TMI Blog2019 (4) TMI 1988X X X X Extracts X X X X X X X X Extracts X X X X ..... eat only the share premium as non-genuine and bring to tax as unexplained cash credit u/s. 68 of the Act. The addition cannot be sustained. Thus, we direct the Assessing Officer to delete the addition made u/s. 68 of the Act. - Decided against revenue. - ITA NO.2888/MUM/2017 - - - Dated:- 5-4-2019 - SHRI C.N. PRASAD AND SHRI O.P. MEENA, JJ. Appellant by : Shri Neelkanth Khandelwal Respondent by : Shri Rajeev Gubgotra ORDER C.N. PRASAD, J. 1. This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) 21, Mumbai [hereinafter in short Ld.CIT(A) ] dated 07.02.2017 for the Assessment Year 2012-13 in deleting the addition made u/s. 68 of the Act towards unexplained cash credit in respect of share premium received by assessee. 2. Briefly stated the facts are that, pursuant to search/survey action in the case of Shri Praveen Kumar Jain [for short PKJ ] and based on the beneficiary of the accommodation entries provided by various entities being operated by PKJ, the Assessing Officer in the course of the assessment proceedings required the assessee to prove the genuineness, identity and creditworthiness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine, the identity of the shareholders, creditworthiness and the genuineness of the transaction was proved, was not accepted by the Assessing Officer, in view of the statement from PKJ and accordingly the Assessing Officer treated the share premium received from the shareholders as unexplained cash credit u/s. 68 of the Act. On appeal the Ld.CIT(A) considering the evidences furnished by the assessee and also the submissions and various decisions deleted the addition made u/s. 68 of the Act. 4. Ld. DR vehemently supported the orders of the Assessing Officer. He further submitted that, based on the information received by the investigation wing and the submissions recorded in the course of search in the case of PKJ who have categorically stated that they have provided only accommodation entries, the Assessing Officer is quite justified in treating the said transactions as non-genuine and bringing the same to tax u/s. 68 of the Act. He strongly placed reliance on the decision of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., [102 taxmann.com 182]. 5. On the other hand, Ld. Counsel for the assessee submits that the assessee has filed all the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these shareholders have been accepted and this was not doubted by the Assessing Officer. 7. Referring to the Page No. 16 of the Paper Book which is the letter addressed to the Assessing Officer in the course of the assessment proceedings the Ld. Counsel for the assessee submits that assessee furnished certified copy of transaction ledger, date of allotment of shares, copies of Board Resolution, details of ROC compliances to the Assessing Officer, therefore, Ld. Counsel for the assessee submits that all these evidence prove that the transactions are genuine. Ld. Counsel for the assessee referring to Page No. 94 of the Paper Book requested for copies of the statements and opportunity for cross examination of PKJ and the Assessing Officer never provided for any cross examination of the PKJ on whose statements he is relying on. 8. It has been argued that the assessee has established the identity, genuineness and creditworthiness of the shareholders and primary onus cast on the assessee has been discharged. It is further submitted that the Assessing Officer disregarded all the evidences and proofs furnished by the assessee and merely relied on the statements of PKJ which had alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as called for by Assessing Officer to substantiate the transactions entered into by them with the assessee. The Assessing Officer completely ignoring all the evidences and proceeded to treat the transactions as non-genuine solely based on the statement said to have been recorded from PKJ. We also notice that the Assessing Officer not provided the statements to the assessee on which he is placing reliance for treating these transactions as non-genuine. We also find that no cross examination has been provided by the Assessing Officer to the assessee on the third party statements on which he is relying on. 13. We find from Page No. 97 of the Paper Book that PKJ had in fact retracted his earlier statement given to the Income-tax Department stating as under in his affidavit dated 15.05.2014: My statements recorded by the income Tax Authorities at the time of search are hereby retracted ad I once again totally deny the contents. The said statements be treated as null and void and as have never been made by me. 14. We find that all these submissions and evidences were considered by the Ld.CIT(A) and deleted the addition observing as under: - 12. I have examined the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance 75 % of face value and premium i.e. ₹ 7,50 towards share capital and ₹ 367.50 towards share premium per share. Thus a total of ₹ 525,00,000 was paid up by these four investor companies in respect of the partly paid up shares. These further payments were examined and accepted by the assessing officer for AY 2013-14 in the assessment order u/s 143(3) dated 23.3.2016 and no addition u/s 68 was made. The premium thus has been accepted by the same assessing officer in the subsequent year. 15. I do not find any merit in the contention of the appellant that the investment being a share capital is a capital receipt and