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Income Tax Officer, Ward 16 (2) , New Delhi Versus Tempo Appliances (P) Ltd.

2016 (4) TMI 853 - ITAT DELHI

Addition u/s 68 - Held that:- 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. 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 avail .....

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BER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Appellant by: 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) o .....

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f 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 assessee company had shown receipt of share application money/share capital of ₹ 24.00 lacs from the following companies in its books:- S. No. Name of the Company Amount 1 M/s Rabik Exports Ltd. 3,00,000 2 M/s Ethnic Creations Pvt. Ltd. 3,50,000 3 M/s Satwan .....

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Officer has acknowledged that the assessee had filed affidavits, copies of income tax returns, along with balance sheets etc. to substantiate the claim but no bank statements were filed initially. Information u/s 133(6) of the Act was called for and the bank statements were obtained from the bank. The Assessing Officer was of the opinion that the creditworthiness of the companies was not proved. The Assessing Officer also observed that it would be foolish for any prudent businessman to have inve .....

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Name and address of the shareholders b) Income Tax particulars of the shareholders c) Share application forms d) Confirmation 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/ .....

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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 the transactions. He submitted that it has also proved the creditworthiness or the financial strength of the subscriber/creditor. It has offered an explanation about the nature and source of money found .....

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elevant material placed on record. It is seen that the AO has not verified the details furnished by the assessee and I.T. records of the shareholders/investing companies. The averments of the assessee before the AO were not controverted by the AO. The assessee has discharged its burden of providing basic details which were required for verification to fulfill the conditions viz. identity of the creditor, creditworthiness of the creditor and genuineness of transaction as laid down by higher judic .....

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and complexity of the Assessee it should not be harassed by the Revenue s insistence that it should prove the negative. In the case of public issue, the company concerned cannot be expected to know every details pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement .....

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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 .....

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/subscriber denied of repudiated the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee; (7) the Assessing Officer is duty- bound to investigate the credit worthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. 10. With regard to the issue of share application money, while dismissing the SLP filed by the Department, the Hon ble Supreme Co .....

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d no infirmity with the impugned judgment. 11. The Hon'ble Delhi High Court in the case of CIT vs Nipun Auto Pvt. Ltd. (2014) 361 ITR 155 (Delhi) held as under:- 10. ………..Whereas in the present case, the identity of the two companies which are sister companies stood established. Furthermore, this is not a case of mere furnishing of copies of bank accounts of the subscribers. But, in the present case, as noted by the Commissioner of Income-tax (Appeals) the assessee had f .....

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ld not shift the burden back onto the assessee-company without the Assessing Officer producing any tangible material to doubt the veracity of the documents furnished by the assessee. The Income-tax Appellate Tribunal concurred with the views taken by the Commissioner of Income-tax (Appeals). 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. .....

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t 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 the sha .....

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nt does not have the means to make the investment, but the investment made by the applicant should be shown to have emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. It is noticed that the Revenue has not been able to specifically show that the investments had emanated from the coffers of the assessee in this case. In these circumstances, respectfully following the decision of the Hon ble jurisdictional High Court as also Hon ble Su .....

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share applicant in accordance with law. We direct accordingly. 13. It is seen that in the present case, the identities 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. The additi .....

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