Lovely Exports (P) Ltd. (2008) 6 DTR (S.C.) ,308;CIT Vs. Value Capital Services (P) Ltd. (2009) 307 ITR 334;CIT Vs. Divine Leasing Finance Ltd. (2008) 299 ITR 268 (Del.);CIT Vs. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (S.C.)and CIT vs. Oasis Hospitalities (P) Ltd. in ITA no.2093 of 2010 dated 31.1.2011, the ld. AR submitted. The ld. AR further pointed out that statement of Shri S.H. Malik was recorded on 23rd June, 2004 while the amounts were received from the aforesaid companies on 23rd December, 2004, 28.12.2004 and 6th January, 2005. Thus, no reliance can be placed on the statement of Shri S.H. Malik. On the other hand, learned DR supported the findings of the ld. CIT(A). 5. We have heard both the parties and gone through the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite having information from the Investigation Wing, the AO did not make any further inquiries. There is nothing to suggest that in lieu of these cheques, cash was returned to the aforesaid companies. 5.3 In this regard, we refer to the decision of the Hon ble Apex Court delivered in the case of CIT Vs. Lovely Exports 216 CTR 195. In this case it was held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. 5.4 Following the aforesaid decision, while adjudicating an identical issue,Hon ble Jurisdictional High Court in the case of C.I.T. vs. Dwarkadhish Investment P Ltd. in ITA No. 911/2010 vide order dated 02.8.2010 held as under: 6. In our opinion, as section 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 judgements, we do not have to reconsider all the judgements referred to by Mr. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, entry operators of which the appellant was the beneficiary. According to the Assessing Officer, the modus operandi involved in such type of activity was like this: an entry operator operates a number of accounts in the same bank/branch or in different branches in the name of companies, firms, proprietary concerns and individuals and for the operation of these bank accounts, filing income tax returns etc. persons are hired. Most of these persons work on part-time basis and are called upon to sign documents, cheque books, etc. whenever required. Whenever any beneficiary is interested in taking an entry, he would approach the entry operator and handover the cash alongwith commission and take cheques, demand draft, postal order. The cash is deposited by the Entry Operator in a bank account either in his name or in the name of relative/ friends or other person hired by him for the purposes of opening the bank account. After the deposit of cash when there is sufficient balance, the entry operator issues demand draft, postal orders, cheques in the name of beneficiary. Most of these concerns / individuals also have obtained PAN from the department and are filing income tax returns, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at when the Assessing Officer is questioning the bona fides of M/s Diamond Protein Ltd. for collecting money to subscribe to the share to the capital of the appellant, but it is the appellant who is fastened with the liability. The Assessing Officer did not question M/s Diamond Protein Ltd. in this behalf. Insofar as Assessing Officer is concerned, it is not disputed that money was paid to it towards the aforesaid share application money, by means of cheques. It is not for the Assessing Officer to probe as to the source from where M/s Diamond Protein Ltd. collected the aforesaid money. It was for the Assessing Officer, in these circumstances to inquire into the affairs of M/s Diamond Protein Ltd. which is an independent company inasmuch as no finding is arrived at by the Assessing Officer that the two companies are umbrella companies or have any relationship with each other. 30. We are, therefore, of the opinion, that there is no merit in these two appeals, which are accordingly dismissed at the admission stage itself. 5.6 In the light of view taken in the aforesaid decisions ,especially when the existence of aforesaid share applicants is not in doubt, we have no hesitation i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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