TMI Blog2016 (1) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... omers - Held that:- The A.O. made the additions without conducting any further enquiry about the genuineness of the transactions by summoning the concerned customers. The CIT(A), without appreciating the fact that these advances were returned to the customers, held that the assesse introduced its own unaccounted money under the guise of advance from customers. In our opinion, both the authorities failed to appreciate the fact that the so called advance was repaid to the customers by way of cheques. In view of the above factual position, we are of the opinion that the advances collected from customers towards flat bookings and later returned to the customers by way of account payee cheques cannot be at any stretch of imagination considered as assessee's income from undisclosed source. Therefore, we reverse the order of CIT(A) and direct the A.O. to delete the additions made on account of advance from customers. - Decided in favour of assessee - ITA No. 74/Vizag/2010 - - - Dated:- 6-11-2015 - V. Durga Rao, JM And G. Manjunatha, AM For the Appellant : Shri C V S Murthy, AR For the Respondent : Shri Th Lucas Peter, DR ORDER Per G. Manjunatha, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sesse, treated the share application money as well as advance from customers as unexplained cash credit u/s 68 of the Act and brought to tax. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before CIT(A), assessee contended that with regard to the share application money, it has furnished the names, addresses, relationship and also affidavits from the concerned parties for having subscribed to the share capital. It is further contended that the shareholders who subscribed to the share capital of the company has disclosed the investments in their income tax returns. The assessee further contended that once the identity of the shareholder is established and the very fact that they have accepted the investment in the company, the initial burden which lies on the assessee company u/s 68 of the Act stands discharged. The assessee further argued that once the initial burden is discharged, then the alleged bogus share application money cannot be brought to tax as assessee's undisclosed income in view of the decision of the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 . The assessee also placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences borne on record. 4. The Learned Commissioner of Incometax (Appeals) ought to have appreciated the fact that the appellant company discharged its onus by submitting all the relevant information and evidences with regard to share application money aggregating to ₹ 10,67,700/- and flat advances aggregating to ₹ 8,00,540/- received in the previous year 2002-2003 relevant to the Asst year 2003-04. 5. Let us first take up the issue of addition on account of unexplained share application money of ₹ 10,67,500/-. At the time of hearing, the A.R. of the assessee submitted that the assessee has proved the identity of the persons who had subscribed to the share application money. The assessing officer has examined these persons and recorded their statements which were reproduced in the assessment order. The A.R. further argued that the assessee discharged the initial burden cast upon it by furnishing the names and addresses of the share holders. Once the initial burden is discharged, then the additions cannot be made to the alleged bogus shareholders in view of the judgement of the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shareholder is proved then, the Assessing Officer cannot made any additions to the alleged share application money, even it is found to be bogus. The law stood at the time of assessment year 2003-04 is that even in case the share application money found to be bogus, then the Assessing Officer cannot made any addition to the alleged bogus share application money in the hands of the company. This view was supported by the amendments brought to section 68 by the finance act 2012 w.e.f. 1-4-2013. The provision of section 68 was amended, so as to bring the alleged bogus share application money to the tax in the hands of companies, in case share application money found to be bogus. 8. In the instant case, the assessee has filed the necessary details regarding names and addresses of the persons. It is an admitted fact that all the persons were summoned by the assessing officer and their statements were recorded. The alleged subscribers to the share capital, deposed before the assessing officer that they have subscribed to the share capital of the company and also they have source for the above investment and filed necessary documents regarding sources for investment in the form of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r confirmed by the apex court reported in 251 ITR 263, wherein it was held that even if the subscribers to the share capital were not genuine, under no circumstances the amount of share capital or share application money could be recorded as undisclosed income of the assessee. We also considered the case law referred by the DR in the light of the facts of the present case and come to the conclusion that though the case law cited by DR is in favour of Revenue, which is rendered by lower court, Therefore we preferred to follow the Hon'ble Supreme Court judgement referred by the A.R. 12. Considering the facts and circumstances of the case and also applying the ratios of the judgements cited above, we are of the opinion that the assessee has discharged the initial burden cast upon it by furnishing the names and addresses of the subscribers to the share capital. Once the initial burden is proved, then additions cannot be made to the share capital or share application money in the hands of the assessee company. Therefore, we direct the assessing officer to delete the additions made towards share application money u/s 68 of the Act. 13. The next issue came up for our considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount by cash. It is also an admitted fact that these advances were returned by way of cheques before the date of search. The assessing officer relied upon the unsigned model/draft cancellation letters found during the course of search operations and also on account of finding of signed blank cheque book and pass books in the case of two persons but, at the same time, failed to appreciate the fact that acceptance and return of advance in this line of business is common. In the instant case, though advances were accepted in cash, the repayment was made by way of account payee cheques, this fact was not disputed by the revenue. The A.O's main contention is that these are bogus credits created by the assessee in the form of advance from customers. The A.O. made the additions without conducting any further enquiry about the genuineness of the transactions by summoning the concerned customers. The CIT(A), without appreciating the fact that these advances were returned to the customers, held that the assesse introduced its own unaccounted money under the guise of advance from customers. In our opinion, both the authorities failed to appreciate the fact that the so called advance was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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