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2016 (5) TMI 57 - ITAT MUMBAI

2016 (5) TMI 57 - ITAT MUMBAI - [2016] 46 ITR (Trib) 201 - Addition u/s 68 - Held that:- Assessing Officer was not satisfied with the submissions of the assessee, he pointed out some discrepancy in the balance-sheet of M/s. Buniyaad Chemicals Ltd. and treated the amount of shares capital as unexplained cash credit under section 68 of the Act, and added the same to the income of the assessee. But before doing so, the Assessing Officer neither provided an opportunity of cross- examination of his w .....

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well as evidences collected by him directly from the shareholder company which confirmed the claim of the assessee. Thus we find that in the peculiar facts and circumstances of this case, the addition made by the Assessing Officer is not sustainable as per the law and the same is directed to be deleted. - Decided in favour of assessee - I. T. A. No. 680/Mum/2012 - Dated:- 30-11-2015 - Sanjay Garg (Judicial Member) And Ashwani Taneja (Accountant Member) For the Petitioner : Sanjiv M. Shah For th .....

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the learned Commissioner of Income- tax (Appeals) erred in confirming the addition of share application money of ₹ 55,25,000 as unexplained cash credit under section 68 of the Income-tax Act, 1961, on the ground that genuineness of the transaction could not be established and the amount received was not fully explained to the satisfaction of the learned Assessing Officer. 2. On the facts and in law, the learned Assessing Officer erred in reopening the assessment under section 147 of the I .....

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by Shri Sanjiv M. Shah, authorised representative (AR) on behalf of the assessee and by Shri Arvind Kumar, Departmental representative (DR) on behalf of the Revenue. 4. Ground No. 1 : In this ground the assessee has challenged the action of the learned Commissioner of Income-tax (Appeals) in confirming the addition of share application money of ₹ 55,25,000 as unexplained cash credit under section 68 of the Income-tax Act 1961. 5. In this case the brief facts are that the original assessme .....

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r the assessee submitted its detailed submissions vide letter dated October 20, 2010. The contents of the same are reproduced herein for the sake of ready reference : "The assessee-company submitted that sufficient evidence has already been furnished at the time of assessment in to prove the genuineness of the transactions and the copies of the bank 'statement' were submitted, confirmation of purchase of share was filed by M/s. Buniyaad Chemicals Ltd. in response to notice under sec .....

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g cash, especially when the whole transaction was made through proper banking channels. The assessee has further submitted that the identity of the investor has been proved by furnishing Income-tax acknowledgment, the genuineness of the transaction is proved by the entries reflected in the bank accounts and the credit worthiness of the investor has been proved from the balance-sheet and therefore, no addition can be made on the basis of information received from the Director of Income-tax-2(3), .....

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do not have any control over the filing of financial statements of Buniyaad Chemicals Ltd. and do not know what figures were filed by them before their Assessing Officer. However, in response to the notice under section 133(6) they have furnished the audited balance-sheet and profit and loss account. 4. Without prejudice to the above submissions, even if some discrepancies are found in the financial 'statements' of Buniyaad Chemicals Ltd. then the additions should be made in their hands .....

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decision of the hon'ble Rajasthan High Court in the case of Shree Barkha Synthetics Ltd. v. Asst. CIT [2006] 283 ITR 377 (Raj) ; [2006] 155 Taxman 289 (Raj), where it is held that once the receipt of confirmation letters from the creditors is proved and the identity and the existence of the investor has not been disputed, no addition on account of share application money in the name of such investor can be made in the hands of the company. 6. In the assessee's case identity of the subsc .....

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ll Mehul Chokshi or Buniyaad Chemicals are not in a position to explain the sources of the investments made, then the additions under section 68 can be made only in their hands and not in the case of company where they have invested. For these submissions, reliance is placed on the decision of the hon'ble Supreme Court in the case of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 (SC) ; [2008] 216 CTR (SC) 195." 8. It is noted that the Assessing Officer preferred to rely upon the .....

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assessee filed detailed submissions and relied upon the evidences filed by it before the Assessing Officer for the purpose of discharging its burden under section 68, but the learned Commissioner of Income-tax (Appeals) was not satisfied with the submission and evidences of the assessee, and endorsing the observations of the Assessing Officer, he confirmed the addition made by the Assessing Officer. 10. Being aggrieved the assessee has filed an appeal before the Tribunal. 11. During the course .....

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een asked by the Assessing Officer, from the said company directly. Without bringing anything contrary to negate the evidences brought on record by the assessee, the Assessing Officer made addition on the basis of general and vague "statement" of Mr. Mukesh Choksi. It was submitted that the "statement" of Mukesh Choksi was not recorded in the presence of the assessee nor was it recorded by the Assessing Officer of the assessee. Under these circumstances, the Assessing Officer .....

