TMI Blog2017 (2) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... Per R. C. Sharma (A.M): These are appeals filed by the assessee against the order of CIT(A) for the assessment year 2009-10 and 20110-11 in the matter of order passed u/s.143(3) of the I.T Act. 2. In both the years common grievance of assessee relates to addition made u/s.68 in respect of share application money received during the years under consideration. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that assessee is a Builder and Developer. Information was received by AO from the investigation wing of income tax department vide letter Dt.12/09 /2011. As per this information, a search action was conducted at the premises of One M/s. Mahasagar Securities Pvt. Ltd. In the concerned search action, it was found that the company was floated by one Mr. Mukesh Choksi. In addition to this company, Mr. Mukesh choksi also floated many more companies, having same registered address. As per report Mr. Mukesh Choksi accepted that he used to give accommodation entries to various persons through his various companies. 5. During the course of scrutiny assessment AO asked about the same, assessee submitted the copies of cheques received and also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of above mentioned four parties the AO alleged that these are companies floated by Shri Mukesh Choksi and were engaged in bogus share capital introduction. 10. The Hon'ble Mumbai ITAT has given its decision in respect of the above mentioned parties at para 6, page no 5 to 6 of the order as follows: 6. We have heard the rival submissions and given a thoughtful consideration to the orders of the authorities below and with the assistance of the Ld. Counsel, we have considered the relevant documentary evidences brought on record and referred to before us. The undisputed facts are that out of six companies viz., M/ s. Kaycee share Broking Pvt. Ltd., M/ s. Mihir Agencies Put. Ltd. M/s. Alliance Intermediateries Network Pvt. Ltd.,M/ s. Mahasaqar 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 AO to justify the addition. It is also an undisputed fact that transactions with these companies have been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D Bench has decided the following cases in favour of the assessee on similar issue: a. ITO - 10(2)(1) vs. M/ s. Deep Darshan Properties Pvt Ltd in ITA No. 2117/Mum/2014: AY 2006-07 and ITA No.2118/ Mu m/ 2014 : AY 2007-08 b. ITO -10(2)(3) vs. Aajivan Computers Pvt Ltd in ITA No.2160/ Mum/ 2014:A Y 2006-07 c. ITO -10(2)(3) vs. Dignity Securities Trading Pvt Ltd in ITA No.2157/Mum/2014:AY 2006-07 d. ITO -10(2)(1)vs. M/ s. Blue Hill Properties Pvt Ltd in ITA No.2119/Mum/2014:AY 2006-07 2.3 It was also pointed out in the case of CIT vs. M/ s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC), it was held as under:- If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company. 2.4 In this background, it was submitted on behalf of the assessee that the Assessing Officer failed to appreciate that there is no documentary evidence against the assessee- company to support such impugned additions. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated to Mr. Mukesh Choksi's case of investment in share application. The ratio of Charti Syntex Ltd. (ITA nos 172 1731 Jp/2010) makes it clear that if a share holder has invested the money and if assessee receives such money as share application money and assessee during assessment proceedings provides the details like name and address of corporate entity, PAN no., ROC no., then this may be referred to the concerned Assessing Officer for proceedings against such share holders instead of adding the amount u/s.68 of the Act in the hands of assessee company. This view has been upheld by Hon'ble Bombay High Court in case of CIT vs. Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom) by observing as under: If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department can always proceed against them and if necessary reopen their individual assessments. Held, dismissing the appeal, that there was no dispute that the assessee had given the details of names and addresses of the share holders, their PANI GIR numbers and had also given the cheque numbers, name of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to the assessee before using these statements against the Assessing Officer. Following submissions have been made before us, in support of the claim made by the assessee: (i) The share application form. is the confirmation of the share applicant. The share allotment in compliance of Companies Act 1956 in