therefore cannot be considered as income in the hands of the appellant. The credits fall within the scope of section 68 which is a deeming provision. Several case laws including those of the Apex Court and High Court have considered credits made to capital account of the assessee's to be covered under the provisions of section 68 and therefore deemed income. The rule for application of section 68 is that the identity and credit worthiness of the investor/lender /creditor has to be established and the genuineness of the transaction has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company . (ii) The Hon'ble Bombay High Court in the case of CIT v/s Creative World Telefilms Ltd 333 ITR 100 has held as under: If the share application money is received by -the assessee company from alleged bogus share holders who's name are given to the Assessing Officer then the department can always proceed against them and if necessary reopen their individual assessments. Held, dismissing the appeal, that there was no dispute that the assessee had given the details of names and addresses of the shareholders, their PAN/ GIR numbers and had also given the cheque numbers, name of the bankers. The Assessing Officer ought to have found out their details through PAN cards, bank reholders. Thus, the view taken by the Tribunal could not be faulted. (iii) The Hon'ble Supreme Court of India in the case of CIT vs. Orissa Corporation reported in 159 ITR 78 (SC) has held as under: That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.584/M/2015 has deleted similar addition made u/s 68 of the I.T. Act. The Hon'ble ITAT (Jaipur Bench) in the case of Bharti Syntex Ltd. vs. DCIT ITA Nos.172 173/Jp/2010 has held in para 24.4 as under:- 24.4 In this case also no cross examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only on the statement of Shri MukeshChoksi. We further noted that all other necessary details have been filed before AG. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation along with copies of share certificate, bank statement, memorandum of articles, copy of share application money, audited balance sheet and P L a/c of these parties were filed. These are similar details as were filed in case of three other companies for asst. yr. 2005-06. We have already disposed of the appeal for asst. yr. 2005-06 whereby we have held that the assessee has discharged its onus by filing necessary details and further have relied on the decisions of Hon'ble Supreme Court and Hon'ble Delhi High Court alongwith various other decisions of Tribunal and have held that addition cannot be made under S. 68 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions received by them save and except two transactions of ₹ 1 lac each received by two creditors from verifiable donors. (iii) The bank accounts as well as returns filed by the creditors who were assessable to tax alongwith their PANs‟ were also available with the A.O. (iv) The assessee in turn had received the monies by way of cheques in respect of which credits were made in their books of accounts. (v) The creditors had also placed on record receipts of commission as well as the gift deeds in respect of gifts made to the donors. (vi) The identity and addresses of sub creditors was also available. 14. With this material on record in our view as far as the assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the credit worthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deposed that he is providing only accommodation entries through various concerns. On the basis of this information received from DGIT(investigation), Mumbai the Assessing Officer noted that assessee was one of the beneficiaries of accommodation entries given by Shri Pravin Kumar Jain. Assessee was required to explain the unsecured loans obtained in the name of M/s Mohit International and M/s.Natasha enterprises of ₹.10 lakhs each and prove the genuineness of the transactions. Assessee furnished information in respect of the above transactions i.e. copy of Loan confirmation and Affidavit establishing identity of the lender, copy of ledger giving detail towards loan taken during the year and subsequent repayments and Copy of ITR V filed establishing Creditworthiness of the Lender. However, Assessing Officer did not accept the evidences furnished by the assessee and also the retraction statement of Shri Pravin Kumar Jain, ignoring all the evidences Assessing Officer concluded that the assessee has not explained the transactions as genuine and therefore he has added the unsecured loans as unexplained income of the assessee. Correspondingly he has also disallowed the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d foremost, the appellant has not been given any access to the material (reports, intimations, statement etc.) used against it. Secondly, by withholding the said material the assessing officer has denied to the appellant an opportunity to refute the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely. 6.4. It has to be said that the appellant had done everything in its power to prove the three ingredients required to prove the satisfactory nature of the loan transactions. He has submitted confirmation from the parties. filed Audit Reports of the parties alongwith copy of their ITR, and bank statements. In these circumstances, the onus had shifted to the assessing officer. If the assessing officer was still not satisfied, he had the option of making enquiries from the alleged lenders by summoning them. However as seen from the assessment order, he did not do any such thing. Further, if the assessing officer was satisfied with what had been given to him by the appellant, he was duty bound to specify what more material he wanted from the appellant to furnish. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted after discussing the issue in detail in the above paragraphs. 6.6. Thus, above discussion and various explanations leads to the conclusions that the Ld. Assessing officer has made addition of ₹.20,00,000/- and interest given to the parties, disregarding the evidence on record and without discharging his onus and without establishing anything to the contrary to the submissions of the appellant and without verifying the bank account, existence of entities who have extended loans to the appellant and without making fruitful investigation. Therefore, the Assessing officer is directed to delete the addition made of ₹ 20,00,000/- on account of unexplained unsecured loans and ₹.2,35,246/- made on account interest on the same. The grounds of appeal are allowed. 10. On a plain reading of the Assessment Order, we find that the Assessing Officer has gone only by the statement recorded from Shri Pravin Kumar Jain who said to have been deposed that he is only providing accommodation entries and no real business is carried on by the entities. The Assessing Officer has not made any efforts to make independent enquiries with the lender companies. We also obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g genuineness of the transactions u/s. 68 of the Act. Even the assessee requested Assessing Officer for issue of notices u/s. 133(6) of the Act to the lenders to find out the genuineness of the transactions with the assessee. Therefore, once the initial onus is discharged by the assessee the burden shifts to the Revenue to disprove the claim of the assessee. We notice that all the loans were taken through banking channels and the repayments for the same was also made through banking channels. The Assessing Officer ignored the documentary evidences submitted by the assessee and has exclusively relied on statements of third party in making the addition. In spite of request by the assessee the Assessing Officer did not provide any cross-examination of the parties who have made the submissions. All these aspects have been considered by the Ld.CIT(A) and deleted the addition observing as under: 5.9. From the assessment order, it transpires that the AO has solely relied upon the statement of Mr. Pravin Kumar Jain and did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the appellant. The AO in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Nipun Builders Developers P. Ltd. (ITA No.557/DEL/2010) wherein the Tribunal dismissed the Revenue appeal by holding that the Assessing Officer has primarily relied upon the Report of the Investigation wing which cannot conclusively prove that assessee's own money was invested in the form of share application money. 5.12. Further, in the recent judgment of Shri.Jafferali K Rattonsey V. DCIT reported in 5068/Mum/209, the Mumbai Bench of the Income Tax Appellate Tribunal has also held that the mere statement of a person cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee specially when all other supporting evidences filed by the assessee were neither proved to be false or untrue. The Hon'ble ITAT Mumbai in the case of ITO vs Anand Shelters Pvt.Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits have evolved and has taken a definite shape. A few aspects of law u/s.68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 5.15. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words shall be charged to income-tax as the income of the assessee of that previous year . The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 5.16. After considering the totality of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies of Shri Praveen Kumar Jam. Although said statement has been immediately retracted by him by filing an affidavit with the CBDT, the CIT(A) has deleted the said addition as in his opinion the assessee has duly discharged his onus as laid down on it u/s. 68 of the I.T.Act. It was also noted by the CIT(A) that the assessee has proved the identity, credit worthiness as well as genuineness of the transactions and, therefore, no addition u/s. 68 can be made. 7. The learned AR before us relied on the order of the CIT(A) and has also pointed out that the loan received by the assessee has been returned to the respective parties through cheques and in none of the case the respective party has deposited any cash. He relied on the following Tribunal decisions: Arceli Realty Ltd vs. ITO [ITA No.6492/Mum/2016 dated 21.04.2017 (Mumbai)] M/s Komal Agrotech Pvt. Ltd. vs. ITO [ITA No.437/Hyd/2016 dated 25.11.2016 (Hyderabad)] Sudhanshu Suresh Pandhare vs. ITO [ITA No.5185/Mum/2012 dated 05.10.2016 (Mumbai)] Dilsa Distributors Combines vs. ITO [ITA No.5849/Mum/2011 dated 06.09.2013 (Mumbai)] Aim Properties Investments Pvt. Ltd vs. Income Tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11.2016 has held as under: A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D G. I T (Investigation), Mumbai. No enquiries or investigation was carried out. No evidence to controvert the claims of the Assessee was brought on the record by the AO. Even the statement of Shri Praveen Kumar was supplied. Nothing is on record about the result If investigations done by DGIT (Inv), Mumbai. The papers filed by the assessee do demonstrate the identity, creditworthiness and genuineness of the transaction. The addition is made merely on surmises and conjectures. In view of the above, we hold that the addition made under section 68 of the Act is bad in law. We noted that in the said case also loan had been received from Javda India Impex Ltd. 12. Being consistent with the view taken by this co-ordinate Bench in the case of Komal Agrotech Pvt. Ltd. (supra), and in view of the facts and circumstances, we do not find any illegality or infirmity in the orders of the CIT(A). It is accordingly, confirmed for both the years under appeal. 