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actions. Lastly, he placed reliance on various judgments in support of his claim. Reliance was placed on the judgment of the hon'ble Bombay High Court in the case of CIT v. Creative World Telefilms Ltd. dated October 12, 2009 [2011] 333 ITR 100 (Bom), CIT v. Lovely Exports P. Ltd (supra) and the decision of the co-ordinate Bench of the Income-tax Appellate Tribunal in the case of ACIT v. Krishna Sheet Processors Pvt. Ltd. 44 CCH 280 Mum-Trib. It was submitted that in the case of Krishna Shee .....

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of the Tribunal in the case of Deputy CIT v. Pratiksha Mercantile P. Ltd. I. T. A. No. 2096/Mum/2011 dated August 10, 2012 wherein the judgment of the hon'ble Supreme Court in the case of CIT v. Lovely Exports P. Ltd. (supra) has been discussed and distinguished the same on facts. It was requested that the orders of the lower authorities should be upheld. 13. We have gone through the submission made by both sides, orders of the lower authorities, the material placed before us for our consid .....

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(iii) Copy of the bank "statement" of the said company showing payment to the assessee-company by cheque, it was also shown therein that no amount of cash was deposited prior to issuance of cheque in favour of the assessee-company. (iv) Copy of bank statements of the assessee-company showing receipt of capital by cheques. (v) Copy of statutory register of members maintained by the assessee- company showing the name of M/s. Buniyaad Chemicals Ltd. in the list of members. (vi) Copy of sh .....

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of association of the said company to show that the said company was registered with the Registrar of Companies, Government of India. 14. It is further noted by us that the Assessing Officer had issued show- cause notice under section 142(1) dated December 3, 2010 to the assessee, wherein this fact was acknowledged by him that he had made direct inquiries with the said company, and in response to the same, he had received confirmation from the said company and various other supporting documents .....

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. The co-ordinate Bench of the Tribunal has dealt this issue in numerous cases where addition was made by the Assessing Officer on the basis of "statement" of Mr. Mukesh Choksi. 15. First of all, we refer to the decision of the Mumbai Bench of the Tribunal in the case of ACIT v. Krishna Sheet Processors Pvt. Ltd. (supra). In this case also, the addition was made on the basis of the statement of Mr. Mukesh Choksi. After considering the entire facts of the case, the co-ordinate Bench del .....

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and Network Pvt. Ltd., M/s. Mahasagar Securities Pvt. Ltd., belong to Shri Mukesh Choksi group. The only reason for making the addition was that during the course of search operation Shri Mukesh Choksi admitted that he is a name lendor and arranging profits/loss/share application money to various persons. Except for this, there is nothing on record brought by the Assessing Officer to justify the addition. It is also an undisputed fact that transactions with these companies have been done through .....

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rans actions with the assessee-company non-genuine. The transactions have been done through account payee cheque and it is not a case of the Revenue authorities that prior to issuing the cheques the applicants have deposited cash in their respective bank account. The hon'ble Supreme Court in the case of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 (SC) ; [2008] 216 CTR (SC) 195 has held that if the share application money is received by the assessee-company from alleged bogus shareho .....

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d by the assessees themselves which have been ploughed back as share capital in the books of the assessees. The transaction is, therefore, appears to be not genuine. 6.2 We have carefully perused the bank 'statement' brought before us which are placed in the paper book. We do not find any strength in the allegation made by the Assessing Officer. Allegations are baseless and without any supportive evidence. On the contrary, these two companies have paid share application money from their .....

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n record before us, we do not find any reason to interfere with the findings of the learned Commissioner of Income-tax (Appeals). 6.4. In the result, the appeal filed by the Revenue is dismissed." 16. In another case, a similar view has been taken by the co-ordinate Bench in the case of Yamuna Estate P. Ltd. v. ITO in I.T.A. No. 2672/M/ 2012 dated September 9, 2015 [2016] 45 ITR (Trib) 517 (Mum). We find it appropriate to reproduce hereunder the relevant observations by the hon'ble Benc .....

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ssing Officer has made additions on the basis of general statement of Mr. Chokshi made before the Investigation Wing. The name of the assessee did not appear specifically in any of the statements of Mr. Chokshi. The assessee was not provided opportunity to confront Mr. Chokshi in relation to transactions related to the asses see. The assessee before the Commissioner of Income-tax (Appeals) has also submitted the confirmation of Sh. Mukesh Chokshi about the share transactions done through his sha .....

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witnesses or to compel the production of records before him. Hence under such circumstances, merely because the assessee could not produce Mr. Chokshi before the Assessing Officer, that itself is not a sufficient ground for the confirmation of the additions. If the Assessing Officer required the presence of Mr. Chokshi before him, he could have exercised his powers under the Act to secure the presence of Mr. Chokshi before him. Even the learned Assessing Officer, in his remand report, has not co .....

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