TMI Blog2012 (1) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... for 3,700 cumulative redeemable preference shares of ₹ 1,000 each at a premium of ₹ 4,000/- per shares were allotted to different private corporate bodies. The AO further noticed that the amount of ₹ 37,00,000/- was received towards the face value of the shares and ₹ 1,48,00,000/- towards premium of the shares and hence total amount of ₹ 1,85,00,00/- was received towards share application money for allotment of 3700 cumulative redeemable preference shares. It was found on investigation by the Addl. DIT(Inv.) , Unit-I, Kolkata that following companies had paid share application money to the assessee: S. No. Name of Party Shares applied Amount received 1 Platinum Commerce Pvt. Ltd. 100 500000 2 Nilhat Promoters Fiscals Pvt. Ltd. 600 3000000 3 Ventex Trade Pvt. Ltd. 1000 5000000 4 Ankita Finvest Pvt. Ltd. 1000 5000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee has tried to shift on the AO s shoulder. The AO noted that when the opportunity was given to the assessee for filing confirmation and to present directors of share applicant companies personally on 17/12/2007, the assessee failed to produce any director personally, in stead he filed a letter giving photocopy of confirmation of M/s Platinum Commerce Pvt. ltd. with photocopies of share application, acknowledgment slip, certificate of incorporation etc. It was noticed that the confirmation was not signed by the directors, but by the authorized signatory. The details of the authorized signatory was not mentioned in the confirmation letter. Therefore, genuineness of the confirmation could not be established. In view of the above findings, the AO held that since the burden of proving genuineness of transaction pertains to socalled corporate bodies, was on the assessee and it failed to carry the burden. It could not get away from this responsibility by putting it on the shoulders of the AO. It was the assessee s responsibility to produce directors of so called Kolkatta based companies for cross verification. Besides, it failed to file original confirmation for all so ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue cheques, thus to give semblance of genuineness to the entire transaction. In view of the such irrefutable piece of evidence, the only conclusion that can be drawn is that the entire exercise was conducted with the active connivance of the assessee for the purposes of laundering of its unaccounted income. Since the assessee could not refute their statements, it chose to stal l and delay necessary investigation by the Investigation Wing and never intended in the right earnest to cross-examine such persons, if at all it was of the view that entire investment was sacrosanct and beyond doubt. Had all such transactions were bona f ide and genuine, the assessee could have conveniently obtained the denial of the directors on some or other ground, in the form of respective aff idavits or statements. Moreover, respective directors would not have disowned such transactions in any circumstances, involving huge sums unless they acted a conduit for such unaccounted transactions and entered into accommodation entries with the assessee company. They would not have been na ve enough to disown their own investments, had everything been overboard. Therefore, the genuineness of the transaction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 19th October, 2011. The copies of the said orders are available on record. It is to be noted that the AM was one of the party in the said two cases. 8. On the other hand, the learned DR did not controvert the facts available on record and fairly conceded that the issues involved in these appeals are covered by the orders of the Tribunal in the assessee s sister concern cases namely Chat Computers (supra) and Netscape Software Ltd. (supra). 9. We have heard the rival submissions and perused record as well as gone through the orders of the authorities below. In this case the addition made by the AO and confirmed by the CIT(A) was based on the Investigation Report of the ADIT(Investigation) Unit-IX(2), Mumbai and based on the statements of the directors of investing companies recorded by the Investigation Wing, Unit-1(2), Calcutta. This aspect was carefully considered by the Tribunal in the case of M/s chat Computers Pvt. Ltd. (supra) at page 122 vide paras 6.2 to 6.3 in its order. The Tribunal has observed that the AO relied on the statements of the directors during the course of investigation proceedings by the DDIT9Inv.) , Unit-1(2), Calcutta and no opportunity was give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per the investigation report received from theADdl.DIT)(Inv) Unit I Kolkata, the following companies has paid share application money to the assessee: Sl.No. Name of the Party Shares allotted Amount Recd. 1. Regency Shares Holdings P Ltd 1000 5000000 2. Yulan Marketing P Ltd 1200 6000000 3. Nilhat Promoters Fiscals P Ltd 600 3000000 4. M G Greenfield P Ltd 1200 6000000 5. Dabriwal Investment Financiers P Ltd 200 10000000 6. Asrara Fintrade P Ltd 1000 5000000 7. Hooghly Vinimary P Ltd 1000 5000000 8. Clix Securities P Ltd 150 750000 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reached to the assessee company. Few such instances are covered in the report annexed herewith. 