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TMI Blog2015 (6) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not the business of assessee to find out the source of money of creditors. Similar observation has also been given in the case of Hastimal (1962 (12) TMI 60 - MADRAS HIGH COURT) and Daulatram Rawatmal (1972 (9) TMI 9 - SUPREME Court). Thus the assessee has substantiated the transaction regarding share application money received by it was genuine transaction and the same were not accommodation entries. He did not find any evidence collected by the AO which could prove otherwise and deleted the additions in dispute. As regard to the addition of ₹ 12,500/- made on account of commission which was presumed to have been allowed by the assessee for obtaining the Hawala entry in dispute, the ld. CIT(A) observed that the Assessing Officer was not able to brought anything on record that it was assessee’s own money which was rooted in the form of share application money and has rightly deleted the same. - Decided against revenue. - ITA No. 2821/Del/2009 - - - Dated:- 1-4-2015 - SHRI N.K. SAINI SHRI H.S. SIDHU, JJ. For the Appellant : Sh. P. Dam Kanunjna, Sr. DR For the Respondent : Sh. O.P. Mody, Adv. ORDER PER H.S. SIDHU, J.M. The Revenue has fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the ld. First Appellate Authority who vide impugned order dated 13/03/2009 deleted the addition in dispute by partly allowing the appeal filed by the assessee. Now the Revenue is in appeal against the impugned order dated 13/03/2009 filed the present appeal. At the time of hearing, ld. DR relied upon the order passed by the AO and reiterated the contentin raised by the Revenue in its grounds of appeal. On the contrary ld. Counsel for the assessee relied upon the order passed by the ld. First Appellate Authority. He has also filed a paper book attaching various documentary evidences supporting the impugned order passed by the ld. First Appellate Authority. 3. Ld. Counsel for the assessee relied upon the order passed by the First Appellate Authority. He has also filed a paper book containing page 174 pages in which he has attached various documentary evidence supporting the claim of assessee and he requested that appeal filed by the revenue may be dismissed. 4. We have heard both the parties perused the record available with us specially orders passed by the revenue authority along with the documentary evidence filed by the assessee. We are of the view that the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the other person involved are on part time basis. The part time employees are called us and when required to sign documents, cheque books etc. A person interested in introducing its undisclosed money into his/her/it, business approaches the entry operator and hands over the cash. along with commission and takes cheques DD/PO. The cash is deposited by the entry operator in a bank account either in his own name or in the name of relative/friends or other person hired him for the purposes of' opening bank account. The other person, in whose name the account is opened. only sign: the blank cheque -book and hands over the same to the main entry operator The entry operator, in turn. Issues cheques/DD/POs in the name of the Beneficiary either from the account in which the cash is deposited or after multi-layering and further obscuring the trail by rotating it through other account or accounts, which are used only as conduits and in ,which the funds are transferred through clearing in two or more stages. Thus, the beneficiary's unaccounted money sails through several accounts before round-tripping back to it, only disguised in the form of share application money, unsecure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing sworn statements 0f Sh. Mukesh Gupta and his other associates given before the Additional Director of Income Tax Investigation), Unit-I, New Delhi. a) Statements dated 14.0 I. 2004 of Sh. Mukesh Gupta. b) A joint letter/statement dated 11. 05. 2004 addressed to the Addl. DIT (Investigation), Unit-1, New Delhi by Sh. Mukesh Gupta, Sh. Rajan Jassal and Sh. S. P. Singh. In reply to the show-cause, the A R finished his reply vide written submission dated 15. 12.2008. The substance of the reply is as under .. a) The assessee company has filed confirmation , copy of the ITR etc. of the said company. It is company duly incorporated under the Companies Act. The assessee company has discharged its onus by filing above documents evidencing their identity and creditworthiness. b) The statements given by the above persons are vague and general in nature and the name of the said company does not figure in the companies/concerns identified by them. The assessee's contentions in support of the genuineness of the transactions and the documents purporting to be confirmations etc of the above share applicants have been considered, but have not been found to be suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive of the nature of receipt. Whether the onus, in a particular case, is stringent or light, would depend upon the facts of the case. For example, where the amount it received from close relatives or friends by way of loan or deposit or otherwise, the onus would be stringent or light, would depend upon the facts of the case. For example, where