TMI Blog2013 (12) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order dated 28.12.2007 to the tune of ₹ 79,80,000/- on account of unexplained share capital contribution and ₹ 19,950/- on account of unexplained expenditure on commission for getting accommodation entries. 2. Put in brief, the relevant background aspects of the matter are as follows : The respondent Company is engaged in manufacturing of the segments used in the marble sawing. The Company came into existence on 16.06.2003. Thus, the previous year related with the Assessment Year 2004-05 had been the first year of the business of the assessee company. In the original return filed on 01.11.2004 under Section 139 of the Act, the assessee Company declared a loss of ₹ 3,88,740/- . It appears that search and seizure operation under Section 132 of the Act were carried out on 23.01.2006 at the business premises of the assessee along with the residential as well as other business premises of Choudhary Group of Cases; and pursuant thereto, notices under Section 153A were issued. In the return filed on 06.12.2006 in response to the notice under Section 153A, the assessee company declared a loss of ₹ 3,38,740/- 3. On the return so filed, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany by issuing a letter u/s 133(6) of the I.T. Act 1961. The ld. A.O. Sh. V.K. Chakarvarty was heard and the case was discussed with him. On perusal of letter u/s 133(6) I find that no confirmations or comment was asked from the directors of the purchaser company about their statement in the search and seizure operation in their case. The ld. A.O's only reason for rejecting the confirmations and affidavits filed by aforesaid directors of the purchaser companies was that the directors did not retracted their statement in such confirmations or affidavits. The ld. A/R's contention is that the directors of the purchaser companies have fully replied against the ld. A.O's letter u/s 133(6). There is no question to retract against anything which is not mentioned in the letter u/s 133(6). Therefore, the rejection of confirmations and affidavits filed by the directors of the purchasing companies was not justified and the various case laws relied by him is still applicable in this case and binding on the department. Moreover the ld. A/R also submits that the statement made by third party on the back of the assessee cannot be utilized against him without giving him opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly Exports Pvt. Ltd. only bogus share application was found but the investors were genuine. However, in the present case even there are no genuine investors as all the companies are fabricated just to provide accommodation entries only as admitted by one of the Directors i.e. Shri Pradeep Jindal. Whether those companies were fictitious or bogus, the moot question here is that whether the assessee company had received share application money or not. It is seen that share capital was received through account payee cheques along with premium amount totalling to ₹ 79,80,000/- from five private limited companies i.e. M/s. Sanraj Associates Pvt Ltd., M/s. Fortress Impex Pvt. Ltd., M/s. Sumit Overseas Pvt. Ltd., M/s. Pushpanjali Caps Pvt. Ltd. and M/s. B.P. Builtech Pvt. Ltd. all these companies are situated at Delhi. All these companies are assessed to tax and they are registered under the Companies Act. Return of allotment of shares in prescribed form No.2 to the Registrar of Companies was also filed before Assessing Officer as well as before ld. CIT (A). It is further seen that the addition is based on alleged statement of Shri Pradeep Jindal recorded under section 131 behind the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecourse for taking action against the respective shareholders as the Assessing Officer was directed to take necessary action against the purchaser company for such investment in purchase of shares. 10. We have also considered the contention of ld. D/R that the share application money which remained unproved can be added under section 68. We would like to observe here that there is a difference between cash creditor and shareholder. In case of cash creditor, the cash creditor has right to demand the money back from the assessee. However, in case of shareholder, there is no liability of the company to refund the amount as the shares can be sold in the market. Therefore, in case of cash creditor, heavy onus lies on the assessee to prove whether cash creditor was genuine or not. However, in case of shareholder, it is held by various High Courts and Hon'ble Supreme Court that if shareholders are not genuine, then in that case no addition can be made in the hands of the company but the case can be reopened of the shareholders for enquiring about their source of buying the shares in the company. 10.1 The contention of ld. CIT D/R that cash was deposited in the account of the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law is involved in this appeal. 8. The reference to the statements made by some of the persons related with the said investing companies is of no effect because such statements could not have been utilized against the assessee Company when the assessee-company had not been afforded an opportunity of confronting and cross-examining the persons concerned. There does not appear anything occurring in the statements of the persons relating with the assessee-company so as to provide a basis for the findings recorded by the AO. 9. In any case, the points as sought to be raised by the appellant in the present case are all the matters relating to appreciation of evidence. The relevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour of the assessee. As regards the referred share capital contributors, it is noticed that they are existing assessees having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard at the hands of assessee-company. 10. Ultimately, the question as to whether the source of investment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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