TMI Blog2016 (2) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... prove identity, creditworthiness and genuineness of the 4 shareholders were bogus or fabricated. In the light of the above, we find that the ld. CIT (A) has rightly discussed a number of judicial precedents to delete the addition made by the AO. So, therefore, we do not find any infirmity in the order passed by the ld. CIT (A) - Decided against revenue - ITA No.1722/Del./2011 - - - Dated:- 11-1-2016 - SHRI A.T. VARKEY, JUDICIAL MEMBER and SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri R.S. Singhvi CA. For The Revenue : Shri Hemant Gupta, Senior DR ORDER PER A.T. VARKEY, JUDICIAL MEMBER : This appeal, at the instance of the revenue, is directed against the order of the CIT (Appeals)-XVIII, New Delhi dated 20.12.2010 for the assessment year 2007-08. 2. The assessee has taken the following effective grounds of appeal :- 1. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of ₹ 70,00,000/- made by the AO on account of unexplained cash credit u/s 68 of the IT Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. M/s Paras Fincap Pvt. Ltd. 12000 Rs.12,00,000/- Total : 70000 Rs.70,00,000/- The AO observed that the aforesaid four parties had invested a total sum of ₹ 70 lakhs in the assessee company as share application money. But the AO observed that as per the information received from the DIT (Investigation), New Delhi, either these parties are in the list of beneficiary of accommodation entries or in the list of accommodation entry providers to other companies. Further, the AO noted that the enquiries conducted by the Investigation Wing of the department revealed that most of the entry operators were charging commission @ 2% for giving these accommodation entries. 3.2 The AO asked the assessee to produce balance sheets, statement of companies, bank accounts, copy of ITR, confirmations of the parties and other evidences to ascertain the Identity, Creditworthiness and Genuineness of the parties and also their personal appearance to prove the existence of the parties, specially the aforesaid four parties. In response to that, nobody app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority and the ld. CIT (A) deleted the addition by observing as under :- 4.3 I have carefully considered the assessment order, remand report of the AO and written submissions made by the ld. AR. It is argued by the ld. AR that the impugned share application/premium money totaling ₹ 70,00,000/- was received from four companies, Namely, M/s At All times Yours Securities Pvt. Ltd. (Rs.42,40,000/-), M/s Focus Industrial Resources Ltd. (Rs.6,60,000/-), M/s Archit Fincap Ltd. (Rs.9,00,000/-), M/s Paras Fincap Pvt. Ltd. (Rs,12,00,000/-), by account payee cheques/demand draft. It is argued that the appellant company had received share application/premium amount from a total 23 parties (including the above four parties) during the year under consideration and had submitted copies of confirmations from the said companies confirming the payment of the above amount as share application/premium money, copies of PAN cards of the respective companies, share application forms, share allotment details and bank account copies alongwith Balance Sheet and P L Account etc. of the above investor companies before the AO in support of its claim. It is argued by the Id. AR that the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO has also not made any adverse comment in his remand report on the merit of the case and the large number of documentary evidences relied upon by the appellant. 4.3.1. Further, I find that apart from the case laws relied upon by the ld. AR, the established legal position on the subject under consideration as adopted in a large number of case laws is as follows : 4.3.2. As held in the case of R. B. Mittal v. CIT 246 ITR 283 (AP) in an enquiry u/s 68, the rule of audi alteram partem has to be observed and the assessee must be given a fair and reasonable hearing to discharge the burden cast on him u/s 68 of the Act. 4.3.3. Further, it is settled law that in the matter of cash credit, the initial onus lies on the assessee to prove the genuineness of the transaction alongwith the identity of the lender/investor and his creditworthiness. Having done so, the appellant in the instant case has discharged the onus cast upon it. Beyond this, for the charge of unexplained cash credit to stick, the onus lies on the AO to disprove the claim of the assessee by establishing that the evidence filed by the assessee was false and by bringing new material on record and failure to do so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly as held in the case of CIT v. Metachem Industries (2000) 245 ITR 160 (MP) where a credit is shown to have come from a person other than the assessee, there is no further responsibility of the assessee to show that it has come from accounted source of the lender, as long as the fact that he had made the advance and was capable of making the advance are established. It was held by the Hon'ble Madras High Court in Hastimal (S) v. CIT (1963) 49 ITR 273 that after a lapse of decade, the assessee should not be placed upon the rack and called upon to explain not merely the origin and source of a capital contribution, but also the origin of origin and source of the source. 