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The ACIT, Central Circle-17, New Delhi Versus M/s. TRN Energy Pvt. Ltd. And Vice-Versa

2018 (1) TMI 389 - ITAT DELHI

Unexplained share application money - sufficient documentary evidence to prove the genuineness - Held that:- Assessee-company produced sufficient documentary evidence before A.O. to prove the ingredients of Section 68 of the I.T. Act. The A.O. however, did not make any further enquiry on the documents filed by the assessee-company. The A.O. thus, failed to conduct any enquiry and scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Company and a .....

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eciation of the evidence before him correctly deleted the addition. No interference is called for in the matter - Decided in favour of assessee - ITA.No.453/Del./2016, C.O.No.96/Del./2016 And ITA.No.453/Del./2016 - Dated:- 1-1-2018 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The For Revenue : Ms. Rachna Singh, CIT-D.R. For The Cross-Objector : Shri Sajjan Kumar Tulsiyan, Advocate Ms. Nisha Rachh, C.A., Shri Karan Kumar, C.A. ORDER PER BHAVNESH SAINI, .....

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he A.O. issued notices under section 143(2) and 142(1) of the I.T. Act. The A.O. observed that during the year under consideration, the assessee-company has received fresh share application money of ₹ 10,63,50,000 from M/s. Jaisri Properties Exports Pvt. Ltd., The assessee was asked to furnish evidence in support of the genuineness of the share application money. The assessee in support of the genuineness of the share application received from the Investor Company, filed name of the party, .....

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0,610. Therefore, financial capacity is not proved. In the absence of balance sheet, source of the credit entry was not proved. A.O, therefore, was of the view that creditworthiness of the Investor Company has not been proved. Mere production of the documentary evidence would not prove the genuineness of the transaction in the matter. The A.O. accordingly, treated the share application money as unexplained and made the addition. 3. The assessee challenged the addition of ₹ 10,63,50,000 bef .....

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the investor. The financial capacity of the investor is very sound because in assessment year under appeal, the Investor Company was having share capital and reserve and surplus of ₹ 40,18,26,586. The assessee-company has provided balance sheet of the Investor Company. Further, the data is available in public domain of the Registrar of Companies. Once assessee-company filed complete details before A.O, then initial onus upon assessee-company has been discharged to prove the identity of th .....

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e appellant, case laws and have gone through the assessment order passed u/s 143(3) r.w.s. 153A of the Act. I have also examined the submissions of the ARs w.r.t the assessment records that were requisitioned from the AO. The Appellant had received share application money of ₹ 10,63,50,000/-. The AO has treated the entire amount of ₹ 10,63,50,000/- u/s 68 of the IT Act . He has made this addition due to reason of non submission of Audited accounts of the party for the year under cons .....

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to the AO. 8.2. In the instant case, the Appellant had proved the identity, creditworthiness and genuineness of share applicants, by submitting their Name, Address, PAN, Bank Statements and Balance Confirmations and ITR acknowledgements. The Appellant is not expected to keep the audited balance sheets of third parties in its possession. 8.3. It is seen that A.O. had called upon the Appellant to provide assessment particulars of investors vide questionnaire dated 21.01.2015. The Appellant had dul .....

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ng the Appellant to explain the Source of the Source came into effect from A.Y. 2013-14. The same cannot be applied retrospectively in A.Y. 2007-08. 8.6. There is no doubt that the department has come across several cases where Kolkata based companies have been identified as indulging into providing accommodation entries. However, the AO needs to look beyond the place of domicile of a company to draw an inference that the company is not genuine. 8.7. The Appellant has placed reliance on several .....

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enough to prove genuineness of the cash credits. Merely because transactions are conducted through banking channel is no ground to delete the addition. The Ld. D.R. relied upon the following decisions. (i) CIT vs. Independent Media (P) Ltd., (2012) 25 taxmann.com 276. (ii) CIT vs. Nipun Builders & Developers (P.) Ltd., (2013) 30 taxmann.com 292. (iii) CIT vs. Ultra Modern Exports (P.) Ltd., (2013) 40 taxmann.com 458. (iv) CIT vs. Empire Builtech (P.) Ltd., (2014) 366 ITR 110. (v) CIT vs. Fo .....

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s. A.O. did not make any enquiry on the documents filed by assessee-company and even did not ask for production of the Investor. The Learned Counsel for the Assessee relied upon the decision of the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd., 159 ITR 78 and other decisions in the written submissions. 7. We have considered the rival contentions and perused the material on record. In this case, the assessment under section 143(3) have been passed on scrutiny assessmen .....

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nt. The A.O. noted that there were high value transactions conducted by the Investor Company. The Investor Company has filed return of income at ₹ 2,80,610 and copy of the balance sheet is not filed. The assessee-company has filed copy of the balance sheet before the authorities below. Copy of the same is also filed in the paper book. Page-53 of the paper book is balance sheet of the Investor Company to show that it has total capital of ₹ 40,18,20,586 which was more than enough to ma .....

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lue transactions carried out through the Bank. Therefore, creditworthiness of the Investor Company should not have been doubted. The assessee-company produced sufficient evidence before A.O. to discharge the initial onus upon it to prove the identity, creditworthiness and genuineness of the transaction in the matter. Further, the A.O. did not make any investigation on the documentary evidences filed by the assessee- company. The A.O. did not ask for the production of the Investor Company for exa .....

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d. [2008] 216 CTR 0195 in which it was held as under : If the share application money is received by the assessee company from alleged bogus shareholders, whose names 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. 7.2. Decision of Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Ltd. & Ors. 361 ITR 0220 (Delhi) in which it was held .....

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o logical conclusion by further investigation and therefore addition under s.68 was not sustainable. 7.3. Judgment of Hon ble Delhi High Court in the case of CIT vs Vrindavan Farms P.Ltd. etc. in ITA No.71/2015 dated 12.08.2015 (Delhi) in which it was held as under : The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents .....

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addition by relying upon the decision of the Hon ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applican .....

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ne parties. They are not bogus and fictitious therefore, the impugned order is set aside. 7.6. Decision of Hon ble Delhi High Court in the case of CIT vs. Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under : No adverse inference should be drawn if shareholders failed to respond to the notice by A.O. 7.7. Decision of Hon ble Madhya Pradesh High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held as under : Dismissing the a .....

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n-resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen .....

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ssesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sigh .....

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ut this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of ₹ 35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the .....

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tion was justified. 7.9. Decision of Hon ble Delhi High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603, in which it was held as under : Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incor .....

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he case of CIT vs. Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) (HC), in which it was held as under : Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. 8. Considering the facts of t .....

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