Form NO.2 is factually evident of the share capital. (ii) Funds of the share capital subscription are through banking channel and reflected in the bank statement. (iii) The allotments of the shares are recorded in the minutes of the company which are kept in accordance with the applicable provisions of the Companies Act 1956. (iv) All shares subscription of the company are duly incurred by corporate entities having Income Tax Permanent Account Number and are filing returns of income and are duly assessed and thus, identity of the shareholders is also established. (v) Applicant's name is not mentioned in any of the statement of Mr. C. Choksi Group recorded by the IT Department. In view of these peculiar facts and circumstances, we find that the assessee discharged its onus as per law, as stipulated section 68 of the Act. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 Copy of the Resolution passed by Alliance Intermediateries Network Pvt. Ltd for subscription of shares of the assessee company 11 Copies of the share application documents forwarded by the said Alliance Interrnediateries Network Pvt. Ltd., for subscription of 600 equiry shares of the assessee 12 Copy of the confirmation in respect of subscription of shares issued by the said Alliance Intermediateries Network Pvt. Ltd. to the assessee. 13 Copy of the bank statement extracts of the said Alliance Intermediateries Network Pvt. Ltd. in respect of the amount paid to the assessee by it from its Current Alc No.: 641405050107, maintained by it with ICICI Bank. 14 Copy of the demand draft I bankers cheque for a sum of ₹ 15 Lacs on 07.02.2009 issued by ICICI Bank on behalf of the said Alliance Intermediateries Network Pvt. Ltd. 15 Copy of the certificate of incorporation of Alpha Chemie Trade Agencies Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledgement of furnishing of the return of income by Goldstar Finvest Pvt. Ltd. for AY 2007 - 08 34 Copy of the Resolution passed for subscription of 200 equity shares by the said Goldstar Finvest Pvt. Ltd., 35 Copies of the documents in respect of subscription of 200 equity shares by Goldstar Finvest Pvt. Ltd. 36 Copy of the confirmation issued by Goldstar Finvest Pvt. Ltd.for subscription of 200 equity shares. 37 Copy of the bank statement of Goldstar Finvest Pvt. Ltd. with ICICI Bank Current Alc No.: 64140500109. 38 Copy of the demand draft for a sum of ₹ 5 Lacs issued by ICICI Bank. 39 Copy of the certificate of incorporation of Kaycee Shares Braking Pvt. Ltd. 40 Copy of the PAN of the said Kaycee Shares Braking Pvt. Ltd. 41 Copy of the acknowledgement of furnishing of the return of income by Kaycee Shares Braking Pvt. Ltd. for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies which were allegedly a part of Mahasagar Securities Pvt. Ltd., owned by one Mr. Mukesh Choksi who was alleged to provide accommodation entries as per inquiry conducted by the Investigation Wing in the case of Mahasagar Securities Pvt. Ltd. Name of Company No of Shares Amount Alliance Intermediaries Pvt. Ltd., 600 75,00,000 Goldstar Finvest Pvt. Ltd., 200 25,00,000 Buniyad Chemicals Pvt. Ltd., 200 25,00,000 Kayee Share Broking Pvt. Ltd., 200 75,00,000 Mihir Agencies Pvt. Ltd., 600 25,00,000 Alpha Chemie Agencies Pvt. Ltd., 200 25,00,000 2000 2,50,00,000 23. The shares were issued at face value of ₹ 100/ - and premium of ₹ 19,900 / - per share. The share premium was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- v Mihir Agencies Pvt. Ltd., 600 AAGFM0809D 15,00,000/- vi Alpha Chemetrade Agencies Pvt. Ltd., 200 AAGFA0609P 5,00,000/- Total 2000 50,00,000/- 28. Since there was a failure to pay the last call money of ₹ 5,000/- per share by all the shareholders as stated above, the shares in question were forfeited. 29. As per the decision relied on by learned AR as reproduced above, the assessee has filed all the documentary evidence in support of share capital so received. In all these decisions, additions were made by AO on account of share subscription made by the group concerns of Shri Mukesh Choksi, on the plea that same was bogus and not genuine. 30. As can be observed from the above decisions, additions made under section 68 for share application money introduced by the following companies owned by Mr Mukesh Choksi were deleted: i. Alliance Intermediaries Pvt Ltd ii. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garded as undisclosed income of assessee company. 