TMI Blog2014 (2) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... he genuineness of the transaction - though the assessee furnished particulars relating to three share applicants, the further inquiry made by the AO raised more questions than answers - The share applicants’ lack of resources, the assessee’s position vis-à-vis share amounts received and its commercial condition all pointed to the amount received by it falling within the mischief of Section 68 as unexplained amounts - Decided against Assessee. - ITA 31/2013 - - - Dated:- 13-2-2014 - S. Ravindra Bhat And R. V. Easwar,JJ. For the Appellant : Sh. Salil Aggarwal and Sh. Prakash Kumar, Advocates. For the Respondent : Sh. Balbir Singh, Sr. Standing Counsel with Sh. Abhishek Singh Baghel, Advocate. JUDGMENT Mr. Justice S. Ravindra Bhat (Open Court) C.M. APPL. 933/2013 (for exemption) Allowed, subject to all just exceptions. ITA 31/2013 1. This is an assessee s appeal, directed against an order of the Income Tax Appellate Tribunal (ITAT), of 18.05.2012 in I.T.A. No.1637/Del/2011. The assessment year concerned is 2007-08. The following question of law arises for consideration: Did the Tribunal fall into error of law in setting aside the order of the CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2007-08 by all the three companies. As all the three applicants were existing and assessed to income-tax, it was argued that the share applicants were genuine. The assessee, however, failed to provide bank statements for F.Y. 2006-07 of the aforesaid three companies. 4. Acting on the basis of the materials furnished by the assessee, the AO found that all the three pay orders were obtained from Mahamedha Urban Cooperative Bank Ltd., Noida. He issued summons to the said bank, requiring it to send the bank statements of the three companies from 01.04.2006 till the date of summons. From the information received from the bank, the AO found that M/s. Hub Services P. Ltd. opened bank account No.1002014026499 on 31st March, 2007 whereas the pay order was dated 29.09.2006. M/s. R.S. Accessories P. Ltd., also opened account No 1002014026502 on 31st March, 2007 whereas the pay order was dated 29.09.2006. The assessee s contention that the pay orders were made from the accounts on 29.09.2006 was, therefore, not accepted. M/s. Transaction India P. Ltd. had two accounts bearing No. 1002014026258 and No. 10020140025746. Both these accounts were opened during F.Y. 2006- 07. On considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) deleted the addition relying on the decision of the Supreme court in Lovely Exports Pvt. Ltd. (supra) and other decisions on the issue. 7. The Tribunal, in its impugned order set aside the appellate Commissioner s findings, holding that: 10. We have heard both the parties and gone through the material available on record. During the course of hearing the assessee filed photo copies of share applications containing Pay Order numbers, Photo copies of undated confirmations, photocopies of undated affidavits of the companies from whom share application money claimed to have been received, photo copy of undated resolution, photo copy of Memorandum Article of Association and copies of acknowledgement of returns for Assessment Year 2005-06 in the cases of all the three parties. The assessee by filing these evidences has claimed that initial onus has been discharged. Since the identity of the share applicants has been established, the contention of the assessee is that no addition can be made in the hands of the assessee. The AO had conducted enquiry from Mahamedha Urban Cooperative Bank Ltd., Noida. We have gone through the information obtained from the bank. It is seen that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. R.S. Accessories P. Ltd. and M/s. Transaction India P. Ltd. are located at 5/7B, Pusa Road, New Delhi. It is not mere co-incidence that all the three parties located at two different places in Delhi went to the same Bank on the same day at the same time and got the Pay Orders for requisite amounts in the same series. It will not be possible in the ordinary course of business that all the three persons would go to Noida for purchase of pay orders from the same bank at the same time and with the same running serial numbers. M/s. Hub Services P. Ltd. is located at Laxmi Nagar, New Delhi. There is no dearth of banks in Laxmi Nagar or Pusa Road Delhi. It has to be understood as to why anyone would go for purchase of pay orders from a bank located at long distance in Noida. When the AO confronted the assessee vide order-sheet entry dated 24.12.2009 by issuing show cause notice as to why the amount of Rs.80,00,000/- claimed to have been received by the assessee as share application money from three companies, should not be treated as income of the assessee u/s 68 of the Act, the assessee vide letter dated 29.12.2009 filed reply reiterating that the identity of all the three appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er companies are assessed to income tax at Delhi. The assessee also furnished the latest addresses of the shareholder/applicants, whose particulars could also be verified from the Registrar of Companies. Instead of proceeding to make any inquiry, the AO brushed aside these explanations and wrongly made the additions. 9. Relying on the judgment in Lovely Exports Pvt. Ltd. (supra), it was urged that the assessee s responsibility was to adduce acceptable evidence about the identity of the share applicant and the genuineness of the transaction. This duty did not extend to actually producing the share applicants. If the AO wished, he could easily summon them to attend the proceedings. Counsel highlighted that as against the share application money of Rs. 1.8 crores received, the AO made an addition only of Rs. 80 lakhs, implying that the transactions in respect of the sum of Rs. 1 crore was accepted. Therefore, the addition was based purely on an unverified assumption. Learned counsel invited the attention of the Court to the remand report called for and considered by the CIT (Appeals) and underlined the fact that the impugned order entirely overlooked these circumstances. 10. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant companies are also not under the control of the assessee company, therefore the assessee cannot obtain and file the copies of their Balancesheets, P L accounts and its schedules as required by you in the said letter and also cannot produce the directors of the said three companies. It is quite strange to note that on one hand the assessee has filed copies of the Bank Statements of all the three applicant companies and copies of acknowledgment of return of R.S. Accessories P Ltd. and of M/s Transactions India P.Ltd. for the assessment year 2007-08 vide its letter dated 27.9.2010 before the learned CIT(A) and on the other hand it is expressing its inability to file the same in its letter dated 08.11.2010 (reproduced above). In the copies of acknowledgement of returns of these two companies (acknowledgment of return of the third not filed) the gross income for assessment year 2007-08 has been shown as under:- M/s R.S. Accessories Pvt.Ltd Rs. 40,194/-(Return filed on 31.3.09) M/s Transaction India Pvt.Ltd Rs. 7,31,619/-(Return filed on 31.3.09) As per ROC site, all these three companies have been shown as defaulters of filing DIN 3 and Form 32. The Authorised/ Issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were ultimately used to subscribe to the shares were deposited in cash on 29.06.2006. In the third case, the sum of over Rs. 24 lakhs was deposited in a span of a month. All these cash deposits were made into accounts the same day or on proximate days, and the pay orders given to apply to the shares were issued from a far-off bank branch in NOIDA. These, together with the share applicants lack of resources and the woefully inadequate share capital, as well as the authorized and subscribed share capital of the assessee (Rs. 50 lakh being the authorized capital, and the paid up capital being Rs. 70 lakh, as against it the reserves being over Rs. 2 crores, for reason of the premium received), showed that the transaction claimed to have resulted in receipt of share money was dubious. 14. Lovely Exports Pvt. Ltd. (supra) is an authority for the proposition that the assessee is under an obligation to dispel any doubts regarding the genuineness of an investor and the genuineness of the transaction. Here, though the assessee furnished particulars relating to three share applicants, the further inquiry made by the AO raised more questions than answers. The share applicants lack of resou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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