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ITO, Ward-2, Ratlam Versus Dashrathlal Agrawal

2011 (11) TMI 782 - ITAT INDORE

ITA No.158/Ind/2009 - Dated:- 9-11-2011 - Joginder Singh (Judicial Member) And R. C. Sharma (Accountant Member) For the Appellant : Arun Dewan For the Respondent : Avinash Gaur ORDER Joginder Singh (Judicial Member) This is an appeal by the Revenue challenging the order dated 7.1.2009 of the learned Commissioner of Income Tax(A)Ujjain. The first ground raised is that on the facts and in the circumstances of the case, the ld. first appellate authority erred in deleting the addition of ₹ 2 l .....

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d, the learned counsel for the assessee Shri Gaur contended that the identity, genuineness and creditworthiness are proved, therefore, the impugned order was defended. 3. On perusal of record and after hearing the rival contentions, we find that the assessee is engaged in trading of cotton. The Assessing Officer made addition out of unsecured loan of ₹ 1 lac in the name of Shri Sitaram Lohariwala and ₹ 2 lacs in the name of Shri Hanuman Prasad Lohariwala. The assessment was completed .....

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t was filed as per which the amount of ₹ 2 lacs was given through cheque meaning thereby the identity and genuineness of transaction as well as creditworthiness is not in doubt, therefore, in view of the decision in the case of CIT vs. Metachem Industries (245 ITR 160) (MP) and the decision from the Hon ble Apex Court in Lovely Exports (216 CTR (SC) 195), the conclusion drawn on this issue is affirmed. 4. The second ground pertains to deleting the additions made u/s 68 of the Act by the As .....

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m M/s. Hindustan Continental Ltd. is concerned, an elaborate discussion has been made in the case of M/s. Agrawal Coal Corporation Ltd. & others (ITA Nos.151, 136, 196, 137 & 190/Ind/2009) and (ITA Nos.158, 34, 283 & 193/Ind/2010) vide order dated 31.10.2011 held that the identity of M/s. Hindustan Continental Ltd. was not proved at any stage. The relevant portion of the order is reproduced hereunder: 21. We have considered the rival submissions and perused the material available on .....

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M/s Hindustan Continental Limited, applied for 40,000 shares of the assessee company of the countenance value of ₹ 10/- each at a premium of ₹ 90/- per share. Similarly, Optimates Textile Industries Limited also applied for 10,000 shares of the assessee company of the same value and premium per share. The learned Additional CIT, Indore (Assessing Officer), has referred the report of ACIT 5(1), Indore, wherein it was found that on the basis of investigation carried out by him in some .....

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ompany. The relevant extract from the assessment order is extracted hereunder :- The contention of the assessee is not acceptable. Assessee has relied upon the decision of Hon ble I.T.A.T., Indore Bench, in case of ACIT vs. Kalani Industries Ltd. the said decision was not acceptable to the department and is being contested before Hon'ble High Court of M.P. assessee has tried to prove genuineness of transaction by furnishing confirmation, copy of bank account and acknowledgement of return. It .....

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n which public is not substantially interested. Thus as per section 68 onus was upon the assessee to establish depositor s identity, creditworthiness and genuineness of transaction. Assessee in its written submission stated that company has received share application money of ₹ 40,00,000/- from Hindustan Continental Ltd. 19, Shubh Kamna Apartment, Gul Bazar, Jabalpur. As per the report of the ACIT 5(1), Indore, it is clear that no such company exist at the given address. The creditworthine .....

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action, credit in the account of the assessee on account of share application money from Hindustan Continental Ltd. ₹ 4,00,000/- and share premium amount of ₹ 36,00,000/- are being treated as unexplained credit u/s 68 and added back to taxable income. Similarly, assessee has tried to establish identity of M/s Optimates Textile Industries Ltd., but it is evident from the report of the ACIT 5(1), Indore that company is also a paper company used to providing accommodation entries only. .....

