TMI Blog2012 (11) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the three companies which have invested in shares of the assessee really existed or not. If on enquiry, it is found that the companies did exist when they made investment and investment made by them are genuine,then no addition can be made u/s 68 of the Act. The AO may exercise his power to make enquiries with the concerned Registrar of companies to find out the real status of share applicants and after gathering all information, the AO shall complete the assessment after affording a reasonable opportunity of being heard to the assessee - In the result, the appeal filed by the Revenue is treated as allowed for statistical purpose. - ITA No.1168/Hyd/2009 - - - Dated:- 8-6-2012 - SHRI CHANDRA POOJARI, SHRI SAKTIJIT DEY, JJ. Appellant by : Smt. Nivedita Biswas Respondent by : Shri Kalyandas ORDER PER SAKTIJIT DEY, JM: This appeal by the Revenue is directed against the order dated 14-09-2009 passed in ITA No.329/Tr/DCIT3[1]/CIT(A)/TPT/09-10 pertaining to the assessment year 2005-06. 2. Ground Nos. 1 and 4 are general in nature and they do not require any adjudication. 3. Ground Nos. 2 and 3 are common relating to deletion of an amount of Rs.86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made by the AO, the assessee filed an appeal before the CIT (A). 6. In course of hearing before the CIT (A), the assessee contended that the entire share application money was paid through account payee cheque or DD. Confirmation letters from the Investor companies have been furnished before the AO which disclosed the identity of the investors, PAN Numbers and also income-tax details. The assessee further contended that all relevant documents in connection with increase in share capital such as resolution of AGM, Board s resolution for allotment of shares, share certificate numbers have also been furnished before the AO. The assessee also filed affidavits of three investor companies before the CIT (A). Relying upon various decisions, the assessee contended that share application money to be accepted as genuine. The CIT (A) called for Remand Report from the AO on the issue. The AO after examining the IT return of the investor company opined in his report that these companies may not have invested in share application money in the assessee company. 7. In reply to the remand report of the AO, the assessee contended that the identity of the investors, their incometax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence regarding capability of the investors to invest in the shares. The learned DR submitted that these facts justify the action of the AO in adding an amount of Rs.86 lakhs u/s 68 of the Act. 9. The learned AR for he assessee submitted that the three investor companies have directly issued letters of confirmation to the AO furnishing all details regarding the amount invested by them for allotment of shares with payment details. They have also furnished their PAN numbers and income-tax circle where they are assessed. Apart from confirmation letters, the investors have also submitted affidavit confirming investments made by them. The learned AR contended that the investors having confirmed about investment made by them for allotment of shares, payments received through banking channels and copies of DDs have been filed on record along with application for allotment of shares clearly prove that the transactions are genuine. The learned AR through his written submission further contended that allegation of the AO that seven cheques amounting to Rs.36 ;lakhs was never credited to the bank account of the assessee is also not correct as the cheques were deposited in the account m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduction of share application money, the assessee did not produce any evidence except articles of association of the concerned companies who had invested in shares. The AO therefore issued letters u/s 133(6) to the share applicants calling for details regarding investment inshares u/s 133(6) of the Act. However, all three letters issued to the investor companies returned unserved with the postal remark no such company, hence unserved . Only after the letters returned unserved, these three companies sent confirmation letters to the AO stating therein that they had invested in the assessee s company for purchase of shares. However, the confirmation letters did not contain pmt. A/c Number or any information whether the share applicants are income-tax assesses or not. It is a fact that the AO had issued letters on the same address which was mentioned in the letter heads of the applicant companies which returned back unserved. The assessee also did not furnish any evidence regarding the creditworthiness of the three share applicant companies like their balance-sheet or bank statements. The AO therefore treated the investments in share application money as unexplained investment u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination by the AO to prove the existence or identity of the applicant companies. It is well settled principle of law that in the case of this nature, the initial burden lies on the assessee to prove the genuineness of the transaction. Furnishing of an affidavit by itself is not necessary proof to conclude that the transaction is genuine. It is well settled principle of law that to prove a credit entry in the books the assessee to establish three ingredients which (1) identity of investors (2) their creditworthiness and (3) genuineness of transaction. From the orders of the revenue authorities, it is seen that these three ingredients have not been properly established. Facts are not brought on record to show as to whether the share applicants are having their independent existence or are mere name lenders. The CIT (A) in his order has not at all dealt with these issues and in a cryptic order has simply observed that since PAN numbers and identity of share applicants have been furnished, no addition can be made. As has been held by Hon ble Delhi High Court in the case of CIT vs.Oasis Hospitalities Pvt. Ltd., and Others (supra), the assessee has to establish the identity of the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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