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TMI Blog2015 (1) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... ed return declaring income of ₹ 3,519/- on 30.01.2002. The return was processed u/s 143(1) of the Income Tax Act, 1961 (herein after the Act ). Subsequently information was received from the DIT (Investigation), New Delhi; and AO after recording reasons, issued notice u/s 148 of the Act on 30.03.2009. In response, the assessee company filed reply stating that return of income filed earlier may be taken in compliance to the notice u/s 148 of the Act. 3. Pursuant to the above, order of re-assessment was framed by the AO, making an addition of ₹ 9,96,000/- u/s 68 of the Act. He has held as under:- During the course of proceedings summons u/s 131 of the I.T.Act1961 was issued to the these persons to attend personally with certain details as mentioned in the summons. No detail was filed nor did anyone appear on his behalf. During the course of assessment proceedings the assessee had only filed an affidavit with confirmations from these persons in support of their providing the money to the company. In its letter the assessee had also requested that an opportunity was to be given to them to cross examine the persons who have given statement against them. It was with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t received back by the AO, in response to which the affidavits from the parties were produced and the parties filed their replies seeking time for personal appearance which was not allowed by the AO. It is argued that the AO has also not conducted any independent enquiry in the matter. It is also argued that even in the event of the investor companies being bogus, as alleged, no addition can be made u/s 68 in the hands of the appellant company. The Id. AR has accordingly argued that the said addition ₹ 9,96,000/- u/s 68 made by the AO in the hands of the appellant company is illegal. The Id. AR has relied upon a plethora of case laws in support of his claim. On careful consideration of the matter, I find that the above contention of the Id. AR cannot be rejected on merit. The AO has also not been able to bring on record any valid material evidence to disprove the claim of the appellant in this regard. 5. Now the Revenue, is in appeal and has raised the following ground:- 1. In the facts and circumstances of the case, the ld CIT(A) has erred in law and on facts in deleting addition of ₹ 9,96,000/- u/s 68 of the IT Act on account on unexplained cash credits. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord confirmations, income tax returns, bank-statements and share-application forms from each of the share-holders. Summons issued to them, have also been responded to, confirming the investment. However, we find that AO made no further enquiry to discredit the claim of the assessee in this respect. Admittedly,the prior-enquiry made by the investigation wing which triggered the re-assessment, has been made behind the back of the assessee, which in the light of the aforesaid facts and materials on records does not justify the inference of the AO to make the addition in the light of ratio laid by the Hon ble High Courts in the following cases. 9. In the case of CIT vs Fair Finvest Ltd ITA no. 232/2012 dated 22-11-2012, the jurisdictional Delhi High Court has held as under:- 6. This Court has considered the submissions of the parties. In this case the discussion by the CIT(Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. 342 ITR 169 and judgement in the case of CIT vs. Lovely Exports 319 ITR (Sat 5)(5. C) held as follows:- As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect:- ''Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of ₹ 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the share application affidavits of the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description ofS.68 of the Income Tax Act 1961. Having regard to the entirety of facts and circumstances, the Court is satisfied that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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