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ch the address of the company was given as 13, South Hati Pala, Indore. This company is also not existing in real sense and only accommodation entries are being given to the beneficiaries in the form of share application money or unsecured loans. Since assessee fails to establish identity, creditworthiness and genuineness of the transactions, share application money credited on account of M/s Optimates Textile Industries Ltd. ₹ 1,00,000/- share premium ₹ 9,00,000/- is treated unexpla .....

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come tax return of the company. Our attention was invited to the details of capital work in progress and licence capacity of HCL Limited by arguing that the existence and credit worthiness of HCL is established since it is having share capital of ₹ 8.09 crores. During hearing before us, the Ld. Counsel for assessee Mr. Choudhary, invited our attention to deposit of cash in bank account of M/s Sahayata Marketing and transfer thereof through account payee cheque to the bank account of M/s Su .....

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loyees of these companies ? The Ld. Counsel for assessee conveniently contended that the assessee cannot be put to adverse burden meaning thereby that the assessee was not in a position to produce such persons. The Bench again contended that in view of the above reply of the Ld. Counsel for assessee, an adverse view may be taken against the assessee. The Ld. Counsel for assessee remained mum and nothing was canvassed against the query raised by the Bench. 23. The notices issued u/s 133(6) of the .....

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aring, the Ld. Counsel for assessee claimed that identity of both these companies has been established as both these companies were registered with Registrar of Companies and their income tax returns were filed and both are having PANs/bank accounts. We are not agreeing with this proposition because at the time of registration, these companies may be existing either on papers or in real sense but thereafter were specifically found non-existent as the summons/notices issued were returned back uns .....

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tted to the applicants on the basis of applications without verifying the existence of applicants at the address given in the application. Likewise, Registrar of companies also register a company without physical verification of the existence of the applicant company. There is a specific finding that on verification by the ACIT in the case of M/s Sahayata Marketing Company neither the operators of the accounts were available at the addresses given to the bank nor the introducer. Therefore, the a .....

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ed. It is pertinent to mention here that there is a difference between a private and public limited company as in a private limited company, the public at large is not subscribing the shares as the shares are allotted to close relatives, friends and other known persons who are having faith in the subscribing company on personal relations whereas there is an invitation to the public at large by a public limited company and not necessarily having personal relations and in that case, the individual .....

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bscribed in their share capital, how the department will proceed against these companies in terms of the verdict of the Hon'ble Supreme Court in the case of Lovely Exports (supra). Any addition in the hands of such subscribing companies is only possible when the assessee is able to establish identity of these companies which the assessee has grossly failed not only before the Assessing Officer but also before learned Commissioner of Income Tax (Appeals) and the Tribunal. Under these facts an .....

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ent, these companies were found to be non-existent. Even the Inspector was deputed to verify the addresses who also reported that these companies were not available at the given addresses. It is not possible that the companies making huge investment in the form of share application are not found at the given addresses. There is a possibility that there may be a change of address but till the stage of the Tribunal, not to talk of the Assessing Officer or the learned Commissioner of Income Tax (Ap .....

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TR 801) goes against the assessee. Hon'ble Calcutta High Court in the case of Nivendan Vanijya Niyojay Limited (supra) (page 14) held as under :- After the initial onus was discharged by assessee, the Income Tax authorities have made enquiries and had communicated the result of the enquiry to the assessee and required the assessee to produce the subscribers who provided such credit, in order to establish its case. But the assessee did not do so. On this basis addition made by the A.O. u/s 68 .....

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sion is communicated to assessee, onus shifts on the assessee. Likewise, Hon'ble jurisdictional High Court in the case of M/s Rathi Finlease Limited; 215 CTR 429 at page 28 when company is not found at the given address against the summons issued by the Assessing Officer observed as under - The assessee tried to explain the genuineness of the credit on the basis of letters of confirmations. It could not be explained as to how the transaction was materialised when the companies were not in ex .....

