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TMI Blog2016 (7) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has erred in deleting the addition by placing reliance on the decision in the case of Lovely Exports Pvt. Ltd. as the facts in the case differ with the Lovely Exports Pvt. Ltd. 3) The appellant prays that the order of ld. CIT(A) be set aside and the order of AO be restored." 3. Rival contentions have been heard and record perused. The facts of the case are that a search and seizure action u/s.132(1) of the Act was conducted in Chandbibi Zaidi Group of cases on 20.8.2009 and on subsequent dates by DClT (Inv), Unit-1(3), Mumbai. The assessee company was incorporated in May 2003 as a closely held company of Ms Chandbibi Zaidi. Post search enquiries conducted regarding the genuineness of the share capital introduced in the books of account of the assessee company lead to the addition u/s 68 of the Act treating the same as unexplained share capital. The details of the sums introduced in the books of account as investment in shares in respect of each of the assessment years are given as under:- F.Y. Share Capital Share Premium Share Application 2003-04 1,00,000 -- 44,00,000 2004-05 4,40,000 39,60,000 78,00,000 2005-06 -- -- 1,95,00,000 2006-07 31,70,000 2,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing in Guwahati conducted enquiries in respect of 3 share holders located in Guwahati. It is mentioned in the assessment order that the said 3 share holders have only filed replies in response to the summons issued without appearing in person though the summons were issued requesting for personal appearance. The field enquiry conducted by the inspector of Income-tax revealed that the said 3 companies did not exist in the address given. Similar enquires were also conducted in respect of 9 share holders located in Kolkata by the Investigation Wing Kolkata. The summons issued returned unserved with the postal remark "not known" in respect of 2 share holders. In respect of 7 other share holders, it is mentioned in the assessment order that only submissions were received and no one appeared though personal appearance was requested. The field enquiries conducted by the inspector of Income-tax revealed that no such companies existed in the given addresses. It is also mentioned in the assessment order that the returned income is disproportionate to the investments made by the companies located in Kolkata. 5. It is also mentioned in the assessment order that in the absence of advertisemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of CIT vs Lovely Exports (P) Ltd. [216 CTR 195]. The A.O. did not accept the decision in the case of Lovely Exports (P) Ltd. on the ground that the decision in the case of Lovely 'Exports (P) Ltd. and also in some other cases relate to public limited company and have received the subscription through the public issue as per SEBl's guidelines whereas the assessee company is a private limited company. It is also mentioned that the share applicants are aware of the existence of the company called as 'Lovely Exports (P) Ltd.' and the same cannot be said in the case of the assessee company. It was also mentioned that no investigation was carried out in the case of Lovely Exports (P) Ltd., but the investigation carried out in the case of assessee company reveals that the assessee failed to discharge the burden of genuineness of the share capital. On the contrary the AO. heavily relied on the decision of Hon'ble ITAT, Mumbai in the case of Pratiksha Mercantile Pvt. Ltd. I.T.A No. 2096/M/11 dated 10.8.2012. The AO. also relied upon the decision of Hon'ble ITAT Delhi in the case of Beautex India (P) Ltd. [34 SOT 465]. The AO. finally relied on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant company produced the share holders for examination by the AO. and the AO. recorded their statements u/s 131 of the Act. Since the share holders have been produced during the course of assessment proceedings any reference to the earlier enquiry conducted by the Investigation Wing stating that the share holders could not be located is of little consequence. These persons have appeared before the AO. thereby establishing their identity before the AO. In the statement recorded u/s131 of the Act all persons have confirmed that they have invested in the shares of the appellant company. In support of their assertion they also produced copies of the returns of income filed, bank statements showing the relevant transactions and the balance sheet in which the said transactions are reflected. In such circumstances I am of the view that the decisions in the case of Lovely Exports (P) Ltd. 216 CTR 195 and Steller Investments Ltd. 115 Taxman 99 by the Hon'ble Supreme Court of India are applicable in the case of appellant. 