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TMI Blog2010 (12) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... essee with regard to the credit entries made on account of share application money. With regard to the various amounts of share application money received from different parties, the AO has elaborately discussed each entry in para 5 of the assessment order in which he has observed that on the basis of spot inquiries in many cases the addresses of the parties were not found to be genuine and at the same time the explanation provided by the Authorised Representative of the assessee was not sufficient to establish the identity, genuineness and creditworthiness of the various parties. The primary observations with regard to the various parties were based on the observations of the Investigation Wing and also the fact that the companies could not be located at the given address. The arguments of the AO were similar in nature as had been made for asst. yr. 2006-07. The AO observed that with regard to various parties the status was as follows:- (i) The companies were not existing at the given address by the assessee and appeared to be only formed on paper by some name lenders. (ii) In some cases the letters sent for verification at the address provided by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue. The facts of the present case are similar to the asst. yr. 2006-07 and the additions made by the AO are also based on the report of the Asstt. Director of IT (Investigation Wing), Ghaziabad. The issue had been decided by me for asst. yr. 2006-07 after carefully considering the various facts and circumstances as well as the legal position on the issue. After considering the remand report of the AO, it is clear that the facts of the case in this year also are similar to that of the earlier year i.e., asst. yr. 2006-07. The main issues which need to be considered in this year also are related to the opportunity of cross-examination not having been provided by the AO, the issue of establishing the identity of the parties through PAN, CIN, confirmation etc. is being summarized as follows:- (a) From the facts of the case it is clear that the assessee had raised share application money to the extent of Rs. 8.45 crores from various parties. In this case a survey under s. 133A was carried out and on the basis of the findings during the course of survey which were forwarded by the Asstt. Director of IT, Investigation Wing, Ghaziabad to the AO, the AO provided copies of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Authorised Representative has argued that the statements of large number of parties were totally irrelevant and unreliable since these persons had no locus standi to comment on the existence of various companies. The Authorised Representative has further argued that even during the course of survey under s. 133A no incriminating material has been found which indicated that the share application money was in any manner related to the unexplained income of the appellant. The Authorised Representative has submitted that even though an amount had been surrendered during the course of survey only on grounds of buying peace with Department, this statement itself was retracted since there was no evidence or material to back this surrender. It has also been contended that during the course of survey all the verifications including cash, stock, books of accounts etc. were conducted by the Investigation Wing and no incriminating documents had been found or brought on record. The Authorised Representative has further submitted that fresh affidavits of all the shareholders were filed before the AO and the AO has not controverted these affidavits and has also not commented on the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion that the various parties did not exist at the given address, without providing proper opportunity of cross-examination. (d) It is also important to keep in mind that during the course of remand proceedings the AO was directed to issue summons under s. 131/133(6) of the IT Act and the outcome of any such inquiries made by the AO with regard to the identity of various parties. The AO had submitted that all such details were reported as per para 5 of the assessment order. The Authorised Representative of the appellant subsequently submitted in his letter dt. 18th May, 2010 that the AO had issued summons only to 6 parties and in the case of 3 parties replies were received confirmed the fact and genuineness of the share capital. With regard to the other 3 parties summons were issued at wrong address and factual position was clarified vide letters dt. 22nd Dec., 2009 and 23rd Dec., 2009. It was further submitted by the Authorised Representative that at the request of the AO other documents were submitted relating to these parties and the AO has not disputed the correctness of the documents as there is no case of any adverse inference. The Authorised Representative strongl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and the genuineness of the transactions were held to be genuine on the basis of records and details submitted by the assessee. The issue was decided in favour of the assessee and against the Revenue. (g) In the present set of facts also the AO has been provided various opportunities through remand proceedings to carry out any inquiries or make verifications with regard to PAN and other details of the share applicants. Through letter dt. 22nd Feb., 2010, the AO was specifically asked to make any inquiries required and issue any summons to different parties for controverting the documents submitted by the Authorised Representative of the appellant regarding the identity and genuineness of the transaction. The relevant portion of the letter of the office of the CIT(A) is as under:- 'Various documents have been enclosed for establishing the identity and genuineness of the transaction. It has also been argued that the facts of the case are similar as that of the asst. yr. 2006-07 where the issue has been decided in favour of the appellant. After going through the various documents you are required to comment on the contention of the appellant that the identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted by the AO to be similar to asst. yr. 2006-07, in his remand report. This ground also therefore gets covered, apart from the latest decisions on this issue by the Hon'ble Delhi High Court, referred to earlier. The issue has been decided in favour of the appellants in the cases of CIT vs. Winstral Petrochemicals (supra) and CIT vs. Victor Electrodes (supra). Accordingly this ground of the appellant is treated as allowed." 