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TMI Blog2013 (12) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... ation money was established. 2. The ld. Commissioner of Income Tax(A) has erred on facts and in law by deleting addition of Rs.1,18,50,000/- on account of cash deposits in the bank account of the assessee by ignoring and not deciding on merits the observations of the Assessing Officer in the assessment order and in the remand report that the assessee had no business receipts or other receipts during the year to support and establish the genuineness of cash deposits in the bank account." 2. Subsequently, the ld. DR submitted revised grounds of appeal on 13.1.2011. On the date of hearing i.e. 3.3.2011, the revenue filed following additional grounds:- "The Ld CIT (A) has erred on facts and in law by deleting the addition of Rs 1.65 crores made under section 68 of the IT Act ignoring that: i) The assessee company had repaid the share application money without allotting shares to the share applicants. Hence, this fact distinguish the present case from the case of Lovely Export Pvt. Ltd (216 CTR 195) relied by the Ld CIT(A). ii) The Assessing Officer has given a finding that amount of Rs 1.65 crore received by assessee was in the nature of unsecured loan rather than the share applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. DR submitted that the Commissioner of Income Tax(A) has erred by deleting the addition of Rs.1.65 crore made on account of share application money received by the assessee during the year under consideration through accommodation entries. The DR further submitted that the Commissioner of Income Tax(A) ignored that the creditworthiness of the share applicants to advance the huge amount of share applicants money was not established and also the nexus between the cash deposits in the bank account of the share applicants and the cheques issued by them to the assessee company as share application money was established. The DR also pointed out that the assessee company had repaid the share application money without allotting any shares to the respective applicants, therefore, this fact distinguished the present case from the case of Lovely Export Pvt. Ltd. 216 CTR 195 (SC) on which the Commissioner of Income Tax(A) relied while granting relief for the assessee. 5. The DR also contended that the Assessing Officer has rightly given a finding that the amount of Rs.1.65 crore received by the assessee was in the nature of unsecured loan for which creditworthiness of the creditor could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer, 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. In the case in hand, the Assessing Officer made impugned addition u/s 68 of the Act with following observations and findings:- "Although the receipts of share application money of Rs.1.65 crores was through banking channels, this fact by itself is not sufficient to proof the genuineness of the persons who gave the share application money or their creditworthiness. A perusal of the bank accounts of the three share applicant parties M/s Richie Rich Overseas Pvt. Ltd., M/s Ankur Distributors Pvt. Ltd. and M/s Goyal Textiles Pvt. Ltd. reveal as well as prove that they are mere conduits utilized by the entry-operators for providing bogus accommodation entries to interested parties. The balances in their bank accounts are very low on a given date after which substantial amounts are deposited either by cheques or by cash to increase the balance but invariable within a day or two the same is withdrawn or transferred to some other account bringing the balance down. The process is repeated over and over again many man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication money, the same is more in the nature of an unsecured loan given without interest which was received and returned while making planned use of it notwithstanding the applications for allotment of shares. So benefit has been derived from the share application money that has been received only through accommodation entries since the creditworthiness of share applicants have not been proved. In view of the above facts the amount of Rs. 1,65,00,000/- is being added to the income of the assessee under section 68 of the Income Tax Act. Since it is clear that there is concealment of income by furnishing of inaccurate particulars thereof initiation of penalty proceedings under section 271(1)(c) is called for on this issue." 8. During the first appellate proceedings, the Commissioner of Income Tax(A) considered the detailed submissions of the assessee and the remand report was called from the Assessing Officer on the detailed documentary evidence submitted by the assessee. In the remand report, the Assessing Officer objected the admissibility of detailed additional evidence but the Assessing Officer admitted that the assessee received share application money through banking channels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share applicants, the payments had been received through account payee cheques and, that too, from the applicant's accounts. The applicants were all registered companies and their identities were clearly established. It is in these circumstances that the Commissioner of Income tax (Appeals) as well as the Income tax Appellate Tribunal deleted the addition made by the Assessing Officer. Consequently, we see no reason to interfere with the findings recorded by the Tribunal" In the instant case no evidence has been brought on record by the AO to prove that the share application money emanated from the coffers of the applicant. The AO has not made any enquiries from the concerned parties nor did he examine the assessment records of the share applicants. Relying on the various documents placed on record and the principle laid down by the Hon'ble Supreme Court in the case of M/s Lovely Export Pvt. Ltd. which is directly on the issue of share capital and in view of the decisions cited above, the addition on account of share capital cannot be sustained. The AO has nowhere proved that documents in support of the identity of the parties have not been placed on record or they were forged do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td.(supra). We also observe that the Assessing Officer has nowhere proved that the documents in support of the identity and creditworthiness of the share applicants have not been placed on record or they were found as forged documents in the course of verification. In the assessment order and remand report, the Assessing Officer has not brought any evidence regarding the fact that the share applicants were not creditworthy or genuine despite the fact that the PAN Nos. and the copies of the income tax returns were submitted before the Assessing Officer by the assessee. In this situation, when the identity of the share applicants is proved by the assessee and the Assessing Officer has not brought any adverse material or fact against the share applicants, then no addition can be made in the hands of appellants. We hold that 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. In this situation, we are unable to see any perversity, infirmity or any other valid reason to interfere with the findings of the Commissioner of Income Tax(A). Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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