7.2 I is held in the case of Lovely Exports (P) Ltd. that if the share application money is received by assessee company from the alleged bogus share holders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m that of Lovely Exports (P) Ltd. In the case of the appellant company no statements have been brought on record to show that the transactions are not genuine. The enquiries conducted in respect of 7 share holders only shows that the funds have flown from one company to the other company and the income returned by the said companies is not matching with the the investments made. The finding of the enquiry is not sufficient to hold that the above mentioned companies are mere entry providers. There is no statement to this effect. There is no cash deposit prior to transfer of funds. Except in the case of account held by Shri R.K Parekh nothing is brought on record to show that the debit amounts are matching with the credit amounts. If the source for Shri R.K Parekh is doubted the same will be an issue in his case and not in the case of the appellant. If Shri R.K Parekh is proved to be not in existence then he being the first source for the deposits in the names of M/s S.S.Securities and M/s S.S.Securities Client Alc which are operated by Shri Sanjay Kumar Sarawgi who is the member of Gawahati Stock Exchange, further investigation could have been carried out in respect of these two acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Delhi High Court which held that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, could the amount of share capital be regarded as undisclosed income of the assessee. It was held that it might be that there were some bogus shareholders in whose names shares had been issued and the money might have been provided by some other persons and if the assessment of the persons who alleged to have really advanced the money was sought to be reopened, that would have made some sense but there was no reason why this amount of increased share capital could be assessed in the hands of the company itself. 7.5.2 It is held in the case of Lovely Exports (P) Ltd. that if the share application money is received by assessee company from the alleged bogus share holders whose names are given to the A.O. then the department is free to proceed to re-open their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income u/s 68 of the appellant company. The Bombay High Court in the case of Creative World Telefilms Ltd., 333 ITR 100 also followed the above deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of the appellant. 7.7 In view of the legal position and facts as mentioned above the addition made of Rs. 1,22,00,000/- for AY. 2005-06, Rs. 1,95,00,000/- for AY. 2006-07 and Rs. 3,40,00,000/- for A.Y.2007-08 on account of unexplained investment in share capital u/s.68 of the Act are hereby deleted. 8. Against the above order of CIT(A), revenue is in further appeal before us. 9. We have considered rival contentions and gone through the orders of authorities below. We have also deliberated the ratio laid down in the judicial pronouncements referred by lower authorities in their respective orders as well as cited by ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case and found from the record that all the shareholders in respect of which addition was made by AO u/s.68 had produced books of accounts in proceedings u/s.131. They had also filed their balance sheet, net worth statement etc. We found that source in the hands of all the shareholders were also proved by AO himself as per his observation in para 7.4 of his order. Deposits from S.S. Securities, Proprietor Mr. Sanjay Kumar Saraogi, who is Member of Gawahati St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll) CIT v. Samir Bio-Tech P. Ltd .. 325 ITR 294 (Delhi) CIT v/s Victor Electrodes Ltd 329 ITR 271 (Del) CIT v/s K.C.Fibres Ltd 332 ITR 481 (Del) CIT v/s STL Extrusion Pvt.Ltd 333 ITR 269 (M.P.) CIT v/s Arunananda Textiles Pvt. Ltd 333 ITR 116 (Karn) CIT v/s ASK Brothers Ltd 333 ITR 111 (Karn) CIT v/s Kamdhenu SHel & Alloys Ltd. 361 ITR 220 (Del) C IT v/s Oasis Hospitalities Pvt. Ltd 333 ITR 119 (Del) CIT v. Orbital Communication (P) Ltd. (Delhi) 3271TR 560 CIT v. Ambuja Ginning, Pressing and Oil Co. P. Ltd . 332 ITR 434 (Guj) CIT Kolkata III v/s Dataware Private Itd. Dated 21/9/2011 Reported in C.A. Journal April 2012 page 111 CIT v/s Dwarikadhish Investment LTD. 167 Taxman 321 (Del) S.C. dismissed special leave petition 314 ITR 3 CIT v/s Ujala Dying & Printing Mill Ltd. 328 ITR 437 (Guj) S.C. dismissed special leave petition 317 ITR (Sta) 1 10. In view of the findings recorded by CIT(A), all share holders are produced with their books & Bank statements, hence covered by Bombay High court in CIT v/s Tania Investment 322 ITR 394 (Bom). All are assessed since last 10 years. Acknowledgements of filling returns filed by share holders with AO under proceedings u/s 131. Maj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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