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alleged shareholders do in fact exist or not. If the shareholders exist then possibly no further enquiry need to be made. But if the ITO finds that the share holders do not exist, then in effect it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons. The use of words may be charged in section 68 clearly indicates that the ITO would then have the jurisdiction if the facts so warrants to treat such credit to be the income of the .....

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ot arise. During hearing reliance was placed upon the decision in the case of Stellar Investment Limited; 251 ITR 263 (SC) wherein the issue was subscription of share capital of a public limited company whereas in the present apepals, private limited companies are involved, therefore, there is a material difference between the two as discussed earlier, the shares of private limited companies are generally given to applicants known to the directors whereas in a public limited company the applican .....

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the extent that it partakes as a reflection on section 68, when the inquiry pertained only to section 263. 25. In view of the facts narrated above and the judicial pronouncements discussed hereinabove, it can be said that the assessee did not discharge the onus cast upon it by the provisions of the Act. We tend to reproduce section 68 of the Act :- 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the n .....

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ficer then the same may be charged to tax as the income of the assessee. In the present appeal, at any stage the assessee did not file any explanation regarding the identity of the share applicants, therefore, the onus was not discharged by the assessee. A bare reading of section 68 suggest that there has to be credits of amounts in the books maintained by the assessee that such credit has to be of a sum during the previous year and the assessee offers no explanation about the nature and source .....

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es, were found to be fictitious or non-existent, therefore, one fact oozing out that the assessee has not fulfilled the requirement of section 68. A close reading of section 68 makes it clear that in case of section 68 there should be credit entry in the books of account. This is a fundamental difference between these two provisions. The law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him where the nature and source of a .....

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income it is income from a source which has already been taxed for which we are supported by the decision in CIT v. Deviprasad Vishwanathprasad; 72 ITR 194 (SC). The Hon ble Apex in the case of Sumati Dayal vs. CIT; 214 ITR 801 clearly held that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. There are contrary decision like Addl. CIT v. Bahri Brothers; 154 ITR 244 (Pat) holding that identity of creditors is not relevant for cheque tran .....

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rther the burden of the assessee to prove whether that person itself has invested the money or some other person has made investment in the name of that person. The burden then shifts to the revenue to establish that such investment has come from the assessee company itself. 26. Once the receipt of the confirmation letter from the creditor is proved and the identity and existence of the investor has not been disputed, no addition on account of share application money in the name of such investor .....

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rt clearly held that in case of private placement, the legal regime would not be same. A delicate balance must be maintained while walking the tight rope of section 68 and 69. The burden of proof can seldom be discharged to the hilt by the assessee. However, if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered rather duty bound to carry out investigations. The assessee merely wants to take shelter of the decision of the Hon'ble Apex Court in the cas .....

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Hon'ble Delhi High Court has clearly differentiated the cases of share capital of private limited company from public limited company by saying in the case of private placement, the legal regime will not be the same . Therefore, the facts of that case are not applicable to the case of the assessee as it is a private limited company or closely held company. Besides this, in case of M/s Lovely Exports Limited (in para 23), the Hon'ble Delhi High Court noted that the Assessing Officer has .....

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s controversy because the facts of the present appeals are distinguishable from the facts of Lovely Exports Private Limited. Hon ble Delhi High Court in a latter decision in CIT v. Oasis Hospitalities Private Limited (2011) 333 ITR 119 held as under :- We are of the view that ratio laid down in Steller Investment Ltd. (2001) 251 ITR 263 is applicable only in those cases where the assessee is a limited company and the shares were quoted in the stock exchange. But whenever the issue is subscribed .....

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Apex Court in the case of Lovely Exports Private Limited wherein the Hon'ble Apex Court held that if the share application money is received by the assessee from alleged bogus share holders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undisclosed income of the assessee company. In our view, first of all, the alleged bogus share holders should be in existence, .....