the amount is received from close relatives or friends by way of loan or deposit or otherwise, the onus would be stringent since the assessee is supposed to know all the particulars. In case where the share capital is received through public issue, the company is not supposed too know about the source from which share applicant makes the investment. Therefore, the onus would be light. However, where the shares are issued by a private limited company, the onus would be stringent for the reason that the public issue cannot be made by a private limited company and the capital is received through private placement normally to known persons i.e. the relatives and friends of directors. The degree of the onus would be even stringent when the very credentials of the director of an investor company are suspect because of the fact that he has admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the actual business in which it is said to he engage As mentioned above, there was cash deposit in the said bank account prior to the release of funds in favour of the assessee. In fact, there are specific reasons for not maintaining/ producing books of accounts and filing annexures showing composition a/investments in such cases. For one, the amounts given as share application money etc. are lost forever (as they are one time entries). Another reason for not filing the schedule of investment and loans is that while the amount shown in the balance sheet may be less the actual amounts may be more. For example, if one crore has been actually routed through the bank accounts the amount shown in the balance sheet may he just ten or twenty lakhs. Providing the schedule of investments and assets makes it difficult for them to give a confirmation to anyone whose name is not available in the schedule. (3) (2) The assessee company is private limited company In the case of such companies, there is close and proximate relationship between the promoters/directors and the shareholders. The closely-held companies are permitted to accept the subscriptions of share capital or deposits onlyf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said company .. has clearly been identified in the information/report received from the Wing as one of the entities belonging to the group and through which accommodation entries are being provided Further, the above statements by themselves are sufficient to impeach the credentials of the said Sh. Mukesh Gupta. Apart from this tell-tale connection, the other factors. namely. the pattern of the transactions, the deposit of cash in the bank account immediately before the release of funds in favour of the assessee, the non- furnishing of any evidence ill support of any actual business being carried out by the said company , the non-production of original certificates by it, the fact of the notice having received back undelivered, considered in their totality clearly establish that Mls Paras Infotec P Ltd. is also one of the entities being used to arrange accommodation entries. In the light of the above, the onus lay heavily on the assessee to establish the genuineness of the transactions and the creditworthiness of the alleged share applicants and the genuineness ofthe transactions. Considering the totality of the circumstances, it is obvious that the transaction was only a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him in the state of Nagaland is exempted income vide section 10(26) of the Income Tax Act.. The A R, vide written submission dated 24.12.2008, also furnished on affidavit purportedly from Sh. VK. Angatni to the effect that he has invested in the share capital of the assessee company and that the investment has been made out of the own source of fund and payment made out of my cash balance The law with regard to the admissibility of an affidavit as an evidence is 'well- settled The matter relating to evidence by affidavits is governed by Order of the Code of Civil Procedure. Such evidence by affidavit may be admitted only if the same fulfils the conditions precedent thereto. ln terms of Order 19, Rule 1 of C. P. C, the court may at any stage permit a party to adduce evidence by affidavit on assigning sufficient or cogent reasons. An affidavits are not evidence since it is not included in the definition of evidence in Section 3 of the Evidence Act and can be used as evidence only if for sufficient reasons, the Court passes an order under Order 19 Rules 1,2 of CP. C as observed by Supreme Court in Sudha Devi V MP Narain AIR 1988 (SC) 1381. (1988) 2 SC) 422. In view& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been a man of such financial standing as has been sought to be made out. As per the documents filed, the entire creditworthiness is being sought to be established merely on the basis of mere self-serving assertions which are not supported by any evidence whatsoever, documentary or otherwise, in support of his financial status and the immediate source of the said amount. Even in the alleged investor has chosen to remain silent about the source of this amount of ₹ 10,00,000/-. In view of the above, the identity creditworthiness of the alleged share applicant and the genuineness of the transaction remain unsubstantiated. Therefore, this amount of Rs. J 0,00, O00/- is treated as unexplained and added to the income of the assessee u/s 68 of the Act .. 