6 It is evident from the assessment order that the Assessing Officer has not conducted any independent enquiry during the assessment proceedings; but simply relied upon the report of the ADIT(Inv), Unit 1, Kolkata as well as the statements of the directors of various Kolkata based companies, who have paid the application money. The said investigation by the ADIT(Inv) Unit 1, Kolkata was not carried out during the assessment proceedings; therefore, the said investigation was neither the inquiry carried out during the assessment proceedings nor part of the assessment proceedings. It is clear that the scrutiny assessment commenced after about one year from the alleged investigation was over. The Assessing Officer has heavily relied upon the investigation report and proceedings and specifically on the point that the assessee was given opportunity to cross examine the directors of the investing companies, who paid the application money and further, the assessee was also asked by the Assessing Officer to produce the directors, whose statements were recorded by the investigation unit 1, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation by the ADIT(Inv) Unit 1, Kolkata is preliminary investigation only to verify the suspicion of any concealment of income. The Assessing Officer, during the course of assessment proceedings asked the assessee to produce the said directors for cross examination. It is evident from the letter of the Assessing Officer dated 01.10.2008 as well as dated 16.9.2008 that the Assessing Officer did not summon these directors to be present in the office of the Assessing Officer for the purpose of cross examination by the assessee; but on the contrary, the assessee was asked to produce these directors for cross examination purpose. This is a gross violation of principles of natural justice when the Assessing Officer asked the assessee to produce the directors for availing opportunity of cross examination. The Assessing Officer relied upon the statement of the directors of the investing company recorded during the investigation proceedings by the ADIT(Inv) Unit 1, Kolkata. Instead of ensuring the presence of these persons for giving opportunity to the assessee to cross examine, the Assessing Officer asked the assessee to produce them, which in our considered opinion is an absolute unjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the investing companies not by any cash deposit; but through account payee cheques. Therefore, when all the documentary evidence contradicts the statements of the directors recorded by the investigation unit of the department then such statements alone cannot be taken as the basis much less a good or proper basis for any addition. 6.5 It is settled proposition of law that the statement recorded during the course of investigation without corroborative evidence has no evidentiary value. It is pertinent to mention that the statements recorded in this case are not under search or survey or assessment proceedings therefore the same cannot be used against the assesse without following the due process of corroboration and cross examination. Even otherwise, the statement without cross examination and corroborative evidence cannot be used against the assessee. 6.6 As pointed out by the ld AR of the assessee the credibility of the statements is also not free from doubt as it appears that all the statements are prepared by the department in an identical fashion and manner before those were got signed on different dates. It is apparent that certain identical mistakes are appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as well as cross examination of the persons on whose statements, the Assessing Officer relied upon, amounts to denial of opportunity and would be fatal to the proceedings. The Hon ble Delhi High Court has observed in para 7 as under: 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice in as much as seized material is not provided to an assessee nor is cross-examination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following the approach adopted by us in SMC Share Brokers Ltd. (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration. 8 Similarly, in the latest decision, the Hon ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra), after considering all the relevant decisions on the issue including the decision of the Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of CIT v. Creative World Telefilms Ltd. (in I. T. A. No. 2182 of 2009 decided on October 12, 2009) [2011] 333 ITR 100. The relevant portion of this order is reproduced below: In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement `not traceable'. In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to costs. (emphasis supplied) 16 The court thus clearly held that once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eavy in case the assessee is a private limited company where the shareholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstance, the assessee cannot feign ignorance about the status of these parties. 21 We may also usefully refer to the judgment of the Supreme Court in the case of CIT v. P. Mohanakala [2007] 291 ITR 278. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable compensation from the assessees. The Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the books of account of the assessee, as their income applying section 68 of the Act. The assessee did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The Commissioner of Income-tax (Appeals) confirmed the assessment. On further appeal, there was a difference of opinion between the two M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. 