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both the sides before us. We find that the facts in STL Extrusion are materially different from both the assessees, namely, M/s Agrawal Coal Corporation as well as from M/s Rathi Finlease Limited. In the case of M/s STL Extrusion on receipt of confirmation of share applicants, except observing discrepancies in confirmation, the Assessing Officer neither asked anything from the assessee nor made any inquiry to arrive at the conclusion that share applicants were bogus. However, in the present app .....

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but the assessee in spite of sufficient opportunity provided, failed to prove the existence of such share applicants companies as the correct addresses were not provided to the Assessing Officer and even the Directors or any of the employees or books of account were not produced. Therefore, the only conclusion arrived at by the Hon'ble jurisdictional High Court in the case of M/s Rathi Finlease Limited that the assessee failed to discharge burden with regard to credits in its books and the e .....

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was very much available. Hon'ble jurisdictional High Court while coming to a particular conclusion followed the decision of the Hon'ble Karnataka High Court in CIT v. ASK Brothers Limited (2011) 333 ITR 333 and duly considered the decision from the Hon'ble Apex Court in CIT v. Lovely Exports Private Limited and Steller Investment Limited (supra). In another latest decision in CIT v. Oasis Hospitalities Private Limited, UP Bone Mills India Limited and Vijay Power Generators Limited, .....

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ra 17) 4. CIT v. ASK Brothers Ltd. (2011) 333 ITR 111 (Karn) 5. CIT vs. Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom) 6. CIT vs. Divine Leasing & Finance Ltd. (2008) 299 ITR 268 (Del) 7. CIT v. Dolphin Canpack Ltd. (2006) 283 ITR 190 (Delhi) 8. CIT v. K.C. Fibers Ltd. (2011) 332 ITR 481 (Delhi) 9. CIT v. Lovely Exports P. Ltd. (2009) 319 ITR (St.) 5 (HC) 10.CIT v. Mohankala (P) (2007) 291 ITR 278 (SC) 11.CIT v. Sophia Finance Ltd. (1994) 205 ITR 98 (Del) 12.CIT v. Steller Investment .....

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f the Assessing Officer such explanation is not satisfactory, the Assessing Officer may treat the same as undisclosed income and add it to the income of the assessee meaning thereby the assessee is required to give satisfactory explanation about the nature and source of such sums found credited in the books of account. What kind of proof is to be furnished by the assessee is a question. It has come up for discussion in various judgments rendered by various Hon'ble Courts including Hon'bl .....

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do in fact exist or not. Such an inquiry was conducted by the Assessing Officer in the present case. In the course of the said inquiry, the assessee had disclosed to the Assessing Officer not only the names and the particulars of the subscribers of the shares but also their bank accounts and the permanent account numbers issued by the Incometax Department. Super added to all this was the fact that the amount received by the company was all by way of cheques. This material was, in the opinion of .....

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rove - The identity of the creditor/subscriber The genuineness of the transaction, namely, whether it has been transmitted through banking or other undisputable channels The credit worthiness or financial strength of the creditor/subscriber If relevant details of address or PAN, identity of the creditor/subscriber are furnished to the department along with copies of the share holders register, share application forms, share transfer registers, etc. it would constitute acceptable proof or accepta .....

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ness of the creditor/subscriber, the genuineness of the transaction and the veracity of the repudiation. 30. If the totality of facts and the judicial pronouncements discussed hereinabove are kept in juxtaposition, it is clear that the initial burden is upon the assessee to explain the nature and source of share application money received by the assessee. In order to discharge its burden, the assessee is required to prove - The identity of the share holder The genuine of transaction The credit w .....

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Bank, Indore, during the period 1.4.2002 to 31.3.2005. The modus operandi operated was that the accommodation entries would first pay the cash which was deposited in bank accounts maintained in the name of M/s Yash Associates, M/s G.R. Investments, M/s V.S. Traders, Path Pradarshak Finvest Pvt. Ltd., M.S. Ribeka Garg and Bhanuraj Singh Ranawat, etc. maintained in the same bank branch (in due course old accounts were closed and new accounts in the name of new concerns were opened). Thereafter, t .....