5. On the appeal filed by the assessee, Ld. First Appellate Authority in the impugned order had adjudicated the issue in dispute the findings of the Ld. CIT(A) is as under:- I have gone through the facts and circumstances of the case, observation of the A.O. as contained in the Assessment Order, submissions of the AR of the appellant and judicial pronouncements on this issue. During the year under consideration, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company and the investment has been made out of his own source of funds and payment made out of his cash balance. Since the investors failed to appear before the AO in response to summons issued u/s 131 of the IT Act, the AO disregarded the other evidences produced and emphasized that identity and creditworthiness of the investors has not been proved. He accordingly held that the amount of ₹ 5,00,000/- from M/s Paras Infotech Pvt. Ltd and Rs.IO,OO,OOO/- from Sh. V.K. Angami received by the appellant as share application money from the said two parties cannot be treated as genuine and is only an accommodation entry. On these observations, the appellant relied upon the direction of Honble ITAT, Mumbai Bench in the case of Kashuka Trading Services Pvt. Ltd. Vs. ITO, ITA NO.1145/Mum.l06 wherein it is held that mere non-compliance of summons and notice, it cannot be held that the assessee has failed to discharge his burden u/s 68.. On the same issue, the appellant has also relied upon the Hon'ble Supreme Court judgement in the case of CIT Vs. Orissa Corporation 159 ITR 78 (SC) wherein it is held that in case the creditor does not appear in response to summon is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if subscribers are having bank accounts, issuing account payee cheque, assessed to income- tax showing investment in the balance sheet, balance sheet were audited by the statutory auditors, their credit worthiness, identity and genuineness of the transactions are well established. The appellant further stated that in the case of Paras Infotech Pvt. Ltd., it has submitted the copy of the income-tax return, confirmations and affidavit of the director of the company who has given share application money. All these documents establish the identity and creditworthiness of Mls Paras Infotech Pvt. Ltd. With regard to Sh. V.K. Angami, the appellant submits that he has filed affidavit of Sh. V.K. Angami confirming the transaction. copy of election identity card, copy of tho Schedule Tribe Certificate and copy of the salary certificate received from M/s Newman Enterprises Pvt. Ltd. for the salary paid as Director. All these documents prove the identity and creditworthiness of the investor. In support of this, the appellant has relied upon the case law of Shri Barakha Synthetics Ltd. Vs. ACIT (2006) 155 Taxman 239 (Raj.) wherein it has been held that once the receipt of the confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts. In the said case the appellant has duly explained the said credit entries in the form of various documentary evidence filed. The said documentary evidence contained details, which set out not only the identity of the subscribers, but also gave information, with respect to their address, as well as, PAN numbers, Assessment particulars etc. Based on these facts, the Hon ble Delhi Court dismissed the appeal of revenue. In yet another decision as to the correctness of treating share application money on par with cash credit, the Hori'ble Delhi High Court in CIT vs, Value Capital Services P. Ltd. (2008) 307 ITR 334 (Delhi) found after referring to the two of the decisions of the Delhi High Court on the subject that in respect of share capital amounts, they cannot be assessed in the hands of the company, unless the Department is able to show that the amount received towards share capital actually emanated from the coffers of the assessee company. After going through various facts of the case and judicial pronouncement on this issue, cited supra, it is seen that the appellant's case is covered by the above judgments. After going through the facts of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Assessing Officer as well as before him. Hon ble Supreme Court of India in the case of CIT VS. Lovely Export 299 ITR 261 (SC) which has confirmed the order of Hon ble Delhi High Court has held that once the identity of the share holder have been established, even if there is a case of bogus share capital, it cannot be added in the hands of company unless any adverse evidence is not on record. Ld. First Appellate Authority has examined the documentary evidence filed by the assessee before the Assessing Officer as well as before him and held that the assessee has provided confirmations from all the parties as well as various evidences to establish the genuineness of the transaction, assessee has also relied upon the judgment of Nemi Chand Kothari Vs. CIT 264 ITR 254 (Gauhati) wherein it has held that it is a certain law that the assessee is to prove the genuineness of transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of assessee to find out the source of money of creditors. Similar observation has also been given in the case of Hastimal 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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