13. In the result, the appeals filed by the Revenue are dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee further contended that in response to notices u/s 133(6) issued by AO, the above parties replied alongwith documents mentioned in the notice, therefore, there is no reason for the AO to doubt the transactions only on the basis of information received from Investigation Wing that too, without providing any opportunity of cross examination of the parties. In this regard, he relied upon plethora of judgements including the judgement of Hon ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd 394 ITR 680 (Bom) and Hon ble Supreme Court in the case of Lovely Exports Pvt Ltd vs CIT 216 CTR 295(SC). 5. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The AO made addition towards unsecured loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the basis of information received from Investigation Wing which revealed that the assessee is the beneficiary of bogus accommodation entries provided by Shri Praveenkumar Jain through his bogus companies. The AO has made additions u/s 68 of the Income-tax Act, 1961 on the ground that though the assessee has fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee has discharged his onus cast u/s 68 by filing identity of the creditors, genuineness of transactions and creditworthiness of the parties which is evident from the fact that the assessee has furnished financial statements of the creditors wherein the said transaction has been disclosed in the relevant financial years. We further notice that the assessee also filed financial statements of the creditors which are enclosed in paper book filed. On perusal of the financial statements filed by the assessee, we find that both the companies are active in the website of Ministry of Corporate Affairs. This fact has been further supported by the letter of AO wherein the AO has accepted that both companies, viz. Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are active in MCA website. We further notice that both the companies have filed financial statements for the year ending 31-03-2006. Therefore, we are of the considered view that the assessee has discharged its initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and direct the AO to delete the addition of ₹.10.00 lakhs. 22. In the case on hand also, the assessee has discharged its initial onus of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details and thus the assessee has discharged identity, genuineness and creditworthiness of the parties. 23. The Hon'ble Delhi High court in the case of CIT v. Laxman Industrial Resources Ltd. in ITA No.169 of 2017, held as under: - The Income Tax Appellate Tribunal's (ITAT) order upholding the Appellate Commissioner's opinion that the additions made in the course of reassessments unsustainable, were challenged by the Revenue. The reassessment notice was issued to the assessee for AY 2002-03 on the ground that inform ation received from the Investigation W ing pointed to its being the beneficiary of the accommodation entries that were subjected to addition under Section 68. The Assessing Officer (AO), in the reassessment proceedings, added a sum of 70,77,290/-. Upon appeal, the CIT(A) took note of the materials filed by the assessee and provided an opportunity to the AO to remand proceedings. The AO merely objected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assess cc nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assess cc. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. (iii) CIT vs. Value Capital Services Ltd. (2008) 307 ITR 334 (Dd.) - Hon'ble Delhi High Court has held as under:- 5. While setting aside the order of the Commissioner of Income tax (Appeals), the Tribunal relied upon two decisions of this court, namely CIT v. Stellar Investment Ltd. [1991J 192 ITR 287 and a Full Bench decision in CIT v. Sophia F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blished, but has also examined the fact that each of them were income-lax ass essees and had disclosed the share application money in their accounts which were duly reflected in their Income-tax return as well as in their balance sheets. In these circumstances we see merit in what the learned counsel for the appellant has submitted and we feel that the Tribunal was unjustified incoming to the conclusion that the C'IT(A) had not considered the matter in the right perspective. Consequently, we decide the question in favor of the assessee and set aside the order passed by the Tribunal. 