TMI Blog2017 (5) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... n of proof in terms of the settled dicta in Divine Leasing (2006 (11) TMI 121 - DELHI HIGH COURT ). It is only logical to expect that if the AO was not convinced about the genuineness of the said documents, he would have inquired into their veracity from the bank(s) to ascertain the truth of the assessee’s claims. Having not done so, he was not justified in disregarding the assessee’s contentions that the infusion of monies into its accounts was legitimate. Consequently, the AO was not justified in making additions of the various sums under Section 68 - Decided in favour of assessee. - ITA Nos. 547, 549 & 555/2013, ITA Nos.596, 597, 598, 599, 600 & 601/2015 - - - Dated:- 15-12-2016 - MR. S. RAVINDRA BHAT MR. NAJMI WAZIRI JJ. Appellant Through: Mr. Mayank Aggarwal, Advocate for Mr. Ajit Sharma, Advocate., Mr. Dileep Shivpuri and Mr. Vikrant A. Maheshwari, Advocates. Respondents Through: Mr. Rudra Kahlon, Advocate. Mr. Aryama Sundaram, Senior Advocate with Mr. Sandeep Kapur and Mr. Ajay Wadhwa, Advocates. NAJMI WAZIRI, J.:- 1. These appeals have been preferred by the Revenue under Section 260-A of the Income Tax Act, 1961 (hereinafter to be referred as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness of the foreign investor, given the circumstances of the case?; and 2. Are the findings of the Tribunal on this score perverse on the face of the record? 4. The assessee company is a subsidiary of M/s Russian Technology Centre Holding Ltd. (for short RTCHL ), based in Tortola BVI, which had received various amounts towards share capital and increase in unsecured loans from RTCHL and M/s Protex Trading Company Ltd. The latter company is based in the Republic of Seychelles. The additions received from the Russian based promoter company in AY 2002-03 amounted to ₹ 24,44,300/-. The additions received from RTCHL and Protex Trading Co. Ltd in AYs 2005-06 and 2007-08 amounted to ₹ 55,44,000/- and ₹ 1,17,72,500/- respectively. For the said receipts, the AO had sought details of the depositor s bank accounts along with the cheque number and date; copy of the acknowledgment of return of income etc. The assessee by its letter dated 23.12.2008 had replied that the shares had been allotted to foreign companies as per the chart detailing the addresses, shares allotted and amounts paid, which was annexed as Annexure-I to the said letter. To prove the genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the creditworthiness of the shareholders nor the genuineness of the transactions. Hence, in a way, the CIT (A) had given a finding on the merits of the additional evidence which itself would lead to the conclusion that the additional evidence had been admitted by the CIT(A). The relevant portion of the impugned order reads as under:- 7. Apropos the grounds about additional evidence, we have heard rival contentions and perused the relevant material on record. The assessee had already filed various documents in respect of identity, genuineness and creditworthiness of the shareholders. In our considered view when the assessee is able to make out a case of insufficient time for complying with the requirement, the additional evidence is to be admitted as per the prescription of Rule 46A. Besides, the remand was called by CIT(A) from assessing officer and further assessee was asked to file the rejoinder thereon. After consideration of entire material in this behalf, the CIT(A) has given findings on the contents of the additional evidence. In our view, all these circumstances lead to a conclusion that CIT(A) considered the additional evidence and gave a finding on merits against a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n given by remitter towards remittance for share capital (vi) Copy of FIRC (vii) Copy of bank statements (viii) Copy of Form 2 filed with ROC 8. The Tribunal considered the contentions of the assessee that:- (ii) The assessing officer has failed to consider the Hon'ble Supreme Court judgment in the case of Lovely Exports and various other judgments which describe the primary burden cast on the assessee while proving the share application money. Ignoring various documents procured from FIPB confirmations, ROC records, vehement insistence has been made only on the bank statements of the shareholders. According to ld. Counsel when the burden of the assessee can be amply proved from the documents filed by it, cash credit/share application money cannot be held to be non-genuine without adjudicating them and picking up the non-filing of bank statements of shareholders. The assessing officer has a quasi judicial duty to weigh the quality of evidence produced before it and if it is sufficient to discharge the burden of assessee, the same cannot be cryptically disregarded in the pretext of document which was not filed by the assessee. 9. It then concluded that:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not get registration, it cannot be held that till 31-3-2003 the assessee had set up its business also. In view thereof, we hold that for A.Y.2002-03 and 2003-04, the expenditure has been rightly disallowed, as in our view business of the assessee was not set up. 14.1. Apropos A.Y. 2005-06, the assessee had obtained the registration and participated in the tenders invited by the Ministry of Defence for which necessary evidence, has been referred in the form of correspondence demonstrating the negotiations at various stages. Thus, in A.Y. 2005-06, the assessee was in a state of readiness to obtain the orders if found successful for tendering/bidding. Thus, we hold that in A.Y. 2005-06 the assessee had set up its business and respectfully following the judgment of Hon'ble Delhi High Court in the cases of ESPN Software India P. Ltd. (supra); CIT Vs. Hughes Escorts Communications Ltd. (supra); and Aspentech India (P) Ltd. (supra), the business of the assessee for A.Y. 2005-6 was already set up and the expenditure incurred by it is to be allowed as revenue expenditure. 15. Next ground for A.Y.2005-06 pertains to addition of ₹ 5 lacs being unsecured loans receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the preponderance of evidence indicates absence of culpability 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 a public issue. the Company concerned cannot be expected to know every detail 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 the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee: if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. xxxx xxxx xxxx xxxx 16. In this ..... 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