TMI Blog2012 (9) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of decision in case of CIT v. Lovely Exports Pvt. Ltd.(2008 (1) TMI 575 - SUPREME COURT OF INDIA ) wherein it was held that if the names & addresses and confirmation from shareholders has been provided by the company to the AO then the share application money cannot be added in the income of the company u/s 68 and instead the Department is free to reopen the assessment of such individual in accordance with law, we do not see any reason to interfere in the order of CIT(A). Yet, it is opined that the individual assessments of the alleged shareholders should be reopened and in view of that Department is directed to issue instructions to all jurisdictional AO to reopen the individual cases of all shareholders as listed by AO – Decided again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght forward losses. The case was selected for scrutiny and necessary notices were issued. During course of assessment proceedings, the AO noted that during the year, company had raised share capital money amounting to Rs. 14 crores. The AO obtained information from AMMCO Bank, Muzaffarnagar and found that some of share applicants from whom money was received by company had opened their Bank Accounts on 10-08-2005 and 07-09-2005. The AO also noted that the said Bank Accounts were operated by persons other than account holders. The AO further noted that all these Bank Accounts of persons were opened with the introduction of Mr. Sudhir Kumar Garg, Proprietor of Garima Company, 22 street, Muzaffarnagar. He further found that cash was deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of law. (iii) Supreme Court in CIT vs. Durga Prasad More [(1997) 82 ITR 540, 545, 547 (sc)]. (iv) Jalan Timber Vs. CIT, (1997) 223 ITR 11, 17 (Gauh) and in various other judgements. The assessee further submitted that AO can not treat the share application money as income of the company from undisclosed sources for the following reasons :- 1. That all the subscriber has subscribed the share application money through account payee draft in favour of the assessee company. 2. That the assessee company has already allotted and issued shares to the said share applicant. 3. That the share applicants are regularly assessed to tax have given their assessment details, P.A.N. No. and has filed application for allotment of Shares. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate basis. Withdrawls by all the above assessees in range of Rs. 20,000/ to Rs. 30,000/-. 3. Most of the applicants have filed the return for the first time and got PAN allotted during AY 2005-06. 4. The returns have been filed on the similar pattern. 5. Bank accounts were opened in a particular branch of a particular bank on almost the same date by each of the above depositors. All of them had deposited the amounts in cash and issued cheques in favour of Rana Girders as share application money. 5. Aggrieved the assessee filed appeal before Ld. CIT(A) and submitted as under :- (1) That the assessee company has received the share application money through account payee cheques only. (2) That the assessee company has already a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) Jaya Securities Ltd. Vs CIT Kanpur 166 Taxman 7 (All). (ix) Uma Polymers 100 ITD 1 (Jd) TM. 7. As per Ld. CIT (A) in all the above cases, it was held that once the identity of the shareholders is proved, no addition can be made in the hands of assessee company. 8. Reference was also made in the case of Lovely Exports Pvt. Ltd. Taxman 172 page 44 wherein the Hon ble Supreme Court has held that if the share application money is received by assessee company from alleged bogus shareholders whose names are given to the AO then the Department is free to proceed to reopen their individual assessment in accordance with law. The relevant partition of CIT(A) orders is reproduced below:- I have gone through the facts of the case and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can not be said that money belonged to the assessee and therefore addition u/s 68 was not justified. 12. We have heard the rival submissions of both the parties and have gone through the material available on record. We have observed from the paper book filed by the assessee that share applicants are though assessees but their level of income is not sufficient enough to suggest that they had made investments in the company. We have observed that the following applicants had invested much more than their declared income:- Name Investment Returned income 1. Smt. Nisha Verma Rs.. 7.00 lakhs Rs..80,600/- 2. Smt. Rajni Verma Rs.. 7.00 lakhs Rs..80,500/- 3. Smt. Shally Garg Rs..4.50 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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