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TMI Blog2015 (6) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... H.S. SIDHU : JM Assessee has filed this Appeal against the impugned order dated 01.8.2013 passed by the Ld. CIT(A)-XVII, New Delhi relevant to assessment year 2002-03 on the following grounds:- 1. That the Ld. CIT(A) has erred in upholding the order passed by the AO u/s. 143(3)/147 of the Act even though the AO did not have valid jurisdiction to do so. 2. That the Ld. CIT(A) has erred in upholding the addition of ₹ 30,00,000/- made u/s. 68 of the Act by the AO on the allegation of unexplained credits of share application money. 3. That the Ld. CIT(A) has erred in holding that the assessee has not been able to prove the identity or creditworthiness of the creditor and the genuineness f the transaction. 4. That the Ld. CIT(A) has erred in ignoring the remand report submitted to her by the AO wherein the AO has clearly stated that the assessee has produced the directors of the companies investing in the share application of the assessee company and that those directors have confirmed the fact of having made investment in assessee company and have also explained the mode and manner of the investment made by them in the assessee company. That the Ld. CIT(A) has further fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of the persons from whom share application money was received. But AR of the assessee failed to produce thoese persons for cross verification and also bank accounts of them were not filed. Under the circumstances, the AO completed the assessment u/s. 143(3) /147 of the Act vide his order dated 16.12.2009 and added a sum of ₹ 30,00,000/- as unexplained cash deposit u/s. 68 of the Act. 3. Against the order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 01.8.2013 has dismissed the appeal of the assessee. 4. Aggrieved with the order of the Ld. CIT(A), Assessee is in appeal before us. 5. Shri Sanjeev Jain, Ld. Counsel of the assessee stated that both the Revenue authorities have wrongly made the addition in dispute under section 68 of the I.T. Act as unexplained credit of share application money in spite of the fact that assessee has fully been proved the identity, creditworthiness of the creditors and the genuineness of the transaction with the support of all necessary documentary evidence before the authorities below. But the revenue authorities has not properly appreciated the evidence filed by the assessee and made the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Revenue Authority has perused the return of income filed by Shree Gupteshwar Marketing (P) Ltd, D.K. Ispat and Timber Ltd. and Kuberco Sales (P) Ltd. and found that the return filed by them are on a very meager side which established that these parties have not established their creditworthiness and genuineness of transactions in dispute, therefore, the Revenue Authority rightly made the addition in dispute, which may be upheld by dismissing the appeal filed by the assessee. 8. We have heard both the parties and perused the records available with us on the preliminary objection and especially the order dated 19.2.2015 passed by the ITAT, Delhi 'G' Bench, New Delhi in ITA No. 4674/Del/2014 A.Y. 2009-10 in the case of SVP Builders (India) Ltd. vs. DCIT, we are of the view that the objections raised by the Ld. DR has already been adjudicated and answered in favor of the assessee by the ITAT in the aforesaid case in which one of the Judicial Member was the party. The relevant para no. 15 of the aforesaid order is reproduced below:- "15. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, a perusal of the papers on record and the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record especially order dated 1.4.2015 of the Coordinate Bench, 'E' Bench, ITAT, New Delhi passed in the case of ITO vs. Neelkanth Finbuild Ltd. in ITA No. 2821/Del/2009 (A.Y. 2006- 07), we find considerable cogency in the assessee's counsel submission that the facts and circumstances of the case are identical and similar to that the aforesaid case in the matter of ITO vs. Neelkanth Finbuild Ltd. wherein, the Coordinate Bench has adjudicated the issue in dispute as under:- "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 Assessing Officer during the course the assessment proceedings has made the following observation in the assessment order on the issues in dispute. "During the year under consideration, the assessee company has increased its share capital by ₹ 1,0,000/- having issued 11,00,000 equity shares @ 20/- each. From the perusal of details furnished by the assessee company, it was noticed that share application money of ₹ 15,00,000/- is claimed to have been received from the following two persons: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither 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, unsecured loan, gift etc. While most of the concerns/individual have obtained PAN from the department and are filing returns as well. what is shown in the return are not actual state of affairs. During the course of the assessment proceedings, the assessee company furnished a copy of the purported confirmation from the Director of the said company, namely Sh. Mukesh Gupta. The said Sh. Mukesh Gupta S/o Sh. R. D Gupta, RIo WZ-414, Naraina Village, Delhi, along with his associates, has given sworn statements u/s 131 before the Addl. Director of Income Tax (investigation), Unit-I, New Delhi. 