TMI Blog2021 (7) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee either expressed inability or completely thwarted the investigation of the ld AO. CIT(A) did not address this issue at all. The onus u/s 68 is always swinging from Assessee to AO and AO to Assessee. In this case, now the onus rests with the assessee to produce the depositors before the ld AO who have invested in the share capital of the company. Assessee failed to do so. The assessee is a private limited company and therefore, it could not have given share subscription to the public at large. It has issued shares to the private parties which are known to the assessee only. It is not the case of the public limited company where the non production of the share holder could not have visualized in isolation against the Assessee. See NRA IRON STEEL PVT. LTD. [ 2019 (3) TMI 323 - SUPREME COURT] and NDR PROMOTERS PVT. LTD. [ 2019 (1) TMI 1089 - DELHI HIGH COURT] As the ld CIT(A) has failed to answer the several observation of the ld AO as stated above, we set aside the both the grounds of appeal of the ld AO back to the file of ld CIT(A) with a direction to the Assessee to produce the share holders before him - Decided in favour of revenue for statistical purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not furnished share application form and copy of the balance sheet etc. He also referred to issue of notice u/s 133(6) to the Act to various companies and the replies were showing meager income. The Assessee was asked to produce on 03.03.2015 and 05.03.2015 the parties who invested in the Assessee company to prove the genuineness of the transaction. The Assessee has shown its inability to produce. The ld AO further summons to the parties but none appeared. On the request of the Assessee the Inspector of the AO accompanied to record the statement of the Principal Officer. However, later on the ld AR back tracked and express his inability in this regard. The ld AO thereafter dealt the whole issue and made an addition of ₹ 3 crores in the hands of the Assessee as under:- 4. On perusal of the various details furnished by the assessee vide its letter dated 05.12.2014 it is observed that the assessee has received share application money amounting to ₹ 3,00,00,000/- from M/s. Mega Top Promoters Pvt. Ltd., M/s. AD Fin Capital Services Pvt. Ltd., M/s. Virgin Capital Services Pvt. Ltd. M/s. Euro Asia Mercantile Pvt. Ltd. M/s. Shalini Holdings Limited A M/s. Hum Turn M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn Marketing Pvt. Ltd. and in support of it the assessee has furnished along with letter dated 05.12.2014, Names, PANs and amount of share application money received from these entities. Vide letter dated 23.12.2014 copies of confirmations, Copy of acknowledgement of return A Bank statement of the companies from whom the share application money received by the assessee company. No other details like share application forms, copy of balance sheet etc were filed by the assessee. The assessee although has filed some details i.e. share application form, copy of balance sheet bank statement in support of transactions it entered during the year, which cannot be relied upon as the same are taken by the assessee from the companies who provides entries at the time of such transactions. 5. Information were also obtained by issuing notice u/s 133(6) of the Income tax Act to all above mentioned concerns. On perusal of the replies received in response to notices issued under section 133(6) it is noticed that all the investee companies are paper companies returning meagre income in the year under consideration. The bank statements also reflect that the funds are crediting in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e types of identity are merely on paper. The authority allotting PAN or processing the return of income seldom verify the actual identity of the person. These tools are being employed intentionally for the purpose of proving existence, however actual identity of the business and its genuineness do not automatically get proved by these passive documents when in fact no actual and active business is being carried out. Hon'ble High Court has held in its decision dated 08.11.2012 [disposing ITA No.497 of 2010 ] in the case of CIT Vs Youth Construction (P) ltd. reported in 44 Taxman 364. In this court the Hon'ble Court has held that merely by filing confirmation letters, etc. identity, creditworthiness and genuineness of the applicants cannot be established. 5.2 The creditworthiness essentially means capacity in financial dealings or capacity to pay. The creditworthiness of a person is something that is assessed by somebody while giving loan to the said person on arm's length basis. The bank assesses the creditworthiness of the person while allowing it loan. The creditworthiness is reflected in the balance sheet of the person and also in the profit making capacity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson who would invest his own money or forward a loan would certainly seek return in any form. The inherent capacity of money to earn is forgone without any consideration. These facts clearly show that the transaction is not genuine. It is most important to note that the assessee is enjoying the benefit of the said money without any associated financial burden in the same manner as if it is its own tax paid money. 5.3 The contention that the company was incorporated and hence its identity is established cannot be accepted. In appropriate cases, law permits looking beyond the corporate veil. The corporate veil can be lifted or pierced where the only actual activity the alleged corporate entity is found to be engaged in is evading the obligations imposed by law, more particularly in tax matters to see whether the entire facade has been put up to evade payment of taxes. 5.4 Truly, this menace should not be allowed to be perpetuated on technical grounds. The substance of the transaction which is apparent to everybody must not be ignored in the favour of the charade created by the masterminds in the interest of public at large. 5.5 There are any number of decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld CIT(A) who passed an order on 29.04.2016 deleting the above addition as per page No. 26 to 29 of his order as under:- I have gone through the facts of the case, grounds of appeal, observations of the Assessing officer in the assessment order dated 18.03.2015, written submissions and paper book of the appellant company and case laws relied upon by the appellant and considered them. On perusal of the assessment record for the assessment year, it is seen that the appellant has furnished all the relevant details pertaining to the share capital and share premium that were called for by the Assessing Officer, and in response to the aforesaid notice, appellant furnished various details pertaining to the share capital and share premium from 7 companies. The evidences furnished by the assessee during the course of the assessment proceedings are as under: I. Copy of share application ii. Confirmation iii. Copy of acknowledgement of return of income. iv. Copy of PAN V. Copy of bank statement vi. Auditors report and balance sheet From the perusal of the aforesaid, it is evident that the assessee has produced complete documentary evidence to establish the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re capital received by the assessee cannot be held to be not genuine. That the Apex Court in the case of CIT vs. Lovely Export 216 CTR 195 has held that if the share application money is received by the assessee company is from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen the individual assessments of share applicants and addition cannot be made in the hands of the assessee. The AR of the appellant has relied on various other case laws of the Hon'ble Jurisdictional High Court, and other High Courts and Hon'ble Tribunal on this issue which are not reiterated here as they are embedded in the written submission furnished by the appellant company. Respectfully following the aforesaid judgments relied upon by the appellant on this issue, I hold that the appellant has discharged its onus cast upon it as per the provisions of section 68 of the IT Act, 1961. Thus the action of the assessing officer in making the impugned addition is unwarranted and unjustified. To sum up, from the material on record I find that the appellant company had discharged its onus as provided in the provisions of section 68 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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