6. Being aggrieved with the CIT(A)'s order, the Revenue is in appeal before us. 7. The learned Departmental Representative has summarized the details of particulars and informations supplied by the assessee with regard to 16 share applicants and submitted that there was no dispute as to the share applicant namely, M/s NTARIX Multimedia (P) Ltd. mentioned at serial No. 2 of the table furnished by the learned Departmental Representative that the assessee has furnished the details of address, PAN, bank account No. and in respect thereof notice issued under s. 131 was complied with. However, he contended that in respect of parties mentioned at serial Nos. 3, 4, 6, 8, 9 and 12 only PANs were furnished without there being any evidence to substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the share application money received by the assessee to be the undisclosed income of the assessee on the basis of report given by the Investigation Wing that during the course of survey conducted by Investigation Wing, the share applicant companies were found to be non-existence at the addresses given and their directors were also not found at the given addresses and the companies were formed merely on papers. The identical addition was also made by the AO in asst. yr. 2006-07 on the basis of report of Investigation Wing. The report of Investigation Wing relied upon by the AO in asst. yr. 2006-07 has also been relied upon in asst. yr. 2007-08 as well. From the assessment order, the CIT(A)'s order and remand report submitted by the AO before the CIT(A), it is clear that the assessee was not given a chance to cross-examine various persons, on the basis of their statements, the Investigation Wing had given a report that the share applicant companies were found to be non-existent at the given addresses and their directors were also not found at the addresses given by the assessee. During appellate proceedings before the CIT(A), the CIT(A) had given a chance to the AO to provide th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as undisclosed income under s. 68 of IT Act, 1961? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment......' 7. Consequently, the doctrine of merger would apply and the judgment of the Supreme Court in Lovely Exports (P) Ltd. (supra) would cover the field with regard to interpretation of s. 68 of the Act, 1961. 8. In any matter, the onus of proof is not a static one. Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to discharge its initial burden to prove the identity of the creditors and genuineness of the transaction. The same cannot be rejected merely because the creditors or share applicants could not be found at the address given and it would not give the Revenue the right to invoke s. 68 of the Act. Therefore, in the light of the proposition laid down by the Hon'ble Delhi High Court in this case, the order of the CIT(A) in deleting the addition cannot be said to be improper and unjustified. 12. Similarly, the Hon'ble Delhi High Court in the case of CIT vs. Victor Electrodes Ltd. (2010) 42 DTR (Del) 152 held as under:- "6. The SLP filed by the Revenue against the above-referred decision of this Court was dismissed by the Supreme Court vide its decision in Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 which inter alia reads as under:- 'Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was, however, made by him. Therefore, the CIT(A) and the Tribunal, in our view were justified in holding that the identity of share applicants and the genuineness of the transactions had been established by the assessee." 13. In this decision, in the case of CIT vs. Victor Electrodes Ltd. (supra), it has been clearly laid down by the Hon'ble Delhi High Court that there is no legal obligation on the assessee to produce some director or representative of the applicant companies before the AO, and, therefore, failure of assessee to produce them could not, by itself, have justified the additions made by the AO, when the assessee had furnished documents, on the basis of which, the AO, if he so wanted, could have summoned them for verification. Similarly in the present case, merely because directors of share applicant companies were not found available at the addresses given, that by itself is not sufficient for the AO to reject assessee's case when the assessee has furnished all documents relating to share applicants, such as their PAN, details of income-tax assessment, registration of companies under Companies Act and bank details. Therefore, this case is also squarely applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be perverse and does not call for interference by this Court. 9. The finding of fact recorded by the Tribunal, which is the final fact-finding authority, cannot be said to be perverse merely because some of the applicants had a common address and the Inspector deputed by the AO to make field inquiries did not find five applicants functioning at the addresses provided to him. There is no legal bar to more than one companies being registered at the same address. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of account payee cheque, they cannot be said to be non-existence, even if they, after submitting the share application had changed their address or had stopped functioning. 10. In view of the decision of this Court in the case of Divine Leasing and Finance Ltd. (supra), the identity of the share applicants would be established if details of address or PAN card are furnished to the Department along with the copies of shareholders 'register/share application form, share transfer register, etc. In this case, share application forms were duly produced before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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