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2015 (5) TMI 923 - ITAT DELHI

2015 (5) TMI 923 - ITAT DELHI - TMI - Unexplained credits in the books of account u/s 68 - CIT(A) deleted the addition - Held that:- AO denied opportunity of being heard for the assessee and the CIT(A) wrongly shifted onus on the revenue authorities and misunderstood the meaning of onus with regard to section 68 of the Act. Hence, we are of the considered opinion that the issue of share application money was not adjudicated by the lower authorities as per provisions of section 68 of the Act and .....

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alleged share application money after affording due opportunity of hearing for the assessee - Decided in favour of revenue for statistical purposes. - ITA No. 1308/Del/2010 - Dated:- 8-5-2015 - Shri N. K. Saini And Shri Chandramohan Garg,JJ. For the Appellant : Shri Y. Kakkar DR For the Respondent : Shri Alok Kumar Gupta, CA ORDER Per C. M. Garg, Judicial Member This appeal has been directed by the Revenue against the order of the CIT, Faridabad dated 27.01.2010 in Appeal No.150/09-10 for AY 200 .....

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s money to the assessee. 3. We have heard arguments of both the sides and carefully perused the relevant material placed on record, inter alia assessment order, impugned order of the CIT(A), assessee s paper books spread over 164 pages and citations, judgments and orders relied by both the parties. Ld. DR has drawn our attention towards para no. 8 to 11 of the assessment order and submitted that the assessee failed to produce the persons who have given credit to the assessee company during the y .....

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deliberately and intentionally fails to produce relevant evidence during assessment proceedings with the desire to prevent inquiry/investigation, then adverse inference should be drawn against the assessee. Ld. DR further contended that mere production of Permanent Account Number (PAN) or assessment particulars does not establish the identity of a person which includes the place of work, staff members and the fact that such person was actually carrying on business and further the recommendation .....

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nd the assessee failed to discharge its onus of proving the genuineness and creditworthiness of the person who claimed to be the shareholder of the assessee company. Ld. DR pointed out that as per operative part of the impugned order in the last line of para 6, the CIT(A) granted relief for the assessee without any justified basis and by wrongly holding that the AO has not discharged his onus at all. Ld. DR has also drawn our attention towards decision of Hon ble Delhi High Court in the case of .....

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share application money providers but this was not sufficient to discharge required onus of the assessee to prove identity, creditworthiness and genuineness of the transaction. Ld. DR finally prayed that the impugned order may be set aside by restoring that of the AO. 4. Ld. AR supporting the impugned order submitted that the AO made additions with pre-determined mind and she has thrown away all relevant explanation, details and evidence filed by the assessee during the assessment proceedings. .....

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oviders also requested through their Advocate Shri Devender Singh to provide information about the share application money providers but the AO did not allow the same. Ld. AR also pointed out page no. 164 of the Paper book and submitted that this letter was also submitted by the alleged share application money providers on 30.12.2009 but the AO passed assessment order by mentioning the date of 29.12.2009 denying opportunity of hearing to the assessee and the alleged share application money provi .....

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the AO without making any further inquiry or investigation simply proceeded to make addition u/s 68 of the Act, then such addition is not sustainable in the light of decision of Hon ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) as relied by the CIT(A) while granting relief for the assessee. 5. On careful consideration of above submissions of both the sides, at the very outset, we note that admittedly the assessee filed evidence in support of admissibilit .....

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and the summons sent by post were returned back unserved. Then the AO asked the assessee to furnish whereabouts of the said parties from whom the credit entries/share application money appearing in the books of accounts were received. From para no. 6 of the assessment order, we note that from 14.12.2009 to 29.12.2009 regularly the AO was making efforts to verify and investigate the alleged share application money provider but without result and the Inspector s report was also called on 24.12.20 .....

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bserve that the alleged entry providers also submitted some details and documents for the consideration of the AO but the assessment order was passed on 29.12.2009. Although we are unable to see from record which details were filed by the alleged share application money provider on 30.12.2009, there was an attempt to submit information and submission from the AO on behalf of the share applicants. At this juncture, we respectfully take guidance from the decision of Hon ble Delhi High Court in the .....

