TMI Blog2019 (10) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... nvested share application money and also appeared before the AO in remand proceedings (part of first appellate proceedings) along with all documentary evidences which includes, confirmation of share application money invested; bank statement of their company; balance sheet of their company; copy of Board Resolution of their company etc. The directors of the share applicant companies have not confirmed providing of any accommodation entry to the assessee. Thus, the oral statement given by the persons before the Investigation Wing, which have been relied upon by the learned CIT(A), is of no relevance, when directors of the share applicant companies have confirmed the investment in assessee company. The lower authorities have also failed to corroborate the statement of those persons that cash was deposited in their bank accounts and, thereafter, cheques have been issued to the assessee. The Assessing Officer has failed to substantiate this claim of cash deposit in the bank account of those persons or share applicant companies. CIT(A) is not justified in relying the statements of those persons given before the Investigation Wing, and that too without any cross-examination and corrobora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presenting sums received from the following shareholders as share application and erroneously held as unexplained cash credit under section 68 of the Act: 1,76,40,000 Sr. No. Name of the Shareholder Amount (In Rs.) 1. Vivek Cybertech (P) Ltd. 45,00,000 2. Saar Enterprises (P) Ltd. 30,00,000 3. Blossom Advertisers (P) Ltd. 30,00,000 4. Kylsans Finance (P) Ltd. 30,00,000 5. Tulip Engineering (P) Ltd. 24,00,000 6. Impulsive Financial Services (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that shareholders were corporate entities, duly assessed to tax and. had made investment by account payee cheques and supported by necessary evidence and therefore, such shareholders were not only identifiable companies but also had requisite creditworthiness and, thus the said sum received could not in law or on fact be brought to tax u/s 68 of the Act, more particularly when such sum stood refunded by the appellant company. 1.4 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that appellant had placed on record voluminous evidences in the shape of audited financial statement, annual returns, etc. to discharge the burden with regard to both genuineness of the transactions and creditworthiness of the shareholders and therefore, in absence of any whisper to rebut the said evidence, the credit could not arbitrarily be regarded as unexplained cash credit under section 68 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share application money was in fact the money belonged to those very share applicants and those share applicants were genuine existing entities. 2.1 In second round of assessment proceeding, the Assessing Officer issued a detailed questionnaire containing more than 29 questions. The assessee responded those queries and sought cross-examination of 7 persons, whose statements had been recorded by the Investigation Wing of the Income-tax Department and which were relied upon by the Department for making addition under section 68 of the Act. According to the assessee, it submitted all documents in support of identity, creditworthiness and genuineness of the transaction and also justified reasons for charging share premium. In support of identity of 15 entities, who applied for shares, the assessee filed copy of certificate of incorporation issued by the Registrar of companies, copy of PAN issued by the Income Tax Department, bank account held in the name of the entities, etc. It was also submitted that those companies were active on the site of the Registrar of the companies. Regarding the creditworthiness of those entities, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce the directors so that, the veracity of the submissions of the assessee could be examined and the documents allegedly furnished by the assessee as claimed to be genuine and true, could be examined. When the assessee could not produce the directors of applicant companies for shares, or who allegedly have contributed to share application money and thereby to share capital in question, this office issued summons to the applicants for deposition on request of the assessee, although, the onus to produce the persons (Directors) of applicant companies lay squarely with the assessee. Thus, the pursuit of examining the persons who know the truth and whose testimony is crucial to decide whether the share capital/share application money is genuine or otherwise, could not be achieved as the assessee, in spite of every possible opportunity given could not produce persons for the reasons best known to the assessee and hence, the obligation cast upon the department has been fully discharged. The assessee's contention regarding cross examination of the persons on the basis of whose statements the proceedings for reopening the assessment were under taken, has got no force, as the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the above mentioned share applicants during the year under consideration. (c) From perusal of the chart prepared above on the basis of financial submitted, shows that as on 31.03.2002 most of these companies have total assets worth much less than that of the investment made In FY 2002-03 as share application money in assessee company. (d) The investment made as share application money in assessee company doesn't get substantiated with the financial of the above mentioned companies. (e) As per the reply submitted during assessment proceedings, the assessee has filed copies of letters dated 17.02.2005 issued to these companies conveying that equity shares stand in your name has been forfeited, whereas in the statement recorded during examination of directors of these companies they have replied that the shares have been allotted during the FY 2002-03. Both these facts are contradictory in each other. (f) Further during the survey proceedings u/s 133A of the Income Tax Act, 1961, the statement of Sh. Amit Gupta, Director of the company was recorded. In the statement, Sh. Amit Gupta admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer in remand proceeding. (ii) The asset value of the share applicant companies was out of synch with the amount of share application money invested. (iii) Exact amount has been credited in the bank accounts of the share applicant companies prior to the transfer of fund to the assessee company for the purpose of share application money. (iv) Sh Amit Gupta (claimed to be director of the assessee company) and directors of the share applicant companies in their statement before the investigation wing admitted of engaged in providing accommodation entries. (v) Notices issued to the share applicant companies returned back with postal remark that no such firm existed. (vi) The statement recorded on oath has evidentiary value and can be relied upon for computing assessment wheraas the retracted statement by Sh. Amit Gupta is in the nature of self-serving document in absence of any proof that the earlier s statement was recorded