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TMI Blog2011 (10) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... ead as under:- 1. The order of the learned CIT(A) is erroneous contrary to facts law. 2. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition made on account of unexplained income of u/s 68 of the Act of ₹ 3,43,00,000/-ignoring :- a) the findings investigations made by the Investigation wing of the department and the Assessing Officer as mentioned in the assessment order. b) the assessee is a Private Ltd. Company. Neither it can make public issue of the shares nor it had come out with any advertisement about issue of share capital. It failed to explain as to how then it was able to allegedly receive such a huge amount of capital, including premium in a very short span of period, from so many parties. c) all the share which were allegedly allotted to outside parties were bought back by the Directors and their family member at a huge discount after very short span of time. d) the dictum given by the Hon'ble Supreme Court in CIT Vs Durga Prasad More 82 ITR 540 Sumati Dayal V s CIT 214 ITR 801 in which Apex Court has laid down the proposition that the Courts Tribunals should see the preponderanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. Rekha Garg 7. Shri Ajay Bansal 8. Shri Satish Kumar Sharma 9. Shri Kesho Ram Gupta 3.1.1 As the summons issued to the above parties were received back unserved, the assessee was asked to explain as to why adverse inference may not be drawn and was required to furnish details about the remaining parties who contributed to share capital but for which no details were filed by the assessee. In response, the assessee further filed details in respect of remaining parties which contributed to the share capital of the assessee company. In all, the assessee received share capital of ₹ 4,35,00,000/- during the year which include an amount of ₹ 92,00,000/- received from the four Directors / their family members, and the balance amount of ₹ 3,43,00,000/- was received from other than directors of the assessee company. 3.1.2 The Assessing Officer also issued summons u/s 131 to the following parties through Inspector of the Ward in order to verify the genuineness of the transactions but none of the parties was found available at the addresses given by the assessee:- 1. Shri Santosh Kumar Choudhry 2. Smt. Simla Devi 3. Shri Chetan Parkash 4. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income Tax (Appeals) noted that assessee has furnished voluminous evidences to justify the identity, creditworthiness of the parties and genuineness of the transactions. He further observed that it appears that no verification was carried out by the Assessing Officer to controvert the evidences filed by the assessee from the income tax records of the concerned parties. Ld. Commissioner of Income Tax (Appeals) further observed that Assessing Officer insisted for the production of the parties before him by the assessee but he did not make any independent effort to enforce the appearance of such parties. No further evidence was brought on record to establish that the documents field by the assessee were false or the transactions entered not by the assessee were sham transactions. The Assessing Officer has not made any effort to call Shri Mahesh Garg to record his statement to verify the facts as to what he stated before the Investigation Wing was correct and applicable in the assessee s case. Ld. Commissioner of Income Tax (Appeals) observed that no cross examination was granted by the Assessing Officer to the assessee before making the additions. He further observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard, we refer to the decision of the Hon ble Apex Court delivered in the case of CIT Vs. Lovely Exports 216 CTR 195. In this case it was held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee. 6.3 We further place reliance upon the decision of the Hon ble Jurisdictional High Court in the case of C.I.T. vs. Dwarkadhish Investment P Ltd. in ITA No. 911/2010 vide order dated 02.8.2010. The relevant paras of this judgement of Hon ble Delhi High Court i.e. para No. 6, 7 8 are reproduced herein below:- 6. In our opinion, as section 68 of the Act, 1961 has been interpreted as recently as 2008 by a Division Bench of this Court in Divine Leasing and Finance Ltd. (Supra) after considering all the relevant judgements, we do not have to reconsider all the judgements referred to by Mr. Sahni which are prior in date and time to the aforesaid judgement. In fact, a Special Leave Petition filed against the said Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erandi involved in such type of activity was like this: an entry operator operates a number of accounts in the same bank/branch or in different branches in the name of companies, firms, proprietary concerns and individuals and for the operation of these bank accounts, filing income tax returns etc. persons are hired. Most of these persons work on part-time basis and are called upon to sign documents, cheque books, etc. whenever required. Whenever any beneficiary is interested in taking an entry, he would approach the entry operator and handover the cash alongwith commission and take cheques, demand draft, postal order. The cash is deposited by the Entry Operator in a bank account either in his name or in the name of relative/ friends or other person hired by him for the purposes of opening the bank account. After the deposit of cash when there is sufficient balance, the entry operator issues demand draft, postal orders, cheques in the name of beneficiary. Most of these concerns / individuals also have obtained PAN from the department and are filing income tax returns, but what is shown in the return is not actual state of affairs. 28. The appellant filed copies of PAN, acknowled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to subscribe to the share to the capital of the appellant, but it is the appellant who is fastened with the liability. The Assessing Officer did d not question M/s Diamond Protein ltd. in this behalf. Insofar as Assessing Officer is concerned, it is not disputed that money was paid to its towards the aforesaid share application money, by means of cheques. It is not for the Assessing Officer to probe as to the source from where M/s Diamond Protein Ltd. collected the aforesaid money. It was for the Assessing Officer, in these circumstances to inquire into the affairs of M/s Diamond Protein Ltd. which is an independent company inasmuch as no finding is arrived at by the Assessing Officer that the two companies are umbrella companies or have any relationship with each other. 30. We are, therefore, of the opinion, that there is no merit in these two appeals, which are accordingly dismissed at the admission stage itself. 7. In the background of the aforesaid discussion and precedents, we uphold the order of the Ld. Commissioner of Income Tax (Appeals) directing that the addition of ₹ 3,43,00,000/- is liable to be deleted. Since the addition of ₹ 3,43,00,000/- u/s. 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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