36. We also found that vide letter dated 16/12/2011, the assessee requested AO to furnish material in respect of such evidence collected by him with a request to provide for cross examination of Shri Mukesh Choksi. However, the AO did not furnish the material on the basis of which he had come to this adverse conclusion nor was an opportunity, afforded to the assessee to cross examine Shri Mukesh Choksi in this regard. 37. We also found that the AO had never forwarded the material collected from the shareholders by the investigation wing, for the assessee's rebuttal including the opportunity called for by the assessee for cross examination of Shri. Mukesh Choksi. We also found that statement given by Shri. Mukesh Choksi, reproduced by the AO in Para 5 of the Assessment Order is too general and does not particularly mention about shareholding in the assessee company. Hon ble Bombay High Court in the case of H.R. Mehta vs ACIT (387 ITR 561) for addition made under section 68 towards loan amount in hands of assessee on basis that no confirmation letter had been obtained from lender nor any other verifiable evidence in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has discharged the onus cast upon by proving the identity, genuineness and creditworthiness-of the parties from whom it had received share application money. 40. It was also argued by learned AR that Assessing Officer has made the addition merely on the basis of information received from the Investigation Wing in respect of search took place on Mahasagar Securities Pvt Ltd which was floated by Shri Mukesh Choksi. The AO has neither submitted the details of the information received and the copy of the statement recorded of Shri Mukesh Choksi to the Assessee nor allowed the assessee to cross examine. The AO has not proved that the investment actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee and in absence of such findings, addition u/s.68 is not warranted. 41. As per learned AR even, the findings of the CIT(A) for AY 2009 - 10 upholding the addition made of ₹ 2.50 Crores is on the basis of the theory of preponderance of probability. 42. Our attention was also invited by learned AR to the fact that share premium was decided after obtaining a share valuation report from E. A. Patil Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the frequencies and probabilities; c) The appellant's books does not show any drawings on race days or on the immediately preceding days for the purchase of the jackpot combination tickets, which entitled sizeable amounts varying generally between ₹ 2,000 to ₹ 3,000. The drawings recorded in the books cannot be eo- related to the various racing events at which the appellant made the alleged winnings; d) While the appellant's capital account was credited with the gross amounts of the race winnings, there were no debits either for expenses and purchase of tickets or for losses; and e) In view of the exceptional luck claimed to have been enjoyed by the appellant, her loss of interest in races from 1972 assumes significance. Winnings in racing became liable to income-tax from 1-04-1972 but one would not give up an activity yielding or likely to yield a large income merely because the income would suffer tax. The position would be different; however, if the claim of winnings in the races was false and what was passed off as such winnings really represented the appellant's taxable income from some undisclosed sources. 46. After carefully g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came from the coffers of the assessee company. 50. The CIT(A) has also relied on the decision of Allahabad High Court in case of Banarasi Prasad 304 ITR 239. In this case, the assessee had certain entries in his books of account showing receipts from his wife and minor son. Since he was not able to explain the source of income in the hands of his wife and son, the Assessing Officer made additions under section 68. On second appeal, the Tribunal upheld the addition holding that in the case of cash credits in the assessee's books in the names of close relatives, the burden of proof on the assessee under section 68 required him to establish the nature and source of the amount which was affirmed by the HC. The said case being rendered in the special circumstances being credits were received by the assessee from close relatives like his non-earning wife and minor son, the ratio of aforesaid decision cannot be applied to the assessee s case. 51. In view of the above discussion, we do not find any merit in the action of the lower authorities for making addition u/s.68. 52. In the result, appeals of the Assessee are allowed. Order pronounced in the open court on this 05/12/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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