5.4 In the present case the assessee can be said to have discharged its onus under section 68 of the Act. The appellant has given all the necessary details in order to establish the identity of the share applicants. After considering the entire material placed on record, it is fair to conclude that theshare applicants were existing parties and the payments were made through banking channels, It is also observed that the Assessing Officer could not point out any discrepancy in the evidences relied upon by the assessee, He has neither brought out any direct or inferential evidence to contradict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of his powers under order 16. Rule 10 of CPC and where the Officer does not do so, no inference can be drawn against the assessee. Reliance is also placed on the decision of the jurisdictional High Court, i.e. Delhi High Court in CIT v. Pradeep' Kumar Gupta and- Vijay Gupta (2008) 303 ITR 95 (Del) wherein it was held that reopening of assessment is not permissible on mere adverse statements from others. Such statement by itself does not constitute information, unless the Assessing Of has made enquiries thereon and inferred understatement or Income. lain therefore inclined to agree with the submissions made on behalf of the appellant to the effect that the information, if any, gathered behind the back of the assessee without being subjected to cross examination cannot be fully admitted as evidence against the assessee. 5.6 Under the facts and circumstances of the case stated above, it is held that the addition of ₹ 70,00,0001- cannot be sustained and accordingly, the same is directed to be deleted. The consequential addition on account of commission of ₹ 70,000/- for obtaining the said accommodation entries is also directed to be deleted. As a result, groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re capital contribution and ₹ 19,950/- on account of unexplained expenditure on commission for getting accommodation entries. 2. Put in brief, the relevant background aspects of the matter are as follows: The respondent Company is engaged in manufacturing of the segments used in the marble sawing. The Company came into existence on 16.06.2003. Thus, the previous year related with the Assessment Year 2004-05 had been the first year of the business of the assessee company. In the original return filed on 01.11.2004 under Section 139 of the Act, the assessee Company declared a loss of ₹ 3,88,740/-. It appears that search and seizure operation under Section 132 of the Act were carried out on 23.01.2006 at the business premises of the assessee along with the residential as well as other business premises of Choudhary Group of Cases; and pursuant thereto, notices under Section 153A were issued. In the return filed on 06.12.2006 in response to the notice under Section 153A, the assessee company declared a loss of ₹ 3,38,740/- 3. On the return so filed, the assessment was completed on 28.12.2007 at the total income of ₹ 76,61,210/- wherein, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard and the case was discussed with him. On perusal of letter u/s 133(6) I find that no confirmations or comment was asked from the directors of the purchaser company about their statement in the search and seizure operation in their case. The ld. A.O's only reason for rejecting the confirmations and affidavits filed by aforesaid directors of the purchaser companies was that the directors did not retracted their statement in such confirmations or affidavits. The ld. A/R's contention is that the directors of the purchaser companies have fully replied against the ld. A.O's letter u/s 133(6). There is no question to retract against anything which is not mentioned in the letter u/s 133(6). Therefore, the rejection of confirmations and affidavits filed by the directors of the purchasing companies was not justified and the various case laws relied by him is still applicable in this case and binding on the department. Moreover the ld. A/R also submits that the statement made by third party on the back of the assessee can not be utilized against him without giving him opportunity of confrontation or cross-examination of such persons making such statement. This opportunity was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, in the present case even there are no genuine investors as all the companies are fabricated just to provide accommodation entries only as admitted by one of the Directors i.e. Shri Pradeep Jindal. Whether those companies were fictitious or bogus, the moot question here is that whether the assessee company had received share application money or not. It is seen that share capital was received through account payee cheques along with premium amount totalling to ₹ 79,80,000/- from five private limited companies i.e. M/s. Sanraj Associates Pvt Ltd., M/s. Fortress Impex Pvt. Ltd., M/s. Sumit Overseas Pvt. Ltd., M/s. Pushpanjali Caps Pvt. Ltd. and M/s. B.P. Builtech Pvt. Ltd. all these companies are situated at Delhi. All these companies are assessed to tax and they are registered under the Companies Act. Return of allotment of shares in prescribed form No.2 to the Registrar of Companies was also filed before Assessing Officer as well as before ld. CIT (A). It is further seen that the addition is based on alleged statement of Shri Pradeep Jindal recorded under section 131 behind the back of the assessee on 15.4.2004. The assessee was not even afforded any opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was directed to take necessary action against the purchaser company for such investment in purchase of shares. 