TMI Blog2012 (11) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the order of the CIT(A) is erroneous, perverse, illegal and against the provisions of law which is liable to be set aside. 2. On the facts and in the circumstances of the case and in law, the order of the CIT(A) has erred in deleting the addition of Rs. 23,20,000/- made by the Assessing Officer on account of unexplained share application money u/s 68 of the Income-tax Act. 3. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of hearing. 2. Adverting to ground nos.1 2 in the appeal, facts, in brief, as per relevant orders are that return declaring income of Rs. 52,71,342/- filed on 24.11.2006 by the assessee, manufacturing M.S. pipes and GS pipes, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act) issued on 3rd October, 2007. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee received an amount of Rs. 26,20,000/- by way of share application money from the 23 persons mentioned in para 3 of the assessment order. To a query by the AO, seeking details of genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts were submitted by the appellant before the AO. It is also seen that share application money of Rs. 11.00 lakhs was received from 3 directors of the appellant and the directors had duly replied to the notice issued u/s 133(6) by the AO. The AO had recorded the statement of one of the share applicants Sh. Sunil Gupta who had categorically stated before the AO that he had applied for shares. In the remaining cases also details like confirmation letter, copy of ITR, PANs and copies of bank statement were filed by the share applicants. This shows that the identity of the share applicant has between established beyond doubt by the appellant. The AO did not consider the identity proved on account of non production of the party. In this regard it is noticed that in case of P.K. Sethi Vs CIT (2006) 286 ITR 318 (Gau.), it was held by the Honble High Court that the identity of the creditor is proved when a creditor is shown to be an income tax assessee. Further the Hon'ble Delhi High Court in the case of CIT Vs Pratham Projects and Finlease Ltd. vide ITA No. 628/2010 in its order dated 11.05.2010 has held as under: "We find that the Commissioner of Income Tax as well as the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is accepted by the Department, and the payments is through a/c payee cheque the genuineness of the transaction can not be doubted. The matter of credits by way of share application money was dealt with Hon'ble Delhi High Court in the case of CIT Vs M/s Stellar Investment Ltd. (119) 192 ITR 287. In that case share capital was increased by accepting monies from various parties. The following observations of the Tribunal was confirmed by the High Court : "It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself." In the case of M/s Monnet Ispat and Energy Ltd. Vs DCIT it was found that the share application money was received by banking channel and that the assessee had produced confirmatory letters the creditor was asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even if the subscribers to the increased share capital of assessee company were not genuine, the amount could not be regarded as undisclosed income of the assessee company; Tribunal having canceled CIT's order u/s 263 whereby the assessment was set aside on the ground that AO had accepted the genuineness of share capital without making enquiries, no question of law arises". In the decision of the Hon'ble Supreme Court in the case of CIT Orissa Vs Orissa Corp. Pvt. Ltd. [1986] 159 ITR 78 (sq, it was held that: "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessee. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al against the order dated 12.09.2008 passed by the Income tax Appellate Tribunal in ITA No. 82/0/06 for the assessment year 2001-02. The Assessing Officer had made the addition of Rs. 45 lakhs as unexplained investment on account of share application money received by the assessee. The Commissioner of Income tax (Appeals) as well as the Income tax Appellate Tribunal, after examining the case on facts as well as on law, deleted the said addition. The Income tax Appellate Tribunal has specifically noted amongst other things that the appellant has produced confirmation letters from the share applicants, the payments had been received thought account payee cheques and, that too, from the applicant's accounts. The applicants were all registered companies and their identities were clearly established. It is an these circumstances that the Commissioner of Income tax (Appeals) as well as the Income tax Appellate Tribunal deleted the addition made by the Assessing Officer. Consequently, we see no reason to interfere with the findings recorded by the Tribunal" To the instant case no evidence has been brought on record by the AO to prove that the share application money emanated from the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company S/Shri Ganesh Agarwal, Manish Goel, and Rahul Agarwal, who confirmed contribution towards share application money in response to a notice u/s 133(6) of the Act. The ld. CIT(A) found that the assessee submitted complete name and address of share applicants, their PAN details besides their confirmations and copies of income tax returns as also copies of bank statements. Merely because the assessee did not produce these parties, there is no justification to draw an adverse inference. In this case, the assessee had given the names, addresses and PAN of the aforesaid investors. One of the share applicants Sh. Sunil Gupta categorically stated before the AO that he had applied for shares .The AO, apart from issuing notices under section 133(6) of the Act, did not pursue the matter further. There was no effort made to pursue the other investors. In those circumstances, the assessee could not do anything further. In the premises, it cannot be said that the assessee did not discharge the burden that lay on them[CIT vs. Orissa Corporation Ltd.,159 ITR 78(SC)] 5.1 In this regard, we may refer to the decision of the Hon ble Apex Court delivered in the case of CIT Vs. Lovely Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors /share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the revenue, which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source. 5.3 Hon ble Jurisdictional High Court in their another decision in C.I.T. vs. Oasis Hospitalities P Ltd. ,333 ITR 119 concluded as under:- 28. The appellant filed copies of PAN, acknowledgement of filing of income tax returns of the companies, their bank account statements for the relevant period, i.e. for the period when the cheques were cleared. However, the parties were not produced in spite of specific direction of the Assessing Officer instead of taking opportunities in this behalf. Since the so called Directors of these companies were not produced on this ground coupled with the outcome of the detailed inquiry made by the investigation wing of the department, the Assessing Officer made the addition. This addition could not be sustained as the primary onus was discharged by the appellant by producing PAN number, bank account, copies of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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