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2016 (1) TMI 303 - ITAT VISAKHAPATNAM

2016 (1) TMI 303 - ITAT VISAKHAPATNAM - TMI - Unexplained cash credit u/s 68 - Held that:- 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 .....

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the assessee company.- Decided in favour of assessee

Additions towards flat advances received in cash from the customers - 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 opi .....

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ditions 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 This appeal filed by the assessee is directed against the order of CIT(A), Visakhapatnam dated 23.11.2009 for the assessment year 2003-04. 2. The brief facts of the case are that the assessee company wh .....

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edings, the assessment was reopened u/s 153 of the Act. The assessee has filed revised return u/s 153A of the Act on 4.5.2007 admitting the same income as in the original return. The case was selected for scrutiny and notices u/s 143(2) & 142(1) of the Act were issued. During the course of assessment proceedings, the A.O. noticed that during the financial year relevant to assessment year 2003-04, the assessee received share application money of ₹ 25,84,904/-. In addition to the share a .....

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nd advances from customers towards sale of property shall not be treated as unexplained cash credit u/s 68 of the Act. In response to the said show cause notice, the assessee submitted that it has accepted the share application money from the close relatives and friends of the Directors of the company and furnished the names and addresses to the assessing officer. As far as advance from customers is concerned, the assessee stated that it has collected advance from 5 prospective buyers of the fla .....

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plication 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 whic .....

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, (1991) 192 ITR 287. As far as the advance from customers is concerned, the assessee contended that it has received the advance from prospective buyers of flats and wherever the customers cancelled the bookings, the same is returned by way of cheques. Therefore, these advances from customers cannot be treated as assessee's income u/s 68 of the Act. The CIT(A) after considering the explanations filed by the assessee held dismissing the assessee's appeal that the assessee except furnishin .....

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e additions made by the assessing officer. As far as the flat advance is concerned, the CIT(A) held that the assessee has received the advance from the customers in cash and also there is a unsigned letter found during the course of search in the assessee's office premises cancelling the booking of advance. Therefore, it is highly improbable that any prudent person would ever allow such leverage to the principles to give unsigned letters for cancellation of booking of flats. Therefore, for t .....

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77; 18,68,240/- made in the impugned assessment never formed the income of the appellant company. 3. The Learned Commissioner of Incometax (Appeals) ought to have positively considered the facts, circumstances of the case, contentions raised by the appellant company and the material and 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 evide .....

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he 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. (supra). The A.R. .....

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scharged by proving identity, creditworthiness and genuineness of the transactions, then additions can be made in the hands of the assessee company. The D.R. further argued that the judgements rendered by the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports Pvt. Ltd. (supra) and the Hon'ble Delhi High Court in the case of CIT Vs. Stellar Investments are distinguished in the recent judgement of Delhi High Court in the case of CIT Vs. Focus Exports Pvt. Ltd., therefore, he urged .....

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d that the alleged subscribers to the share application money do not have sufficient means to subscribe to the share capital, which was revealed when the statements were recorded from them. Therefore, the A.O. was of the opinion that just by filing the names and addresses of the persons is not sufficient to prove the initial burden cast upon the assessee u/s 68 of the Act. The assessee on the other hand contended that once the initial burden is discharged by filing the names and addresses of the .....

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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 .....

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iled necessary documents regarding sources for investment in the form of proof of agricultural properties and also filed affidavits. Therefore, in our opinion the assessee has discharged initial burden cast upon it u/s 68 of the Act by furnishing the names and addresses of the persons. Once identity is proved, then the onus shifts to the assessing officer to prove otherwise. Therefore, the A.O. is not right in making additions to the share application money in the hands of the assessee company. .....

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But it cannot be regarded as undisclosed income of the assessee company. 10. An identical issue came up for consideration before the coordinate bench of this Tribunal in the case of DCIT Vs. Pragati Fertilisers Pvt. Ltd ITA 694/Vizag/2004 wherein the coordinate bench of this Tribunal held in favour of the assessee as under: "In this regard, the Ld. Counsel for the assessee has submitted that this issue is squarely covered by the judgement of the Apex court in the case of CIT Vs. Lovely Expo .....

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are placed on record. In light of these judgements, we find force in the contention of the assessee. Accordingly, we confirm the order of the CIT(A) who has adjudicated the issue in consonance with the findings of the Apex Court. We therefore, confirm the order of the CIT(A) in this regard." 11. The assessee placed his reliance upon the judgement of Hon'ble Delhi High Court in the case of CIT Vs. Stellar Investments Ltd. (1991) 192 ITR 287, which was later confirmed by the apex court r .....

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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. Theref .....

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mounts to the above customers by way of cheques. The A.R. further submitted that the assessing officer made the additions on the sole ground that during the course of search proceedings, certain unsigned letters in the name of above parties were found, therefore, the assessee has routed his own money in the form of advance from customers. The A.R. further submitted that it is a usual practice in this line of business that customers book flats by paying the advance and at later stages, because of .....

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erused the materials available on record. The A.O. made the additions to the advance collected from customers on the sole reason that during the course of search proceedings, certain unsigned letters from these customers were found in the premises of the assessee company. Therefore, the A.O. was of the opinion that the assessee has routed his own money in the form of advance from customers, hence, made the additions. The assessee's contention is that this is being the first year of the opera .....

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