TMI Blog2018 (2) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... on money as unexplained - Decided in favour of assessee. - ITA No. 6301/Mum/2014 - - - Dated:- 31-1-2018 - SRI MAHAVIR SINGH, JM AND SRI G. MANJUNATHA, AM For The Assessee : K. Shivaram, AR For The Revenue : Manjunath Swami, DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-39, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-39/IT-346/2007-08 dated 27-08-2014. The Assessment was framed by the Deputy Commissioner of Income Tax, Circle 22, Mumbai (in short DCIT) for the assessment year 2006-07 order dated 31-12-2007 under section 143(3) of the Income Tax Act, 1961(hereinafter the Act ). 2. The two inter connected issues i.e. addition of share application money received by the assessee treated as unexplained under section 68 of the Act by the AO and confirmed by CIT(A) and further, confirming the addition commission paid for the share application money. For this assessee has raised the following four grounds: - 1. On the facts and in the circumstances of the case, the Ld. Clt(A) erred in confirming addition of ₹ 2,37.00.000/- wade a1s 68 of the Income Tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Inocent Merchandise (P) Ltd. 35, Chittranjan Avenue, 6th Floor, R.No. 27, Kolkata 700 012. Now 166, BSP Mukherjee Road, Kolkata-700 026 30,00,000 9. Saraswathi Advisory Services 4, Bellavdere Road, 4th Floor, Kolkata-700 001 15,00,000 10. Nairity Tieup Pvt. Ltd. 23/2, N.S. Road, Lilavati Howrah-700 204 15,00,000 2,37,00,000 4. The AO going through the survey report, added the share application money of ₹ 2.37 crore as unexplained under section 68 of the Act by observing as under: - On going through the survey report from Kolkata in connection with the above parties, it is evident: that spot enquiry by the officers either these parties were not available or someone stated about accommodating entry given to the assessee company. Thus, it is clear that these transactions of share application money in the above cases are rot genuine The assessee company also could no produce the parties through submitted the relevant details of the parties. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is stated by the Assessing Officer that there has been no response to the summons issued; the summons have been returned unserved though they were sent as per the addresses provided by the appellant. There upon the AO called upon the appellant to produce the parties in person. - However, the appellant failed to produce the parties; on the other hand the appellant only furnished certain documents in support of the purported transaction. Further, the Assessing Officer has made a mention that even during the course of survey conducted by the Investigation Wing it was found that entities such as Mahashakti Vyapar P Ltd., Innocent Mercandise P. Ltd., Navneet Marketing P. Ltd. and Saraswathi Advisories Ltd., Netscope Dealcomm P Ltd., did not exist or no such party was available at the addresses provided. Further it has also been mentioned by the Assessing Officer that in the case of M/s Dakeon Impex Pvt. Ltd., M/s Maradona Holding Pvt. Ltd., M/s Fidility Marketing Pvt. Ltd. and M/s Nairity Tieup Pvt. Ltd., the Investigation Wing, as per the appraisal report has mentioned that the Directors of the said company had admitted that these were only accommodation entries. Despite the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said companies are seen to be bereft and devoid of any creditworthiness. So also the genuineness of the transactions in doubt, when without exception with respect to all the said companies there are deposits made from unexplained sources prior to withdrawal for making the payments. This aspect coupled with the observations as available in the appraisal report, which has been taken into account by the Assessing Officer that many of the Directors had admitted that these are mere accommodation entries, bring these amounts assessable to tax under s. 68 of the Income Tax Act. The entire gamut reasonably appears to be convoluted exercise so as to reintroduce its own money into to the books of the appellant company in the garb of share capital, involving more than one company. Factually it has been examined and found that the investments have been done by companies which hardly carry on any business. No worthwhile business activities arc carried on by these subscriber companies. The income as returned, as shown in the returns of income by the respective companies, is very meagre. The entire reserves and surplus of these companies are entirely made up of share premium. All these compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions have not been proved. Mere filing of documents or mere appearance alone will not discharge the burden cast on the assessee under s. 68 of the Act. All the three ingredients have to be necessarily proved so as to escape the mischief of section 68 of the Act. In these circumstances, I have no hesitation in confirming addition made under s. 68 of the Act. Since the claim of share application money has been brought to tax as deemed income under s. 68 of the Act, the addition made by the Assessing Officer in a sum of ₹ 2,37,000/- treating the same as commission payment is also confirmed. 5. The learned Counsel for the assessee before us stated the facts that that search under section 132 of the Act was conducted in the case of shri Pradeep N Kainya and Anil N Kainya on 18-01-2006. Consequently, search on assessee was also conducted. The learned counsel stated that the assessee has filed bank statement of the companies from whom the share application money have been received, income tax details i.e. ITR copies, copies of balance sheet/ P L Account etc., details of mode of payment and any other detail asked for by the AO. The learned Counsel for the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Merchandise Pvt. Ltd. 19-20 14. Proof of Delivery of Letter from SHCPL to Innocent Merchandise Pvt. Ltd 21 15. Letter by SHCPL to Nawneet Marketing Pvt. Ltd 22-23 16. Proof of Delivery of letter from SHCPL to Nawneet Marketing Pvt. Ltd 24 17. Letter by SHCPL to Swarnsathi Advisory Pvt. Ltd 25-26 18. Proof of Delivery of Letter from SHCPL to Swarnsathi Advisory Pvt. Ltd 27 19. Letter by SHCPL to Nairit Tie-up Pvt. Ltd 28-29 20. Proof of Delivery of Letter from SHCPL to Nairit Tie-up Pvt, Ltd 30 A2 Records and Documents evidencing the submission made by the share Applicants to the CIT(A) in response to the Appellants request for providing all the information aa sought under Section 68 and as stated by the Id. A.O, with Name and Address of the Sender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 110-109 33. Acknowledgment and Annexures of Deposition before C1T(A) dated 21/11/2008 m case of MsihasaktiVyapaarPvt Ltd. 139-175 34. Acknowledgment and Annexures of Deposition before ClT(A) dated 24/1 1/2008 in case of Fidelity Marketing Pvt. Ltd 176-205 6. In view of the above, the learned counsel for the assessee stated that during statement certain directors of these companies stated that the share application money invested by the respective companies is accommodation entry, were never confronted to the assessee till the stage of adjudication by the CIT(A). The entire basis of addition is only those statements and that the summon issued under section 131 of the Act sent through RPAD, return unserved. The learned Counsel for the assessee stated that for FY 2005-06 the assessee filed complete details in respect of share application money by the application and not disputed by the AO. The learned counsel for the assessee also disputed that the enquiries made with the Kolkata parties or somebody who was available merely confirms that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded to discredit the investors of the assessee, which is completely erroneous. The AO was looking for proof beyond doubt and proceeded on an element of suspicion that the amounts of investments are really those of the assessee, which have been ploughed back by the assessee. But the settle principle of law is that any amount of suspicion however, it strong might be, is no substitute for proof. Suspicion is not sufficient enough to lead to the conclusion that the investments received by the assessee company are all manipulated receipts and on that basis he can record a finding that the explanation of the assessee is not satisfactory. According to us, so long as the proof and identity of the investor and the payment received from him is through a doubtless channel like that of a banking channel, the receipt in the hands of the assessee towards share capital or share premium does not change its colour. The money so invested in the assessee company would still be the money available and belonging to the investors. The consistent principle followed is that the investors sources and creditworthiness cannot be explained by the assessee. If the Department has a doubt about the genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd.(supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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