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Issues Involved:
1. Deletion of addition on account of unexplained cash credits u/s 68 of the IT Act for assessment years 2007-08 and 2008-09. 2. Validity of additions based on statements and documents obtained during search and survey operations. Summary: Issue 1: Deletion of Addition on Account of Unexplained Cash Credits u/s 68 The Revenue filed appeals against the deletion of additions of Rs. 8.5 crore and Rs. 5 crore for assessment years 2007-08 and 2008-09, respectively, made on account of unexplained cash credits u/s 68 of the IT Act. The AO made these additions based on share application money received from companies deemed non-genuine. The AO relied on the statement of Shri Aseem Gupta, CA, recorded during a survey, where he admitted to providing bogus accommodation entries in the guise of share application money. The AO also considered entries in a black diary impounded during the survey, which allegedly pertained to the assessee. Issue 2: Validity of Additions Based on Statements and Documents Obtained During Search and Survey Operations The CIT(A) deleted the additions, noting that the assessee had provided sufficient documentary evidence to prove the identity, creditworthiness, and genuineness of the share applicants. The assessee submitted share application forms, bank statements, IT returns, balance sheets, share allotment certificates, and board resolutions of the share applicants. The CIT(A) observed that the AO did not point out any discrepancies in these documents. The CIT(A) also noted that the AO heavily relied on the statement of Shri Aseem Gupta, which was not confronted with the assessee, violating the principles of natural justice. Additionally, the entries in the black diary pertained to assessment year 2005-06 and not the years under consideration. The CIT(A) held that the assessee had discharged its onus by providing all necessary documents, and the AO failed to bring any contrary evidence on record. The CIT(A) relied on various judicial precedents, including the Supreme Court's decision in Lovely Exports (P) Ltd., which held that if the share application money is received from alleged bogus shareholders whose names are given to the AO, the department is free to proceed against them, but the amount cannot be regarded as undisclosed income of the assessee company. In conclusion, the CIT(A) deleted the additions, and the ITAT upheld the CIT(A)'s order, dismissing the Revenue's appeals. The ITAT emphasized that the assessee had provided sufficient evidence to prove the genuineness of the share application money and that the AO's reliance on the statement of Shri Aseem Gupta and the black diary was not justified.
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