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2011 (7) TMI 1285 - AT - Income TaxUnexplained Cash Credits u/s 68 - AO made the addition on money received from share applicants and commission paid because summons issued to parties in question were returned back as un-served - CIT(A) deleted such additions on the ground that assessee has submitted return of allotment of shares filed with ROC, Affidavits from the parties, confirmation of the parties, copies of bank accounts etc - HELD THAT - We find that assessee in this case has duly submitted all the details to establish the identity of the parties, the income tax particulars in the form of PAN were also provided by the assessee. In the background of the above details, it can be said that assessee has submitted enough details to establish the identity of the parties. Assessing Officer has primarily relied upon the Report of the Investigation Wing which cannot conclusively prove that assessee own money was invested in the form of share application money. We place reliance of the Hon ble Apex Court decision delivered in the case of COMMR. OF INCOME TAX VERSUS M/S LOVELY EXPORTS (PVT) LTD 2008 (1) TMI 575 - SC ORDER , where it was held that, if the share application money is received by the assessee company from alleged bogus shareholders, it cannot be regarded as undisclosed income of the assessee. Further, reliance on COMMISSIONER OF INCOME TAX-IV VERSUS M/S. DWARKADHISH INVESTMENT (P) LTD. AND M/S. DWARKADHISH CAPITAL (P) LTD. 2010 (8) TMI 23 - DELHI HIGH COURT was made, where it was held that, just because the creditors/share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the revenue which has all the power to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source. On considering the facts of the present case and considering the orders made in aforementioned judgements, we do not find any infirmity or illegality in the order of the Ld. CIT(A), accordingly, we uphold the same - Decision in favour of Assessee.
Issues Involved:
1. Deletion of addition made on account of share application money under Section 68 of the Income Tax Act, 1961. 2. Deletion of addition made on account of commission under Section 68 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Deletion of Addition on Account of Share Application Money - Assessment Year 2004-05 (ITA NO. 557/DEL/2010): The Assessing Officer (AO) noted that the assessee received amounts from entry operators, totaling Rs. 1,47,00,000/-. Summons to these parties were returned unserved, leading the AO to conclude that these companies did not exist and thus added the amount under Section 68. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, noting that the assessee had submitted substantial documentation, including share application forms, affidavits, confirmations, and bank account copies. The CIT(A) cited various judicial pronouncements, notably from the Hon'ble Supreme Court and Delhi High Court, establishing that once the identity of shareholders is proven, the amount cannot be regarded as the assessee's undisclosed income. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO did not provide the assessee an opportunity to rebut the information collected and relied heavily on the Investigation Wing's report without concrete verification. - Assessment Year 2005-06 (ITA NO. 558/DEL/2010): The AO made an addition of Rs. 1,77,00,000/- on similar grounds, noting that summons to the concerned parties were not complied with. The CIT(A) found that the amounts were received in the previous year relevant to the assessment year 2004-05 and thus could not be added under Section 68 for the assessment year 2005-06. The Tribunal upheld this finding, noting that the Departmental Representative could not controvert the CIT(A)'s categorical determination that the amounts were received in the prior assessment year. Issue 2: Deletion of Addition on Account of Commission - Assessment Year 2004-05 (ITA NO. 557/DEL/2010): The AO added Rs. 3,67,500/- as commission (2.5% of Rs. 1,47,00,000/-) paid in these transactions. The CIT(A) deleted this addition, reasoning that since the primary addition of Rs. 1,47,00,000/- was deleted, there was no basis for the commission addition. The Tribunal agreed, noting that the AO's reliance on the Investigation Wing's report without confronting the assessee with the information was insufficient to justify the addition. - Assessment Year 2005-06 (ITA NO. 558/DEL/2010): The AO similarly added Rs. 4,42,500/- as commission (2.5% of Rs. 1,77,00,000/-). The CIT(A) directed the deletion of this addition, consistent with the finding that the primary addition was not applicable for the assessment year 2005-06. The Tribunal upheld this decision, finding no infirmity or illegality in the CIT(A)'s order. Conclusion: In both appeals, the Tribunal upheld the CIT(A)'s orders, emphasizing that the assessee had provided sufficient documentation to establish the identity and genuineness of the transactions. The Tribunal reiterated that the AO's reliance on the Investigation Wing's report without proper verification and without providing the assessee an opportunity to rebut the information was not justified. The appeals filed by the Revenue were dismissed.
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