22. We would like to refer to another judgment of the Division Bench of this court in the case of CIT v. Value Capital Services P. Ltd. [2008] 307 ITR 334. The court in that case held that the additional burden was on the Department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such findings, addition could not be made in the income of the assessee under section 68 of the Act. 23. It is also of relevance to point out that in CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi) where the increase in subscribed capital of the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Delhi High Court, in the case of Oasis Hospitalities P Ltd supra) in para 33 and 34 has observed as under: 33 The Tribunal while confirming the aforesaid view of the Commissioner of Income-tax (Appeals) has summarized the discussion as under: 9. We have carefully considered the rival submissions in the light of the material placed before us. The necessary details were filed by the assessee with the Assessing Officer to show the identity of the person who had applied for the shares. The shares also been allotted to respective persons in respect of which intimation was given to the Registrar of Companies and necessary evidence has also been placed on record in the paper book which found place at pages 23 and 24 of the paper book. The assessee also had placed on record the evidence as well as copy of income-tax returns of the share applicants. Keeping in view all these evidence it cannot be held that the assessee did not establish the identity of the share applicants. If it is so, then the law as pronounced by the hon'ble Supreme Court in the case of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 is clear that if the share application money is received by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of cheques from another source. On the basis of enquiry in few cases the A.O. was of the opinion that all the monies were from the assessee and treated them as income from unaccounted sources. It is one of the contentions of the assessee that the assessee was not given all the statements and only 15 of the 37 statements were furnished. As seen from the record this aspect is correct. As seen from the statement recorded from the companies in Kolkata, it is noticed that they have invested in various group companies of the assessee at the same point of time. This aspect also has not been examined and the issue whether the investment in those companies by the same company was accepted or not was also not on record. Few of the companies of the assessee s group like Luminants Investments Ltd., Netscape Software Pvt. Ltd. and Saimangal Investrade Pvt. Ltd. were also involved in getting share application money / funds as can be seen from the statement recorded by the ADIT. Sources of fund also required to be examined/correlated whether those companies have capacity to invest monies in assessee company s case and also in other group companies and the treatment given in their cases about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res examination or investigation to verify the correctness of the new facts first time brought before us. The case of the revenue is that the cash moved from the assesse routed though various level and then reached to the assesse in the form of share application money. The stand of the revenue is not in consonance with the statements of the directors of thhe investing companies which is the basis of the investigation report as well as addition by the AO. In their statements the directors stated to have received cash from assesse for investing in the preferential share of the assesse company, whereas, this fact was not found to be correct from the record and the revenue also took a stand that the cash was not directly given to the investing companies but routed through various levels. When it was found by the investigating unit as well as recorded by the AO that the fund in the bank account of the investing companies was deposited through a/c payee cheques than it is apparent that the statements of the directors are in total contradiction of the facts emerged from the record as well as stand of the revenue. Hence the said statements do not support the case of the revenue and the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged to income-tax as the income of the assessee of that previous year. In a very recent decision of the Hon ble Delhi High Court in the case of CIT Vs. Oasis Hospitalities Pvt.Ltd. 333 ITR 119 (Delhi), the Hon ble Delhi High Court after considering several decisions referred to by the learned D.R. in his arguments before us, summed up the approach in cases where cash credits in the books of company by way of increase in share capital is found: The initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove (i) the identity of the share-holder, (ii) the genuineness of the transaction, and (c) the creditworthiness of the shareholders. In case the nvestor/shareholder is an individual, some documents will have to be filed or the shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc., can be furnished. When the money is received by cheque and is transmitted through banking or other indisputable channels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impuged judgment. Subject to the above, Special Leave Petition is dismissed. 