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2016 (4) TMI 853

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..... y: Shri O.P.Meena, Sr. D.R. For The Respondent : Shri Ved Jain, Adv., Shri Pranjal Srivastava, Adv. ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal is filed by the Department against the order dated 09.08.2010 passed by the Ld. CIT(A)-XIX, New Delhi for Assessment Year 2002-03. 2. The return of income for the year under consideration was filed declaring income at NIL. The return was originally processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called the Act ). Thereafter, on the basis of information received from the office of DIT (Inv.), New Delhi that the assessee had introduced unaccounted money of ₹ 24.00 lacs in its books through accommodation entries, the case was re-opened by issuance of notice u/s 148 of the Act. The Assessing Officer completed the assessment u/s 147/143(3) of the Income Tax Act, 1961 at an income of ₹ 24,00,000/- after adding ₹ 24.00 lacs on account of share capital as unexplained sum u/s 68 of the Act. The Ld. CIT (A), on appeal, deleted this addition. Now, the department is in appeal against the deletion by the Ld. CIT (A). 3. It is seen from the records that during the year, the asses .....

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..... onfirmation of shareholders with regard to share capital subscribed by them e) Affidavits with regard to the share capital subscribed by them f) Copies of return of allotment filed with the ROC for shares allotted to the applicants. 6. The Ld. CIT (A) held that the Assessing Officer had not verified the details furnished by the assessee and the income tax records of the shareholders/investing companies. He also held that the Assessing Officer had not controverted these facts before proceeding to make the addition. Thus, as per the Ld. CIT (A), the assessee had discharged its burden of providing basic details required for verification of the identity of the creditor, creditworthiness of the creditor and genuineness of the transaction. He also observed that the Assessing Officer had not brought anything on record to dispute the facts/details furnished by the assessee despite conducting independent inquiries in terms of section 133(6) of the Act. He, accordingly, deleted the entire addition. 7. The Ld. DR strongly supported the Assessing Officer s order. 8. The Ld. AR relied on the order of the Ld. CIT (A) and submitted that the assessee had proved the genuineness of th .....

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..... o the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company. Further, a distillation of the precedents yields the following proposition of law in the context of section 68 of the Income Tax Act. 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 credit worthiness or financial strength of the creditor/subscriber; (4) if relevant details of the address of 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 drawing an adverse inference only because the creditor/s .....

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..... 12. In the case of Anu Industries Ltd. vs ACIT (2009) 19 DTR (Del), Delhi ITAT observed as under:- We have considered the rival contentions and found that identity of the share applicants are not in dispute. The Hon ble Supreme Court in case of Divine Leasing Finance Ltd. (supra) has held that if the share application money is received by the assessee company even from the 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. Accordingly, addition made under s. 68 which was deleted by the Hon ble High Court was upheld by Hon ble Supreme Court. A perusal of the orders of the Hon ble Supreme Court in the case of Divine Leasing Finance Ltd. referred to supra is in regard to SLP filed by the Revenue against the order of the Hon ble jurisdictional High Court. The Hon ble Supreme Court has specifically with a speaking order dismissed the SLP. The Hon ble Supreme Court in the various decisions referred to by the learned Authorized Representative has categorically held that the addition in regard to the share capital cannot be treated as the undisclosed income of the assessee if .....

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..... . In these circumstances, respectfully following the decision of the Hon ble jurisdictional High Court as also Hon ble Supreme Court referred to supra, the addition made by the AO and deleted by the learned CIT (A) represented by the increase in share capital of the assessee cannot be treated as unexplained cash credits in the hands of the assessee. We have no hesitation to conclude that the assessee has provided necessary details including the ward/circle where the share applicants were assessed to income tax and discharged the onus cast on it. The share applicants were also allotted shares and the details were made available. The AO has not brought anything on record to dispute the facts/details furnished by the assessee. The AO has not found any discrepancy in the books of account and bank accounts maintained by the assessee. Thus, in our considered opinion, in views of facts as narrated above and the judicial pronouncements, the share capital to the extent of ₹ 24.00 lacs stands explained. Hence, the order of the Ld. CIT (A) does not call for any interference. Both the grounds of appeal are dismissed. 14. In the result, the appeal of the department is dismissed. The .....

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