1n the said statements they have admitted that the "companies" and other such concerns owned/controlled/managed by them are not carrying on any actual bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharged 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 sufficient in view of the facts and circumstances of the case. The assessee's contention is that the onus on it stands discharged in view of the above documents filed by it in support of the identities of the share applicants. This rather simplistic contention of the assessee has no legal basis. The Hon'ble High Court of Delhi in the case of CIT v. Mls Himalaya International Ltd. (rendered on 30.07.2007 in ITA 1509 of 2006) has clearly held that the onus is all the assessee to establish the identity & creditworthiness of the subscribers of shares as well as the genuineness of the transaction The following observations made by the Hon'ble High Court in the case of CIT Vs. Divine Leasing and Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus 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 admittedly been running on accommodation entry racket through the medium of many "companies "floated by him. It is now proposed to consider the purported evidence sought to be relied upon by the assessee in the light of the facts and circumstances of the case. (1) As discussed above, simply furnishing the PAN or assessment particulars is not enough. The so-called evidence in the form of return of income etc. Does not facilitate cross verification. While on the purported "confirmation "filed on behalf of the investor "company", its address is mentioned as Ë -71, Amar Colony, Lajpat Nagar, Delhi", the summons sent at the above address has been received back undelivered with postal remarks "no such company" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance sheet may he just ten or twenty lakhs. Providing rhe 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 onlyfrom the friends or relatives of the promoters/directors and such companies arc not allowed to accept subscriptions or deposits from the general public. The shares are, therefore, subscribed by a small number of persons who are known to the promoters or are related to them by family members. As such, there should have been no difficulty on the part of the assessee to produce the socalled investor, had the whole apparatus not been merely a conduit to plough back tlie unaccounted money of the assessee-company in the garb of share application money. There is no reason why a genuine investor would evade inquiries into its affairs. The investors are at least supposed to produce the original share certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 camouflage. The total amount of ₹ 5,00,000/- stated to have been received From the said .. investor company" represents the assessee's own unaccounted money which has sought to be introduced into its business in the garb of share application money. Thus, keeping in view the totality of the facts. the amount of ₹ 5,00,000/- is added back to the income of the assessee company u/s 68 of the IT Act. Share Capital of ₹ 10,00,0001- received from Sh. V.K. Angatnt (4) As per the details filed, the assessee has also received a sum of ₹ 10,00,000/- from Sh. V K. Angami, R/o 21/2. Mile, Dimapur, Assam.The entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted 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' of the same, furnishing of an affidavit in itself and that too at a time when it was not even required under any law of the land reflects that evidence was being created artificially/ superfluously in anticipation of it being required in the course of assessment proceedings. Therefore. affidavit of alleged "investor" which has been filed suo-mote is not even admissible evidence, specially when no evidence in support of [he assertions mode therein is forthcoming. The documents filed in the form of the schedule tribe certificate and the voter card are just cord are just photocopies, which are not attested by on)' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the genuineness of the transaction remain unsubstantiated. Therefore, this amount of ₹ 10,00, 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 appellant company had increased its Share Capital by ₹ 1,I0,00,000/- by issuing 11,00,000 equity shares of ₹ 10/-each from various parties. The Assessing Officer, in the Assessment Order has added the Share Application Money received from 2 parties, namely Mls Paras lnfotech Pvt. Ltd. (Rs. 5,00,000/-). Shri V.K. Angami (Rs. 10,00.000/-) as unexplained cash credit. in the hands of the appellant company. The addition in respect of first company was made on the basis of information received from the Investigation Wing of the Department and on the statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not 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 noncompliance 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 issued u/s 131. no adverse inference can be drawn. Hon'ble Delhi High Court in the case of CIT vs. Pradeep Gupta 207 CTR 115, which has also been relied upon by the Delhi IT A T in recent judgement in the case 0 f Babita Gupta ITA No. 2897/06, wherein it is held that in the facts of the case before us it may be seen that from the very beginning Ld A. 0. had shifted entire burden Upon the assessee and no material was brought by him to prove his allegation that the impugned amount represented assessee company's undisclosed income. Therefore, on this ground alone the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 confirmation letter from the creditor is proved and the identity and the existence of the investor has not been disputed, no addition on account of share application money in the name ofsuch investor can be made in the assessee's hands. "In respect of the share application money received from investors, the assessee company has only to prove that the existence of the persons in whose name share application is received. No further burden is cast upon the assessee to prove whether that person himself has invested the said money or some other person made investment in his name." T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the judicial pronouncements on this issue, I am of the opinion that the appellant has discharged the initial onus of establishing the bona-fide of the transactions and the AO was not justified in ignoring various evidences provided to him by the appellant. It is seen that the Assessing Officer had not done any investigation / enquiry, during the course of assessment proceedings. The Assessment Order has been framed by the Assessing Officer only on the basis of the information received from the Investigation Wing of the Department. without making any further investigation. Nothing adverse has been brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITR 273 (Madr) and Daulatram Rawatmal (1973) 87 ITR 349 (SC). Ld. First Appellate Authority has cited various decisions rendered by the Hon'ble Supreme Court of India as well as the Hon'ble Jurisdictional High Court in the impugned order and finally has held that 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 commi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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