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2011 (10) TMI 675 - AT - Income TaxAddition u/s 68 - share application money - proof of identity of the subscribers - Held that - AO did not bring any material on record, suggesting that the six parties provided accommodation entries to the assessee and that the money received from these parties was ,in fact, the assessee s own undisclosed income , routed back in the guise of share application. As the assessee submitted copies of share application forms, containing names, addresses, PAN, Bank details and confirmations of the investors. In these circumstances, addition deleted while holding that the assessee discharged the initial onus of establishing the identity of the subscribers and the bonafide of the transactions. - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition made under Section 68 of the Income-tax Act, 1961 on account of share application money. 2. Assessee's failure to produce directors/authorized representatives of the share applicants. 3. Reliance on the decision in the case of Lovely Exports (P) Ltd. 4. Jurisdiction under Section 147 and compliance with mandatory conditions under Sections 147 to 153 of the Income-tax Act, 1961. 5. Validity of the assessment order. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68: The CIT(A) deleted the addition of Rs. 54,00,000/- made by the AO under Section 68 on account of share application money. The CIT(A) held that the AO did not conduct any inquiries to suggest that the share application money was the assessee's own undisclosed income. The assessee provided share application forms, names, addresses, PAN, bank details, and confirmations of the investors. The CIT(A) relied on various judicial pronouncements, including the Supreme Court's decision in Steller Investment Ltd. and the Delhi High Court's decision in Divine Leasing & Finance Ltd., which established that the burden of proof lies with the Revenue once the assessee provides initial evidence of identity and genuineness of the transaction. 2. Failure to Produce Directors/Authorized Representatives: The AO added Rs. 54,00,000/- to the assessee's income, stating that the assessee failed to produce directors/authorized representatives of the share applicants, thus not discharging the onus to establish the identity and creditworthiness of the share applicants. However, the CIT(A) found that the AO did not bring any material on record to prove that the money received was the assessee's own undisclosed income. The CIT(A) noted that the AO did not provide the assessee an opportunity to cross-examine the so-called entry providers. 3. Reliance on Lovely Exports (P) Ltd.: The CIT(A) and the ITAT relied on the Supreme Court's decision in Lovely Exports (P) Ltd., which held that if the share application money is received from alleged bogus shareholders, the Department can reopen their individual assessments but cannot treat it as undisclosed income of the assessee. The ITAT also referred to the Delhi High Court's decision in Dwarkadhish Investment P Ltd., which upheld that once the assessee proves the identity of the creditors/share applicants, the onus shifts to the Revenue. 4. Jurisdiction under Section 147: The assessee raised a cross-objection challenging the jurisdiction of the AO under Section 147, arguing that the mandatory conditions under Sections 147 to 153 were not complied with. The ITAT found that since the issue on merits was decided in favor of the assessee, the question of reopening became academic and infructuous. 5. Validity of the Assessment Order: The assessee contended that the assessment order should be quashed. However, since the ITAT upheld the CIT(A)'s decision to delete the additions made by the AO, the issue of the validity of the assessment order was rendered academic. Conclusion: The ITAT upheld the CIT(A)'s findings, dismissing the Revenue's appeal and the assessee's cross-objection as infructuous. The ITAT confirmed that the assessee had discharged its initial onus by providing sufficient evidence to prove the identity and genuineness of the share applicants, and the AO did not bring any contrary evidence on record. The ITAT's decision was consistent with the judicial precedents, including the Supreme Court's ruling in Lovely Exports (P) Ltd. and the Delhi High Court's decisions in Divine Leasing & Finance Ltd. and Dwarkadhish Investment P Ltd.
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