17. In the case of Divine Leasing (supra), the Hon ble Delhi High Court summed up the approach in cases where cash credits in the books of company by way of increase in share capital is found as follows: In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/subscriber ; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels ; (3) the creditworthiness or financial strength of the creditor/subscriber ; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc., it would constitute acceptable proof or acceptable explanation by the assessee ; (5) the Department would not be justified in dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Holdings Pvt.Ltd., Kanodia Vyapaar Co.Pvt.Ltd. and clix securities Pvt.Ltd.), Certificate of Incorporation of these companies (except in the case of Goldstone Trading Co.Pvt.Ltd., Realstone trading Co.Pvt.Ltd., Abhiflax Tracon Pvt.Ltd., Allworth Commodities Pvt.Ltd., Goodview Trading Pvt.Ltd., Iris Commercial Pvt.Ltd., Neerav Holdings Pvt.Ltd., Apsara Fintrade Pvt.Ltd., Cosmic Trade and Investment Pvt.Ltd.). From an analysis of the above documents, we find that in the case of Neerav Holdings Pvt.Ltd. who is claimed to have made application for allotment of 800 preference shares of ₹ 1,000 each at a premium of ₹ 4,000/- per share, the share application form for allotment of 300 shares alone has been filed. Otherwise in respect of all the other shareholders there is proof of either filing return of income before Income Tax Authorities or Certificate of Incorporation issued by the Registrar of Companies. Even in respect of Neerav Holdings Pvt.Ltd., the application form for allotment of shares shows that they have given the income tax PAN No. (AABCN 1477C). 19. In respect of receipt of share application money of ₹ 6,42,00,000 for allotment of 12,840 shares, from 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20.00 lacs each bearing Cheque No.551059 dated 7/1/2006 and Cheque No.376956 dated 3/5/06 Both the cheques drawn on ABN Amro Bank, Brabourne Road Branch, Kolkata-1. The company is stated to be assessed to Income Tax under PAN No.AAACH 7761G. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution authorizing Rajesh Jain, its Director to make investments, Certificate of Incorporation of the company on 18/3/96, acknowledgement of having filed Income Tax return for A.Y 2006-07 declaring total income of ₹ 42,624/- on 23/10/06 has also been filed. Beside the above Memorandum and Articles of Association of the company, Directors s report as on 31/3/06 along with auditors report and balance sheet and P L Account as on 31/3/06 alongwith annexures was also filed. d) Chowdhary Consultants Pvt. Ltd.: This company made an application for allotment of 300 preference shares and paid a sum of ₹ 15.00 lacs along with the application by Cheque No.354335 dated 3.5.2005 drawn on ABN Amro Bank, Brabourne Road Branch, Kolkata-1. The company is stated to be assessed to Income Tax under PAN No.AABCC1035H. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to Income Tax under PAN No.AAACD 9089K. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution dated 15/9/04 authorizing Mr.Chandresh Kumar Jain, Director to make investments, Certificate of Incorporation of the company on 14/7/98, acknowledgement of having filed Income Tax return for A.Y 2006-07 dated 20/10/2006, Memorandum of Association and Articles of Association of the company, Directors report, auditors report and audited accounts for the year ending 31/3/06 has also been filed. h) Regal Commotrade Pvt. Ltd.: This company made an application for allotment of 640 preference shares and paid a sum of ₹ 32.00 lacs along with the application by D.D No.00006 dated 22/7/2005. The assessee had not filed the particulars of PAN or incorporation certificate. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution dated 29/6/03, authorizing Mr.Ajay Singh, Director to make investments and Memorandum of Association and Articles of Association of the company has been filed. i) Apsara Trex Pvt. Ltd.: This company made an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Association and Articles of Association of the company has been filed. l) Lily Enclave Pvt. Ltd.: This company made an application for allotment of 400 preference shares and paid a sum of ₹ 20.00 lacs along with the application. The assessee has not furnished the payment details, particulars of Bank, PAN etc. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolution dated 28/6/05 authorizing Mr.Anjani Banga, Director to make investments, Certificate of Incorporation of the company on 24/5/94, acknowledgement of having filed Income Tax return, Memorandum of Association and Articles of Association of the company has also been filed. m) Bhanu Computronices Pvt. Ltd.: This company made two applications for allotment of 1000 and 600 preference shares and paid a sum of ₹ 80.00 lacs along with the application by DD No.480865 dated 12/5/05 Frs.50.00 lacs and DD No.480884 dated 12/05/05 for ₹ 30.00 lcas. The assessee has not filed details of bank, PAN etc. The Assessee had filed copy of the application form for allotment of preference shares, Extract of the Minutes of the Board Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company. 