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others through manipulation giving rise to artificial height so as to enable certain parties to re-introduce their black money as huge capital gain. It was claimed that in those case also the cash was deposited first in certain account and thereafter the funds were transferred to the share brokers involved in the manipulation and then ultimately to the accounts of the party concerned as sale proceeds of shares. It was also submitted that SEBI has even penalised Hindustan Continental Private Lim .....

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ments. Transaction enquiry was also made (pages 1 to 104) of the paper book filed on 4.5.2010. Pages 108 to 125 of the paper book dated 4.5.2010 contains the adjudication order u/s 151 of the securities and exchange board of India Act read with rule 5(1) of the SEBI (procedure for holding inquiry and imposing penalties by the adjudicating Officer). Rules 1995 against Optimates Textiles Industries Limited (formerly known as Priyansh Saree Industries Limited). Vide para 17 of the order (page 125) .....

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n by the Hon'ble Supreme Court in case of CIT v. Biju Patnaik; 160 ITR 674. 32. So far as the contention of the Ld. Counsel for assessee to the effect that the issue is squarely covered by the decision of the coordinate Bench in the case of Kalani Industries is concerned, we do not find any substance in the same in view of the fact that the addition made in the cases before us was after passing of the order by the Tribunal and the inquiry conducted by the Department thereafter. The enquiry s .....

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p; 2006-07, facts of which are materially different. 33. The contention of the Ld. Counsel for assessee that in view of the decision of the Hon'ble Supreme Court in the case of Lovely Exports, the issue is covered in favour of the assessee, as per our considered view, the case of Lovely Exports (supra) will be applicable only after the identity of the share applicant is established. Since in the instant appeals before us, the identity itself has not been established, there is no justificatio .....

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the Assessing Officer and the letter issued by the Assessing Officer were returned unserved by the postal department with the remark that the addressees are not existing at the given addresses which clearly establishes that either the share applicants are nonexistent or if exist, then merely exist on papers and not in real sense, therefore, their identity is not proved. With all respect, within the territorial jurisdiction of Madhya Pradesh, we are bound to follow the proposition of law laid dow .....

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So far as the contention of the ld. Counsel for the assessee that the company can only be wound up by the order of the Hon ble High Court and death of the company is known to the process of law and also that the company is still available on the website of the Company Law Board is concerned, we are not agreeing with this proposition of the assessee because here it is not a case of winding process rather it is a case of admissibility of claim of the assessee u/s 68 of the Act. Since the share ap .....

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ent with the argument of the assessee that the winding up powers of a company lies with the Hon ble High Court but this issue is not before us, therefore, we are refraining ourselves to comment further. It was fairly accepted by the ld. Counsel for the assessee that in the present appeals merely the assessee filed certain documents which did not prove the identity but did not produce the share applicants/subscribers. At the same time, the learned CIT DR time and again is harping that the share a .....

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ablishment of identity of share applicants. The ld. CIT(A) has got co-terminus powers to do what the Assessing Officer has failed to do. Proceedigns before ld. CIT(A) is also extension of assessment proceedings in addition to the appellate proceedings. However, inspite of full opportunity the assessee failed to rebut the contents of the report which indicated that no shareholders exist in the name of the companies so provided by the assessee. Even though, the report relied by the Assessing Offic .....

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en if the cases relied upon by the ld. Counsel for the assessee, as mentioned/cited/discussed in the preceding paras of this order like Divine Leasing & Finance Limited, Dwarkadheesh Investment Private Limited, Gangor Investment Limited, K.C. Fibres Limited, Dolphin Canpack Limited, Shree Barkha Synthetics (Raj.), Down Town Hospitals Private Limited, ILLAC Investments Private Limited, Rohini Builders and Shree Barkha Synthetics (Raj.) (supra) are considered, the Hon ble Courts have clearly h .....