under Coercion or pressure and such retracted statement cannot be relied upon. (vii) That a formal cross examination is not mandatory if a reasonable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained by way of their bank statements, income tax returns and audited financial statements (g) No material much less incriminating was detected as a result of search or gathered during assessment to allege, observe or assume that share capital represented unexplained credit u/s 68 of the Act. (h) All the share applicants have confirmed their investment in independent confirmation under section 133(6) of the Act and no material to the contrary has been led to establish that such credit it unexplained credit 3.2 Further, regarding the observation of the Ld. CIT(A) of the deposits in bank account of the share applicant companies immediately prior to the date of transfer of share application money to the assessee, the Ld. counsel submitted that the proper course would have been to assess such credit in the hand of the creditor and the assessee cannot be expected to prove the source of the source. He submitted that net worth is the relevant criteria to determine the creditworthiness of the share applicant, irrespective of the low income or no income tax paid by those share applicants. Regarding the observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded under section 133A in the course of survey has no evidentiary value, the Ld. counsel relied on following judicial pronouncement: i) 328 ITR 384 (Del) CIT v. Dhingra Metal Works ii) 300 ITR 157 (Mad) CIT v. S. Khader Khan Son , affirmed by the Apex Court in the case of CIT v. S Khader Khan Son reported in 352 ITR 480 (page 341 of JPB) iii) 263 ITR 101 (Ker) Paul Mathews and Sons v. CIT iv) 2 SOT 402 (Coch) Kurunnem Velil Financiers (P) Ltd. v. DCIT v) 394 ITR 383 (Raj) CIT vs. ARL Infrateh Ltd. vi) 256 ITR 730 (Raj) CIT v. Mool Chand Salecha vii) 97 ITD 3 61 (Ahd) Ashok Manilal Thakkar v. ACIT 3.7 The learned counsel summarizes the aspects of the share capital raised by the assessee company during the year as under: a) That the shareholder from whom share capital was raised/received is duly identifiable corporate entity and assessed to tax; b) That the entire share capital has been subscribed through banking channels and there was no material found during the search which proves that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. 3.10 The Ld. DR, on the other hand, relied on the order of the lower authorities and submitted that the assessee failed to discharge its burden under section 68 of the Act and thus, the Ld. CIT(A) is justified in sustaining the addition. He submitted that facts of M/s. Lakshmi Float Glass Ltd. (supra) relied upon by the assessee are different. 3.11 We have heard the rival submissions and perused the relevant material on record. As far as facts of the instant case mentioned above, there is no dispute between the parties. The only dispute is whether in the facts and circumstances and the evidences brought on record, can the share application money received by the assessee, be held as its own money introduced back by way of accommodation entries. The lower authorities to support their contentions have relied on two sets of evidences, i.e., the first set of evidences are statements recorded during the course of the search/survey proceedings and, the second set of the evidences are documents and information gathered in assessment/appellate proceedings. 3.12 On analysis of first set of evidences, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons that cash was deposited in their bank accounts and, thereafter, cheques have been issued to the assessee. The Assessing Officer has failed to substantiate this claim of cash deposit in the bank account of those persons or share applicant companies. In such circumstances, the Ld. CIT(A) is not justified in relying the statements of those persons given before the Investigation Wing, and that too without any cross-examination and corroborating material on record. 3.13 Further, the Ld. CIT(A) has relied on statement of Sh. Amit Gupta, recorded during the course of survey proceedings under section 133A of the Act at the premises of the assessee. Sh. Amit Gupta stated that the company obtained share application money through accommodation entry but, later on, he retracted from his statement. No material corroborating the statement was found in survey proceeding from the premises of the assessee. Further, the assessee has submitted that Sh. Amit Gupta was not director in the assessee company at the time of receipt of share application money and, therefore, his statement is irrelevant. The Revenue before us could not establish, that Sh. Amit Gupta was direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share applicant companies admitting the investment made in the assessee company. The directors of the company except one company, attended before the Assessing Officer along with necessary financial statements and other documents of their companies. In case of that one company also, representative appeared before the Assessing Officer in second round of assessment proceedings. During the remand proceedings, the directors of share applicant companies have confirmed the fact of the share application money paid to the assessee. The Tribunal in first round of proceeding, remitted the matter back to Ld. CIT(A) to verify whether the money invested in share application belonged to those companies and those companies are genuine existing company. The assessee produced Directors of those companies who not only admitted that investment was made out of their own money but also filed all documentary evidences in support thereof. Relevant part of statement of Sh. Pankaj Khetan (available on page 203 of the paper book-II) is reproduced as under: Q. No. 7: What is the source of money which has been invested by you in South East Impex Pvt. Ltd.? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument of the parties, dismissed the appeal of the Revenue observing as under: Learned counsel relied upon the decision of this court in CIT Vs. Jansampark Advertising Marketing Private Ltd. (2015) 56 Taxmann 286 (Del.) and submits that whereas the assessee might have established the identity of the investor, it failed to establish the genuineness of the investor or the creditworthiness of the share applicants and under the circumstances the impugned order is inconsiderable. This court has considered the submissions. It is no doubt correct that Section 68 casts an initial burden upon the assessee to disclose the identity of the applicant/investor as well as the genuineness of the transaction. In this case, it is evident that the discussion of the facts by the CIT(A) and the ITAI, has resulted from the materials on record. The AO shall undoubtedly be justified as to the identity of the share applicants. This Court is however unpersuaded by the revenue submission that the genuineness of the transaction or the creditworthiness of the assessee had to be established in the given facts of this case. The factual narration by the CIT(A) which was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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