10. We have also considered the contention of ld. D/R that the share application money which remained unproved can be added under section 68. We would like to observe here that there is a difference between cash creditor and shareholder. In case of cash creditor, the cash creditor has right to demand the money back from the assessee. However, in case of shareholder, there is no liability of the company to refund the amount as the shares can be sold in the market. Therefore, in case of cash creditor, heavy onus lies on the assessee to prove whether cash creditor was genuine or not. However, in case of shareholder, it is held by various High Courts and Hon'ble Supreme Court that if shareholders are not genuine, then in that case no addition can be made in the hands of the company but the case can be reopened of the shareholders for enquiring about their source of buying the shares in the company 10.1 The contention of ld. CIT D/R that cash was deposited in the account of the respective five companies before issuing cheque to the assessee company for allottin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements made by some of the persons related with the said investing companies is of no effect because such statements could not have been utilized against the assessee Company when the assessee-company had not been afforded an opportunity of confronting and cross-examining the persons concerned. There does not appear anything occurring in the statements of the persons relating with the assessee-company so as to provide a basis for the findings recorded by the AO. 9. In any case, the points as sought to be raised by the appellant in the present case are all the matters relating to appreciation of evidence. The relevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour of the assessee. As regards the referred share capital contributors, it is noticed that they are existing assessees having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard at the hands of assessee-company. 10. Ultimately, the question as to whether the source of investment or of credit has been satisfactorily explained or not remains wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio of the decisions aforesaid directly applies to the present case too. Herein, as noticed, the appellate authorities have returned the findings of fact in favour of the assessee after due appreciation of the evidence on record, on relevant considerations, and on sound reasonings. These findings have neither been shown suffering from any perversity nor appear absurd nor are of such nature that cannot be reached at all. 13. Needless to reiterate the law laid down by the Courts consistently that the department is free to proceed in relation to the individual investor in accordance with law but the amount of increased share capital cannot be assessed at the hands of the assessee company itself. 14. In the result, the appeal fails and is, therefore, dismissed. 25. In the case of CIT v. Orchid Industries Pvt. Ltd. (ITA No.1433 of 2014) (Bom.), Hon'ble jurisdictional High Court held as under: The Revenue has filed the appeal on following questions: 6.3 Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of ₹ 95,00,000/- made u/s. 68 of the Act, relying only on the docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the Assessee. The learned counsel relies on the judgment of the Division Bench of this Court in case of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) and the order of the Apex Court in case of CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195. 4. We have considered the submissions. 5. The Assessing Officer added ₹ 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. 6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the respondent-assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of ₹ 7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act. (b) Being aggrieved, the respondent carried the issue in appeal. By an order dated 24th May, 2011 the Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition of ₹ 7.53 crores made by the Assessing Officer by holding that the Assessing Officer had given no reason to conclude that the investment made (inclusive of premium) was not genuine. This inspite of evidence being furnished by the respondent in support of the genuineness of the transactions. Further he held that the appropriate valuation of the shares is for the subscriber/investor to decide and not a subject of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that it is declaratory . Therefore 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies (five in numbers) were all located at the common address i.e. 13/34 WEA, Fourth Floor, Arya Samaj Road, New Delhi. In that situation, Hon'ble Delhi High Court reached to a particular conclusion. It is clear that the facts in the case of NDR Promoter Pvt. Ltd., relied upon by the Ld. DR, are different and distinguishable. It is also noted (para-4 of the order of the Hon'ble Delhi High Court) that the money was circulated by first depositing the cash in the bank account of one such company and thereafter transferred/circulated (group companies before cheque is issued to the beneficiaries), therefore, may not help the Revenue. 28. Since facts are different in the case of PCIT v. NDR Promotors Pvt. Ltd. (supra), we are of the view that this decision has no application to the present assessee s case. 29. In view of what is discussed above and in view of the evidences furnished by the assessee, we are of the view that the assessee has discharged its onus of proving the identity, genuineness and creditworthiness of the creditors/shareholders and fulfilled the requirement of ingredients of section 68 of the Act. Thus, the addition made u/s. 68 of the Act which is pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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