TMI Blog2010 (3) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... avin Aggarwal, CA and authorized representative of the assessee attended and furnished the details called for. The AO observed that during the year under consideration, the assessee was in receipt of share capital. The assessee was asked to furnish details of persons from whom the share capital was received and also to prove the genuineness and creditworthiness of the said persons. The assessee submitted the details of subscription of equity shares received by the assessee company which includes PAN Number, share application forms, board s resolution, copy of bank statement, pay order, confirmation from subscribers, income tax returns, copy of balance sheet etc. of the applicant companies and claimed that the share application money should be treated as genuine. As per AO, investigations were carried out by the Investigation Wing of I.T. Department where the persons applying for share capital admitted that they were providing accommodation entries after receipt of cash from the parties and charging their commission thereon. AO also noted that assessee had not filed confirmation from the companies applying for share capital of assessee company. On the basis of investigation report b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before the AO. The CIT(A) also observed that the said application form signed by the counter party is itself a confirmation of the remittance made to the assessee company and could not have been ignored for eliciting a response, other than what the document purports. He after relying on the decision of Hon ble Supreme Court in the case of Lovely Exports 260 CTR 185 affirming the judgment of the Hon ble Jurisdictional High Court in the case of Lovely Exports 299 ITR 268 wherein it was held that where share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, no addition can be made in the hands of assessee company but the department is free to proceed to reopen their individual assessments in accordance with law. Thereafter, he relied on the decision of Hon ble Jurisdictional High Court in the case of Divine Leasing Finance Ltd., General Exports and Credit Ltd. and Shipra Retailers Pvt.Ltd., against which SLP filed by the Revenue was dismissed by the Hon ble Supreme Court vide their judgment dated 21.1.2008, 10.3.2008 and 21.1.2008 respectively. Aggrieved by the above order of CIT(A), the Revenue is in fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication money cannot be regarded as undisclosed income of the assessee u/s 68 of the IT Act. It was also held by Hon'ble Supreme Court that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law. As per learned AR, since the assessee has duly furnished the names of all the shareholders alongwith their addresses and copies of allotment of shares filed with the Registrar of Companies, copies of their balance sheet, income tax returns, copies of their bank statement, the assessee has discharged its primary onus and no addition can be made in the hands of the assessee company. If there is any doubt with regard to genuineness of the alleged shareholders, the department has all the liberty to reopen their assessments and to verify the availability of sufficient balance in their hands to find out their creditworthiness and to verify the genuineness of transaction entered into by them. 6. We have considered the rival contentions, carefully gone through the orders of the authorities below and also deliberat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e certificate numbers, distinctive number of shares allotted to them, copies of the pay order representing money paid by the investee companies on account of share capital, copies of the bank statement of the investee companies, copies of memorandum and article of association together with certificate of incorporation issued by the Registrar of Companies of the investee companies, copies of latest available balance sheet and profit loss account of the investee companies, particulars of PAN numbers, copy of income tax returns, copy of intimation issued by the department in respect of the investee companies on filing their return of income and return of allotment of shares filed with the Registrar of Companies. With regard to creditworthiness of the shareholders, the CIT(A) had categorically recorded a finding to the effect that all the investee companies had either sufficient credit balance in their respective bank account before subscribing to the equity capital of the assessee company or that such companies bank accounts were credited with amounts on transfer from third parties, whereupon amounts were remitted to the assessee as share application money. A categorical finding ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company. Since in the instant case nothing has been brought on record by the department to establish that the money has come from the coffers of the assessee company, no addition is warranted in the hands of the assessee company. Accordingly, the department is directed to look into the actual source from where money has come for investment by these companies. If after investigation such money is proved to be unaccounted money, then department is equally competent and empowered to consider the addition in the hands of those persons who had provided money and which has come to the coffers of these bogus shareholders for investment in share capital. In the instant case, the AO has not made independent enquiry with regard to statement recorded by the Investigation Wing wherein it was alleged that these persons were involved in providing accommodation entries after accepting cash. No opportunity was provided to cross-examine such statement and the persons who have given such statement. Without bringing corroborative material on record with regard to truthfulness of such statement and without giving opportunity to cross-examine these persons, no addition can be made. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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