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The contention of the Ld. Counsel for assessee to the effect that the decision of Rathi Finlease by the jurisdictional High Court was rendered much prior to the decision of the Supreme Court in the case of Lovely Exports (supra) therefore, the proposition laid down by the jurisdictional High Court in Rathi Finlease cannot be applied after the decision of the Hon'ble Supreme Court in the case of Lovely Exports, have no legs to stand insofar as the jurisdictional High Court in the case of STL .....

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'ble Supreme Court in the case of Lovely Exports (supra) itself presupposes the establishment of identity as a pre-condition for not making addition in the hands of the assessee company. In the case of Shri Kela Prakashan Private Limited, the Tribunal has given a categorical finding that the assessee has proved the identity of the subscribers. therefore, no addition was warranted in the hands of the assessee. However, in the instant case before us, the identity of the subscribers has not bee .....

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d to be fictitious. The summons/notices issued by the department were also returned unserved by the postal department with the remark that no such companies are existing at the given addresses, therefore, in the present appeals, the identity of share holders was not proved at any stage, consequently, the decision in the case of Shri Kela Prakashan Private Limited is not applicable being on different findings, therefore, may not help the assessee. Likewise, the Hon'ble Karnatka High Court in .....

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they were capable of investing, the Assessing Officer shall investigate. It is not for the assessee to establish but it is for the department to inquire with the investors about their capacity to invest the amount in the shares . If the aforesaid conclusion is analysed, one fact is clear that the identity of the share holders has to be proved by the assessee. However, in the present appeals the identity itself is in dispute, therefore, the aforesaid decision clearly supports the case of the rev .....

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dicial pronouncement also goes against the assessee. Hon'ble Delhi High Court in a later decision in Vijay Power Generators Limited v. Director of Income Tax and others (ITA No. 514 of 2007) (2011) 333 ITR 119 (Del) at page 136 the appeal was admitted on the following question of law :- Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has erred in law in sustaining the addition of ₹ 25,23,500/- on account of receipt of share application money .....

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Officer issued summons to these parties which were received back either with the remarks incomplete address or in spite of best efforts the address not found or not met or no such person or not found , etc. The Assessing Officer thereafter asked the assessee to produce these persons who had introduced the share capital in the company. The assessee was also asked to furnish cheque numbers/draft numbers for payment of share application money along with the names of the drawee bank and branch of t .....

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on card, election card or passport despite request by the Assessing Officer. The Assessing Officer after analysing the statements of these persons observed that these five persons were small agriculturists and had no means to make investment in the company. 38. In these circumstances, the entire receipt of ₹ 25,23,500/- in respect of these five persons was treated as unexplained investment and made the addition u/s 68 of the Act. 39. The learned Commissioner re-examined the entire issue an .....

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re known to the assessee but during the course of hearing despite various opportunities the assessee could not produce them for verification nor was any evidence filed with regard to their financial status. Out of 15 subscribers, 5 subscribers were produced before the Assessing Officer and during the course of the examination it was admitted that they were small agriculturists and were cultivating the agricultural land after taking it on lease from other agriculturists. No evidence regarding the .....

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court in the case of Steller Investment Ltd. (2001) 251 ITR 263 is concerned, we are of the view that the ratio laid down in Steller Investment Ltd. (2001) 251 ITR 263 is applicable only in those cases where the assessee is a limited company and the shares were quoted in the stock exchange. Once the shares are quoted in the stock exchange and the subscription is open to public at large, the assessee cannot have control over the subscription and also cannot make a verification of the subscribers .....

