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2016 (4) TMI 575 - ITAT DELHI

2016 (4) TMI 575 - ITAT DELHI - TMI - Addition on account of unexplained share capital, share application money and share premium received - CIT(A) deleted the addition - Held that:- According to provision of section 68 it is primary onus of the assessee to prove identity, creditworthiness and genuineness of the transaction. In this case the assessee has submitted extensive details about each of the creditors and despite that addition has been made u/s 68 of the Act.

AR has also subm .....

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e relied upon if there have been a detailed enquiry made by the AO regarding cash deposit by the person and then transfer entries given about the such deposits to the assessee’s depositors. No such Inquiries have been done. Therefore in view of the above we confirm the order of learned Commissioner of Income-tax (Appeals) on this ground and in result the appeal of the revenue is dismissed. - Decided in favour of assessee - ITA No.3432/Del/2009 - Dated:- 22-2-2016 - SHRI H.S.SIDHU, JUDICIAL MEMBE .....

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xplained share capital, share application money and share premium received by the assessee during the year. 2. On the facts and circumstances of the case the CIT(A) erred in deleting the addition of ₹ 66.25 lacs made u/s 68 of the IT Act ignoring the fact that assessee had failed to prove creditworthiness and genuineness of the transaction thereby not discharging the onus cost on its by law. 2. Brief facts of the case are that the appellant is a private limited company derived its income f .....

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sessee submitted certain details. Based on these details the ld AO issued notice u/s 133(6) to the bankers of some of the share applicant as the AO was of the view that credit by way of transfer entries in the bank account of depositors equal to the amount of money being invested in the assessee company. It was found that cash is deposited in somebody else account and that person was giving credit entry to various depositors who in nturn were depositing the sum in the banck account of the assess .....

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ss of the transaction and assessee has discharged its onus, no addition can be made in the hands of the assessee. Therefore the revenue is in appeal. 4. The ld DR relied on the order of the AO and the ld AR relied on the order of learned Commissioner of Income-tax (Appeals) wherein in Para 2.1 full details are made available. 5. We have carefully considered the rival contentions. According to provision of section 68 it is primary onus of the assessee to prove identity, creditworthiness and genui .....

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es, copy of Income Tax returns for all shareholders, address proof in the shape of ration card/ voter I card for all shareholders. fresh affidavits for 20 shareholders, copy of bank statements/ pass books, appellant's own bank statement, return of allotment of share capital (Form No.5) filed with Registrar of Companies ) in respect of the share applicant shareholder indicate the following against each one of them : S.No. Name and address PAN Amount 1. Subash Chand Jain, 486/158, K, Opp Railw .....

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li No.-5, Chander Nagar,, N. Delhi AGZPK93B1M 300000 9. Shashi Jain 527, Mantoia, Paharganj, N. Delhi AAEPJ1122C 350000 10. RamSingh 2124, Khobiwara, Kinari Bazar, Delhi ALXPS7321Q 200000 11. Anni Chopra B-4/34, Sector-7, Rohini, N. Delhi ADXPC5152D 200000 12. Rakesh Jain 2/57637 Block No.-5, Dev Nagar, Karct Bagh, N. Delhi ACWPJ6675Q 200000 13. Pawan Kumar 1655/35, Naiwala, Karol Bagh, N. Delhi AGCPK0255H 250000 14. Anil Kumar 6636/6, Block No.-9, Dev Nagar, Karol Bagh, N. Delhi AGCPK0256E 2500 .....

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upta, 6, Pusa Road, Karol Bagh, New Delhi AEAPG0272N 250000 22. Anita Chopra 3-4/34. Sector-7, Rohini, N. Delhi ABWPC4702G 250000 23. Dilip Sharma 239, GheeMandi, Paharganj, N. Delhi APCPS5959M 225000 24. Rajesh Kumar Chopra B-4/34, Sector-7, Rohini, N. Delhi ABWPC4687N 225000 25. Rajinder Singh B-4/34, Sector-7, Rohini, N. Delhi APAPS5961H 275000 26. Rakesh Jain 2/5763, Block No.-S, Dev Nagar, Karoi Bagh, N. Delhi ACWPJ6675Q 275000 2,2 As can be seen, each of the share applicant is an income ta .....

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admitted that there was an error in giving bank details of those concerns. • Most of the share applicants are men of little means with declared income of ₹ 1 lac to ₹ 1.25 lac. • One share applicant by the name of Renu Kapoor denied outright in the statement recorded on 24-11-2008 that she had any transaction with the appellant, • Mukesh Kumar, Rajinder Singh, Rocky jain, Rita Jain and Dattaram Jain , share applicants , could not be served notices u/s 133(6), as they w .....

