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2013 (12) TMI 1369 - AT - Income TaxShare application money received - Held that - The disputed share application money was received through banking channels and names, address, PAN Nos. supported by confirmation, copies of bank account, copies of application for return of shares, copies of annual accounts of share applicants, copies of return of income of share applicants and affidavits of the office bearers of the applicant companies were submitted before the revenue authorities and all these details were confronted to the Assessing Officer - When the identity of the share applicants is proved by the assessee and the AO has not brought any adverse material or fact against the share applicants, then no addition can be made in the hands of appellants - The Assessing Officer could not prove that the money received by the assessee from alleged three companies in the form of share application money had come from the own sources of the assessee - Following C.I.T. vs Lovely Export P. Ltd 2008 (1) TMI 575 - SUPREME COURT OF INDIA - No evidence has been brought on record by the Assessing Officer to prove that the share application money emanated from the coffers of the assessee and the Assessing Officer has not made any inquiries from the concerned authorities nor did he examine the assessment record of the share applicants - Decided against Revenue. Correlation between cash deposits and cheques issued - Held that - The disputed cash deposits were made out of cash withdrawals made from the same bank on earlier occasions and as per remand report, the Assessing Officer was satisfied about the source of cash deposited in the bank account of the assessee - When the balance matches with the balance sheet and cash book, no addition u/s 68 of the Act is sustainable - Decided against Revenue.
Issues Involved:
1. Deletion of addition of Rs. 1.65 crores made on account of share application money under Section 68 of the Income Tax Act. 2. Deletion of addition of Rs. 1,18,50,000/- on account of cash deposits in the bank account of the assessee. Issue-Wise Detailed Analysis: 1. Deletion of Addition of Rs. 1.65 Crores: The Revenue appealed against the deletion of Rs. 1.65 crores made by the Commissioner of Income Tax(A) on account of share application money received by the assessee through accommodation entries. The Revenue argued that the creditworthiness of the share applicants was not established, and there was a nexus between the cash deposits in the bank accounts of the share applicants and the cheques issued to the assessee. Additionally, the Revenue contended that the share application money was repaid without allotting shares, differentiating the case from Lovely Export Pvt. Ltd. (216 CTR 195). The Assessing Officer (AO) had concluded that the amount was an unsecured loan rather than share application money, and the share applicants had minimal declared income, questioning their creditworthiness. The Tribunal considered the detailed submissions and evidence, including names, addresses, PAN numbers, and bank statements of the share applicants. The Commissioner of Income Tax(A) had granted relief, noting that the identity of the share applicants was established, and the money was received through banking channels. The Tribunal referenced the decision in Lovely Export Pvt. Ltd., which held that if share application money is received from alleged bogus shareholders, the Department could proceed against them individually. The Tribunal found no adverse material proving that the money came from the assessee's own sources and upheld the deletion of the addition, dismissing the Revenue's grounds. 2. Deletion of Addition of Rs. 1,18,50,000/-: The Revenue also appealed against the deletion of Rs. 1,18,50,000/- added by the AO on account of cash deposits in the assessee's bank account. The AO had argued that the assessee had no business receipts or other receipts to support the genuineness of the cash deposits. However, the assessee provided detailed explanations and evidence, including ledger and cash book entries, bank statements, and submissions before the Commissioner of Income Tax(A). The AO's remand report did not comment adversely on the explanation provided by the assessee regarding the cash deposits. The Commissioner of Income Tax(A) held that the cash deposits were made out of earlier cash withdrawals from the same bank account and matched the balance sheet and cash book. The Tribunal agreed with this finding, noting that the AO had not called for an explanation regarding the cash deposits during the reassessment proceedings. As the balance matched the financial records, the Tribunal upheld the deletion of the addition, finding no reason to interfere with the Commissioner of Income Tax(A)'s order. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the deletions made by the Commissioner of Income Tax(A) for both the addition of Rs. 1.65 crores on account of share application money and the addition of Rs. 1,18,50,000/- on account of cash deposits. The Tribunal found that the assessee had provided sufficient evidence to establish the identity and creditworthiness of the share applicants and the source of the cash deposits, with no contrary evidence presented by the AO.
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