4.3.7. Further, I find that the Apex Court in CIT v Lovely Exports (P) Ltd. (2008) 216 CTR 195 held that the even if the share application money received by the appellant company is from alleged bogus shareholder, whose identity is produced by the appellant company, the revenue can always proceed against such shareholders and if necessary reopen their individual assessment. Similar decision is also taken in the case of CIT v. Steller Investment Ltd. (1991) 192 ITR 287 (Del.), (2000) 251 ITR 287 (SC), CIT v. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (2009) 319 ITR 393. 4.3.8. Further, the Hon'ble Delhi High Court relying on the judgement of the Apex Court in Lovely Exports Pvt. Ltd. (supra) has dismissed the department's appeals in limine vide its recent orders in the case of CIT v. Dwarkadhish Investment Pvt. Ltd. and Dwarkadhish Capital Pvt. Ltd (ITA nos. 911/2010 and 913/2010 order dated 02.08.2010), CIT v. Green Tech Tower Builders Pvt. Ltd. (ITA no. 1113/2010 order dated 12.08.2010) and CIT v. Ultratech Finance Investment Ltd. (ITA no. 1122/2010 order dated 12.08.2010). In the case of Dwarkadhish Investment Pvt. Ltd. and Dwarakdhish Capital Pvt. Ltd. (supra) the Hon'ble jurisdictional High Court vide its common order dated 02.08.2010 has interalia observed as under: 7. Consequently, the doctrine of merger would apply and the judgment of the Supreme Court in Lovely Exports (P) Ltd. (supra) would cover the field with regard to interpretation of Section 68 of Act, 1961. 8. In any matter, the onus of proof is not a static one. Though in Section 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the plethora of judicial pronouncements on the subject, the impugned addition of ₹ 70,00,000/- u/s 68 and ₹ 1,40,000/- as estimated commission in the hands of the appellant company is found to be legally unsustainable. In view of the above, the above impugned additions stand deleted. 5. Ld. DR, relying on the order of the AO, submitted that as per the information received from Investigation Wing of the Department that the aforesaid four parties are involved in providing accommodation entries, the AO issued summons and asked the assessee to produce them but the parties were not represented physically. He further submitted that no documentary proof evidencing the source of funding was furnished. He submitted that the AO observed that the assessee filed copies of PAN cards, share application money form, confirmation of party, statement of bank account and balance sheet of 19 out of total 23 companies but no details were filed in respect of the above said four parties who are alleged entry operators. The ld. DR further submitted that the assessee has routed its unaccounted money through them in the guise of application money. In this view, ld. AR submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decline to provide information of Investigation Wing, the ld. AR submitted that the AO failed to provide the copy of information received from DIT (Investigation). The ld. AR further submitted that in the remand proceedings also, the AO was not able to adduce any evidence on record that the contentions of the assessee are false. He also pointed out that it is well settled law that non-appearance of persons to whom summons u/s 131 of the Act were issued, does not make the assessee liable to produce such parties. He submitted that the assessee did not have the legal power to enforce the attendance, as such, he could not be called upon to do something which was beyond his power and any adverse inference drawn on the basis of such failure of the assessee, could not be sustained. Accordingly, he pleaded to uphold the order of the ld. CIT (A). 7. We have heard both the parties and perused the record. We find that the assessee is a private limited company incorporated on 4.02.2006 with the main object of carrying out business of real estate and infrastructure development. This is the first year of operation of the assessee and according to the assessee, it has not commenced the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd against the four companies who had a shareholding of ₹ 70 lakhs and did not provide the assessee the copy of the information which was used against it without affording an opportunity to rebut/cross examine vitiates the entire addition. The CIT (A) sought remand report of the AO wherein the AO accepted that he has substantially relied upon the informational inputs provided by the Investigation Wing, New Delhi for those four parties; and we find that the assessee in order to prove the identity, creditworthiness and genuineness of the 4 parties had submitted confirmation ROC documents, Income-tax returns, particulars of the share applicants and their banks statements, their audited financial statements and evidence regarding issue of shares to the share applicants. We find that in the remand report, the AO has failed to bring any material on record that would suggest that these documents were false or fabricated. The AO by heavily relying on the investigation wing report has simply made an opinion because the 4 parties did not turn up in front of him and could not substantiate its source of source, so he disbelieved them which cannot sustain in the eyes of law. The CIT (A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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