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ied advantage of the contention or factual assertion by the Assessee before him. In case an Assessee deliberately and intentionally fails to produce evidence before the assessing officer with the desire to prevent inquiry or investigation, an adverse inference should be drawn. The said case, i.e., N.R. PORTFOLIO PRIVATE LIMITED (SUPRA ), was also one of the cases where accommodation entries were being provided by Mahesh Garg Group of entry providers as in the present case . It has been noticed i .....

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that a private limited company is a closely held company having proxima te relationship between promoters and shareholders and usually in closely held companies, share capital subscription is from friends, relatives and not from unrelated/unknown third parties/general public. 26. We have further in N.R.PORTFOLIO PRIVATE LIMITED (SUPRA ) held that mere production of PAN Number or assessment particulars does not establish the identity of a person. The identification of a person includes the place .....

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nding circumstances treated as sufficiently disclosing the identity of the individual. 27. Referring to the various judgments of the Supreme Court {A. GOVINDARAJU LU MUDALIAR VS CIT (1958) 34 ITR 807 (SC), CIT VS M. GANAPATHI MUDALIAR (1964) 53 ITR 623 (SC) AND CIT VS DEVI PRASAD VISHWANATH PRASAD (1969 (72) ITR 194 (SC)} we have in N.R.P ORTFOLIO PRIVATE LIMITED (SUPRA) rejected the contention that the revenue must have evidence to show a circulation of money from the Assessee to third parties. .....

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o shares. The share subscribers post investment do not lose touch or become incommunicado. In the case of private limited companies where normally there is close proximity between the company, i.e., the directors and shareholders and the investors. The Assessee cannot simply furnish details and remain quiet even when summons issued to the shareholders under Section 131 are returned unserved and uncomplied. In N.R.P ORTFOLIO PRIVATE LIMITED (SUPRA ) we have held that the Assessee cannot plead as .....

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en surrounding and attending facts predicate a cover up. The production of incorporation details, PAN numbers or income tax details may indicate towards completion of paper work or documentation but genuineness, creditworthiness and identity of investment and the investors are deeper and obtrusive than mere completion of paper work or documentation. 6. In view of above noted facts and circumstances, we note that since the assessment was getting barred on 31.12.2009, therefore, the AO denied even .....

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2009 for filing of additional information and submissions regarding alleged share application money and this request of the assessee was rejected by the AO. From Paper Book page no. 164, we also note that there was an attempt by the alleged share application money contributors through their Advocate to submit supporting documents but the same were not considered as the assessment order was passed on 29.12.2009 itself. From careful reading of the impugned order, we note that the CIT(A) granted re .....

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its of receipt of ₹ 5 lakhs from the 5 persons involved and that the AO has no material on record to prove that all these credits of ₹ 25 lakhs were mere accommodation entries and not genuine credits in the books of account as per the provisions of section 68 of the Income Tax Act, because the appellant had proved also the identity an credit-worthiness of all the parties through their confirmations and accounts through the banking channels which left no room for any shred of doubt fo .....

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the shape of share application money in the case of a company has been finally clinched recently by the Apex Court's decision in the case of CIT Vs. Lovely Exports Pvt. Ltd. (2008) 216 ITR (SC) 195 wherein it has been held that if the share application money is received by the assessee company from alleged bogus share holders whose names are given to the AD, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undi .....

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nly a general confession made to secure immunities for himself and for the members of his family and such mere confessional statement by a third party would not be sufficient to hold that the assessee's income had escaped assessment for invoking the provisions of section 147/148 of the Income Tax Act, 1961. Moreover, as has been decided by the various Courts, when the Revenue has taken the recourse to the provisions of section 147/148 of the Income Tax Act, 1961, its intent and the duty of t .....

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see to discharge required onus upon the assessee u/s 68 of the Act and the assessment proceedings were completed, keeping in view the fact that the assessment was getting time barred on 31.12.2009. During first appellate proceedings, CIT(A) granted relief for the assessee by holding that the duty of the revenue is to establish its case by bringing material on record and the AO has not discharged his onus at all. At this stage, we respectfully take cognizance of the ratio of the decision of Hon b .....

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