22. We shall now see what is the evidence gathered by the AO against the Assessee. It has also to be mentioned that the Director of the Assessee was examined by the AO and in his examination he denied having given cash to the companies which made application for allotment of shares of the Assessee. The copy of the statement of the Director is at page-381 to 387 of the paper book. The other facts with regard to the evidence gathered by the Assessee are in the case of the Assessee are identical to the case of Chat Computers Ltd. (supra) and the Tribunal has already analysed the evidence gathered by the AO against the Assessee and has held as follows: 6. It is evident from the assessment order that the Assessing Officer has not conducted any independent enquiry during the assessment proceedings; but simply relied upon the report of the ADIT(Inv), Unit 1, Kolkata as well as the statements of the directors of various Kolkata based companies, who have paid the application money. The said investigation by the ADIT(Inv) Unit 1, Kolkata was not carried out during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see categorically denied, during the investigation, the allegation of giving cash to those investing companies then the onus is on the revenue to prove that the application money received by the assessee is assesse s own money routed through those applicants companies. There is no evidence or material brought on record by the Assessing Officer, except the uncross examined statements of the third party, to show any movement of cash routed back to the assessee in form of application money in the alleged allotment of cumulative preferential shares. Rather, it is undisputed fact that the application money was received through account payee cheque/bank draft given by the investing companies from their respective bank account. It is also an accepted fact that source of the application money was found in the bank account of the investing companies deposited through account payee cheques; therefore, no cash transaction was found by the Assessing Officer in the bank account of the investing companies. 6.4 The Assessing Officer doubted the movement of cash from the assessee as being passing through various levels and reached to the assessee company. However, no finding has been given to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question No. 4, of all the statements, which shows that questionnaire was already prepared and answers were already written in the same manner as it is evident from the answer to question no.6 as under: Question No. 6 Do you have to say anything else? Ans: I have gone through the above statement and the same has been recorded correctly and without any fabrication. The above statement gas been given by me without the use of any force, coercion or threat. The mistake in the answer no. 6 is also identical in all the statements recorded on different dates. Since the statements were recorded by the investigation team of ADIT(Inv) Unit 1, Kolkata and not during the proceedings before any Court of law; therefore, all these facts suggest and indicate to believe that the same are not recorded as a verbatim of what the concerned person stated; but obtained by the department in a mechanical manner. However, without going into validity of the statements when all other records, material and documentary evidences contradict and nullify the statements then the reliance placed by the Assessing Officer on such statement is highly unjustified and improper. 7. Even otherwise, in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as observed in paras 11 to 16 as under: It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove : (a) the identity of shareholder ; (b) the genuineness of transaction ; and (c) the creditworthiness of shareholders. 12 In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc., can be furnished. 13 The genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers of that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be copies of the shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that summons issues to the investors were returned back with the endorsement not traceable . The same view is taken by the Karnataka High Court in Madhuri Investments Pvt. Ltd. v. Asst. CIT (in I. T. A. No. 110 of 2004, decided on February 18, 2006). In this case also, some of the share applicants did not appear and notices sent to them were returned with remarks with no such person . Addition was made on that basis which was turned down by the High Court in the following words : 6. Having heard the learned counsel for the parties, we notice that whenever a company invites applications for allotment of shares from different applicants, there is no procedure contemplated to find out the genuineness of the address or the genuineness of the applicants before allotting the shares. If for any reason the address given in the application were to be incorrect or for any reason if the said applicants have changed their residence or the notices sent by the Assessing Officer have not been received by such applicants, the assessee-company cannot be blamed. Therefore, we are of the view that the Tribunal was not justified in allowing the appeal of the Revenue only relying upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court, the court while reversing the decision of the High Court held that the findings of