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ky Jain and Sh.asi Jain with the appellant. Similarly, the account, of Shivshakti Enterprises shows cash introduction of ₹ 3.50 lac, which has been used to fund investments of Shashi Jain, Milap Jain and Nitin Jain. According to the AO, the appellant has channelized its unaccounted income through the modality of share capital • There was failure to produce all the share applicants and their complete bank statements, 2.3 My finding on each of the AO's argument is as under : (a) The .....

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t;all the above share applicants " and fresh set of confirmations .was filed. Records show AO that name of the bank branch was typed wrongly in cases of Kaushalya Devi, Vijender Gupta, Anita Chopra, Rajesh Kumar Chopra, and Rajinder Singh ", and corrected confirmation by giving the right name of the bank branch was being filed. In 4 of the 5 share applicants as can be seen; the AO's requisition and the appellant's amended information did not have any co relation , in as much as .....

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nformation on remitting banks in course of assessment proceedings. (b) The AO's views that the share applicants are men of insubstantial means and could not have invested with the appellant since having income in the range of ₹ 1 lac to ₹ 1 .25 lac go against his own narration in the assessment order. 14 of the 26 share applicants are seen to have income in excess of ₹ 1.25 lacs and 22 of the 26 share applicants have income in excess of ₹ 1 lac. The AO's generaliz .....

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put a figure of her investment at Rs JL95Jac , since her investment was ₹ 2.75 lac. Second, the appellant was not allowed to exercise its right to cross examine the witness As regards the first limb of the appellant's arguments, the facts on record indicate that Renu Kapoor of 460, Mantola, Paharganj, New Delhi bearing PAN AHAPK 3312 J 1iasinvWed Rs 2.75 lac through DD No 975989 dated 19-12-2005 drawn on PN8, Sector 5, Rohini, New Delhi. The investment being ₹ 2,75 lacs only and .....

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Present. Sh Sanjay Gupta, CA. He has filed his POA. He has been confronted with the statement of Mrs Rents Kapoor,whose statement was recorded denying any dealing with the assessee co. ' The order sheet notings do not reveal that any such statement of Renu Kapoor was made available to the appettant, The appellant's further request to allow cross examination of the witness has also not been acceded. In a way, the statement of Renu Kapoor on the basis of a figure of investment douDle the s .....

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et the case against hint. This necessarily also postulates t.hut he should cross examine the witness. CIT v. Eastern Commercial Enterprises [1994] 210 TO 103 (Cal) in M. Pirai Choodi v. ITO [2008] 302 ITR 40 the Modras, High Court quashed the assessment proceedings holding that in spite of documentary evidences furnished to substantiate the agricultural income, the AO had overlooked it and refused to admit the agricultural income merely based on statement alleged to have been obtained from the v .....

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cant. (d) The fact that certain share applicants were not found at the addresses given by the appellant, and the appellant failed to produce all the share applicants before the AO have been held against the appellant. Law on this has been established per Divine Leasing and Finance Ltd (ITA No 53/2005, 56/2005,305/2.006) Delhi High Court's order dated 16-11-2006 as under : The assessee has to prima facie prove (1) the identity of the creditor/ subscriber {2) the genuineness of the transaction .....

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d in drawing an adverse inference only because the creditor/ subscriber fails to or neglects to respond to its notices (6) the onus would not stand discharged if the creditor/ subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee {7} toe Assessing Officer is duty bound to investigate the credit worthiness of the creditor/ subscriber , the genuineness of the transaction and t .....

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dences relating to PAN, confirmations of remittance ^affidavits certifying the transmission of share application money, copies of income tax returns of share applicants, I hold that the AO could not have invoked the provisions of section 68 in respect of the share application money obtained by the appellant. (e) The AO on enquiry at the bank accounts of the share applicants has found linkage between some of the share applicants and some third parties, namely, Banke Bihari Securities, and Shivsha .....

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hose 2 concerns or that the appellant was the owner of the cash so introduced. As far as the appellant is concerned, it is twice removed from the 2 third parties L As held in Nemi Chand Kothari Vs CIT 264 ITR 254 (Gauhati), CIT Vs Diamond products Ltd (2009) 21 DTR (Del ) 9 and Orient Trading Co Ltd Vs CIT 49 ITR 723 (Bom ), the appellant is not expected to prove the genuineness of the cash deposited in the bank accounts of third parties, and that the appellant is not obliged to adduce evidence .....

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reported in (2008) 216 CTR 195(SC) , operative part of that order being : " Income-Cash credit-Share application money-lf 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, but it cannot be regarded as undisclosed income of assessee company," In similar set of facts, Delhi High Court in the case of CIT Vs Va .....

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