TMI Blog2011 (4) TMI 1433X X X X Extracts X X X X X X X X Extracts X X X X ..... with the service of a notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on 26-10-2006. During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that the assessee received an amount of ₹ 53 lakhs in the year under consideration from the following parties towards share application money :- Sr. No. Applicants Opening balance Fresh received Amount returned. Shares allotted. Closing Balance. During the year. 1. M/s. Rich Financial Services Pvt.Ltd. Kolkatta. Point 2500000 2500000 2000000 000000 2000000 2. M/s. Prerana Supply Pvt.Ltd., Kolkatta. 3. Hanuman Coke Plant Pvt. Ltd. Kolkatta. 4. M/s. Olypab Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, we found that cash is/are deposited in certain account(s) for routing a few other accounts maintained with the same bank to reach the beneficiary. Bhudapest Traders Pvt. Ltd., paid money by cheque for acquisition of the shares. The source of investment was stated to be sale of shares, share application and refund of advances from other companies. Documents collected from the investors as well as Inspector's reports are enclosed. 3. In the light of the aforesaid report of the Addl. D.I.T.(Inv.), Unit-I, Kolkata, the Assessing Officer show caused as to why the aforesaid amount of ₹ 53 lacs be not added under section 68 of the Act. In response the assessee submitted vide letter dated 26-12-2007 that all the shareholders being in existence, no addition could be made. However, in the light of aforesaid findings of the Addl. DIT (Inv.) and relying upon the decisions in CIT vs. Nivedan Vanijya Noyojan Ltd. (2003) 263 ITR 623(Cal.), Hindustan Tea Trading Co. Ltd. v. CIT (2003) 263 ITR 289(Cal), Ruby Traders and Exporters Ltd's case (2003) 263 ITR 300 (Cal). CIT v. P. Mohankala (2007) 291 ITR 278(SC), Sumati Dayal v.CIT Bangalore (1995)(Supp.)(2 SCC 453)., CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any addition u/s. 68 of the I. T. Act in this case. The Ld. AR also drew my attention to the judgment of Hon'ble Supreme Court in the case of CIT vs. Lovely Export Pvt. Ltd. 216 CTR 195 and decision of various High Courts regarding this issue which has been decided in favour of the appellant. I have gone through the decision of the Hon'ble Supreme Court wherein it has been held that the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the A.O., the Department is free to proceed to re-open their individual assessments, in accordance with law but it cannot be regarded as undisclosed income of the assessee company u/s. 68 of the I.T. Act. That being the case, I hold that even in law, no addition u/s. 68 of the I. T. Act can be made in respect of share application money received by the appellant company. Therefore, addition made u/s. 68 of the I.T. Act is directed to be deleted. 5.. The Revenue is in appeal before us against the aforesaid findings of the ld. C.I.T.(A).The ld. D.R. supported the order of the AO while the ld. A.R. on behalf of the assessee relied upon the findings of the ld. CIT(A) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons........ If the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as a capital receipt but if the assessee offers no explanation at all or the explanation offered is not satisfactory then, the provisions of s. 68 may be invoked . It is apparent that the Hon'ble Court had not reflected upon the question as to whether the burden of proof rested entirely on the assessee, and at which point, if any, this burden could justifiably be shifted to the AO. The Full Bench, in fact, clarified that they were not deciding as to whom and to what extent is the onus to show that an amount credited in the books of account is share capital and when does that onus stand discharged. This will depend on the facts of each case. Recently, Hon'ble Apex Court while affirming the order of the Hon'ble Delhi High Court in CIT Vs. Lovely Exports (Pvt. ) Ltd. CIT Vs. Divine Leasing Finance Ltd.,299 ITR 268(Del.) in 216 CTR (SC) 195 held that if the share application money is receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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