the Assessing Officer, Commissioner of Income-tax (Appeals) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process of banking transaction as not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact. While doing so, the legal position contained in section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of section 68 of the Act suggests that (i) there has to be credit of amounts in the books maintained by the assessee ; (ii) such credit has to be a sum of money during the previous year ; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books, or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money by issuing shares with the help of formation of an investment which was reversed by the Tribunal, this court held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This view was confirmed by the apex court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263. 24. Having taken note of the legal position in detail, we now proceed to decide each appeal on the application of the aforesaid principles. I. T. A. No. 2093 of 2010 and I. T. A. No. 2095 of 2010 9. It is clear from the decision of the Hon ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra) that once the assessee filed copy of PAN, Acknowledgement coy of the return of income of the investing companies, their bank accounts statements for the relevant period; then even the parties were not produced in spite of the specific directions of the Assessing Officer, the addition could not be sustained as the primary onus was discharged by the assessee by producing the PAN, balance sheet, copy of the acknowledgement copy of return of the applicants etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee. In this view of the situation, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) vide which addition made on account of share application money has been deleted. 34 Having regard to the decisions noted above, we are of the view that the addition was rightly deleted by the Commissioner of Income-tax (Appeals) and the Tribunal. Requisite documents were furnished showing the existence of the shareholders from bank accounts and even their incometax details. From bank accounts of these shareholders, it was found that they had deposed certain cash and source thereof was questionable. The Assessing Officer should have made further probe which he failed to do. Moreover, the remedy of the Department lies in reopening the case of these investors and the addition cannot be made in the hands of the assessee. Thus in view of the above observation of hon ble High Court when requite document were produced and available with the A O to establish that no cash was deposited in the bank accounts of the investing companies then without further probe to prove contrary the addition in the hand of the assesse cannot be made. 13. As regards the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records of the Assessing Officer on the reason as recorded in para 13 as under: 13. In view of the above, prima-facie it cannot be concluded that the assessee received share application money which cannot be treated as unaccounted income. Complete facts are not on record to give such a finding. However, it is noticed that the assessee was not given proper opportunity to substantiate its claim and defend the department s observations/allegations. It is also noticed that the Department has not followed up its own investigation to its logical end and not placed on record the complete enquiries made in the case of Madhavpura Mercantile Cooperative Bank Ltd. or in the group companies so as to come to a conclusion that about the source of funds received. The status in the hands of those companies who were also alleged to have received funds in cash has not been placed on record. Since it is one of the contentions of the assessee that they were not given proper opportunity in the course of the assessment and also raised ground that adequate opportunity for cross examination of said companies has not been allowed to the assessee, we are of the opinion that the issue require set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ospitalities P Ltd (supra), we are of the considered opinion that the issue can be decided on merit and need not to be remand to the record of the AO because at the time of the order for the AY 2005-06, the coordinate Bench of the Tribunal was not having the benefit of the decision of the Hon ble Delhi High Court in the case cited supra. Further in view of the decision of hon ble Gujrat High Court in case of Rajeh Babubhai Damania (supra), we see no reason for giving the A.O. any further innings to fill up the lacunas or lapses in the assessment which would cause a great injustice to the assesse. 15. In view of the above discussion and the facts and circumstances of the case, the share application money cannot be treated as income of the assessee company until and unless it is proved beyond doubt that the assesse s own money has come back through some closely related applicant. Once the identity of the applicant is disclosed and found as correct then, even if the said transaction is suspected by the revenue authorities, the same cannot be treated as income of the assessee company which is a public limited company. Accordingly, we delete the addition made by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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