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d their credit worthiness. Their Lordships of the Hon'ble Calcutta High Court in the case of Bhola Shankar Cold Storage P. Ltd. v. Joint CIT (2004) 270 ITR 487 have examined the judgment of the apex court in the case of Steller Investment Ltd. and that of the Hon'ble Delhi High Court in the case of Sophia Finance Ltd (1994) 205 ITR 98 and have held that in the case of Steller Investment Ltd. the ratio laid down by the Full Bench of the Delhi High Court was not overruled and it still hold .....

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on 68 of the Income Tax Act. We, therefore, find no infirmity in the order of the learned Commissioner of Income Tax (Appeals). Accordingly, we confirm the same. Xxx xxx Xxx xxx 42. We have considered these submissions in so far as the statements of the persons who are produced are concerned, they are gone into and analysed by the three authorities below on the basis of which finding of fact is arrived at that neither their identity is established nor their capacity to invest this kind of money .....

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ds and was paid in many instalments. Likewise one Mr. Vijay Kumar who also purportedly purchased the shares of ₹ 1.90 lakhs stated that the payments were made by him in cash in many instalments. He also stated that he personally knew the directors of the company and had very old relation with him. On the basis of such statement without an iota of documentary evidence to support, we are of the opinion that the findings of the authorities below cannot be treated as perverse. It is on proper .....

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icular casae could be applied. As noted above, the initial onus is upon thye assessee to establish three things necessary to obviate the mischief of section 68 of theAct. These are : (i) the identity of investors; (ii) their creditworthiness/investments, and (iii) the genuineness of the transaction. Only when these three ingredients are established prima facie it is only then the department is required to undertake further exercise as discussed above. In the instant casae, no such documents are .....

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ated to the assessee vide order sheet entries dated June 13, 2002 and March 17, 2003 . They are not assessed to tax. They have not produced any documentary evidence showing that they are capable of saving/investing any amount at all. If the persons producved are not carrying relevant documents to establish their identity, creditworthiness at the time of recording of the statements and furnishing photo copy of some documents after a gap of substantial period, it is not possible to verify its corr .....

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ication. Proof of identity produced at a later stage cannot be verified in the absence of concerned person s original documents. 45. The order of the Commissioner of Income tax (Appeals) clearly demonstrates that this remand report was sent to the assessee who had submitted his reply dated February 10, 2004 which is even reproduced in the order and thereafter the learned Commissioner of Income Tax (Appeals) discussed the same in the light of certain decisions cited before him and came to the con .....

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essee. 40. If the aforesaid conclusion drawn by the Hon'ble High Court is kept in juxtaposition with the facts of the present appeal, one fact is clearly oozing out that the assessee has not discharged its onus to the satisfaction of the Assessing Officer and even did not prove the identity of the share applicants. Merely giving the names of such share applicants is not enough especially when these applicants were found non-existent, therefore, this judicial pronouncement clearly goes agains .....

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and Steller Investment Ltd. (supra) meaning thereby that both these decisions were rendered after the pronouncements of decisions from Hon'ble Apex Court in Lovely Exports Private Limited (supra). As discussed in other paras of this order, so far as the decision in the case of M/s STL Extrusion vs. DCIT (2010) 15 ITJ 872 (I.T.A.T., Indore) is concerned, that decision was rendered by the Bench on the facts that since the assessee proved the identity of the investors, therefore, it was held t .....

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subscribers and once the identity is proved, in case of bogus investment, addition can be made in their individual capacity and not in the case of the company. However, in the present appeals even the identity of such share holders is not proved as we have discussed above, therefore, the initial onus has not been discharged by the assessee especially when the assessee was confronted with the finding of the commission (Inspector), summons/notices returned unserved and the addresses given by the .....

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ed; (2011) 17 ITJ 648 (MP) even considered various decisions including the off-quoted decision of Divine Leasing & Finance Limited, Rathi Finlease Limited, Steller Investment Limited and of course Lovely Exports Private Limited wherein the assessee filed list of all subscribers and gave affidavits of all subscribers in the form of confirmations and in that situation the Hon'ble Court held that the assessee is required to establish the identity and source of credits and further held that .....

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