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TMI Blog2011 (1) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... lication money received from M/s Talent Infoway Ltd. Rs. 29,00,000 and M/s Buniyad Chemical Ltd. Rs. 21,00,000 and confirming disallowance of Rs. 7,500 on account of commission paid on the above amount of share application money. Since facts are similar in both the years, therefore, they are disposed of together. We will take first appeal for the asst. yr. 2005-06. The brief facts in this case are that the assessee company is engaged in the business of moneylending and financial activities. Search operations under s. 132 of the IT Act, 1961 were carried out at the residential and business premises of Shri Chetan Prakash Agarwal, director of the company on 22nd March, 2007. Examination of the seized documents revealed that various books of account and documents as per annexures to the Panchnama from the residence of Shri Bhagat Ram Lohiya and Shri Girdhar Nuwal, manager, belonged to the appellant company. The AO noticed that during the relevant period the assessee company had received Rs. 62.50 lacs as share application money @ Rs. 100 each (Rs. 10 fully paid-up share at a premium of Rs. 90 each) from the following companies : Name of the company Amount M/s Flex Mcrcantila India ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain the genuineness of investment in the share application money made by them in the assessee company. The Director of IT (Inv.) Mumbai got the enquires made and reported that at the given address the companies namely M/s Antriksh Commerce (P) Ltd. and M/s Micro Niryat (P) Ltd. did not exist. As such the identity of such companies was not proved. The AO also observed that the assessee company had taken share application money/unsecured loan of Rs. 72 lacs from M/s Ashirwad Tele Network Ltd., Udaipur/Mumbai. On enquiry, it was found that the M/s Ashirwad Tele Network Ltd. in turn had received this money from Buniyad Chemicals Ltd., Mumbai (Mukesh Chokshi). Shri Chobisa, one of the directors of M/s Ashirwad Tele Network Ltd. had accepted the fact that the transactions were not genuine and it was merely accommodation entry. He also admitted to pay tax on Rs. 72 lacs. This proved that the share application money/premium received from the 5 companies (3 companies in the asst. yr. 2005-06 and 2 companies in the asst. yr. 2007-08) by the assessee was nothing but accommodation entry. In view of these facts, the AO made addition of Rs. 62,50,000 under s. 68 after giving opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. vs. Dy. CIT (2006) 101 TTJ (Jd)(TM) 124 : (2006) 100 ITD 1 (Jd)(TM) : (2006) 284 ITR 1 (Jd)(TM)(AT). In view of the above, it was submitted that the addition made by the AO is uncalled for and be deleted. 12. After considering the submissions and perusing the material on record the learned CIT(A) found that assessee failed to discharge onus lay upon it. Therefore, he confirmed the action of the AO in respect to the addition made under s. 68 and in respect to alleged commission paid in respect of the share application money. 12.1 The learned CIT(A) has observed that during the course of search from the residence of Shri Girdhar Nuwal, manager, some documents seized clearly indicate that the share application money shown to have been received from various companies was not genuine. He further observed that blank share transfer deeds signed by the directors of M/s Antriksh Commerce (P) Ltd., M/s Micro Niryat Ltd. and M/s Flex Mercantile India (P) Ltd. were seized from the possession of manager and. therefore, it was held that transaction was not genuine. The learned CIT(A) has also observed that where shares are not through demat account, the physical delivery of share certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the basic details like the amount of sale consideration received mode of receipt, cheque No., date etc. were not mentioned. In a normal transaction of sale of shares by a shareholder to a third party, such blank receipts arc never issued. All these documents clearly prove that the whole process of issuing of shares to these companies was nothing but a make belief transaction and the directors of the company had simultaneously made all the arrangements to ensure that all the documents are obtained from these companies and these documents were to be used at a later date for transferring the shares in the names of the persons of their choice. But in the process the company was able to get cheque amount in the garb of share application money in respect of the shares claimed to have been allotted to these companies. The learned CIT(A) further observed that enquiries were made by Asstt. Director of IT (Investigation Wing) in respect to genuineness of these three parties. However, summons issued to these parties under s. 133(6) were received back undelivered. The contention of the assessee that the payments were received through account payee cheques and their PAN, confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavit filed by another director was also stated to be signed by Shri Choksi on the request of assessee. However, both the companies have given entries only. Accordingly it was submitted that from the statement of Shri Choksi it is amply proved that this was the assessee's own money and, therefore, the AO was right in treating the same as unexplained in view of s. 68 of the Act. Therefore, learned CIT(A) was justified in confirming the order of AO. Similar argument was advanced in respect to share application money received for asst. yr. 2005-06. It was also submitted that the manager of the assessee company has also accepted this fact by stating that he is working on the direction of the director of the company and, therefore, it is clearly established that the share application money was nothing but assessee's own money under the garb of share application. Much weight was given to the fact that blank certificates were found from the possession of the manager of the assessee company. It was also submitted that this is a clear case of laundering of money and assessee is not of so much worth that anybody will buy the share of assessee company. In support of her contention, attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty the source of source could not be proved. The question is not proving this source of source but the question is that whether the party from whom the share application money received was existing or not. Certificate of incorporation of RoC is placed on record. It means they are registered companies under the Companies Act, PANs of all the three parties have been given and surprisingly no enquiry has been made by the Department from its own Department whether the PANs allotted to these parties are correct or not or these companies are assessed to tax or not. The assessee company has filed copy of their balance sheet also showing the shares of the assessee company in their books of account on assets side. Year-wise these shares have been shown in their balance sheet and they have stated that they are regularly assessed to tax. Copy of confirmation along with affidavit and share certificates issued are also placed on record. Therefore, in our considered view by merely saying that these parties are not traceable and treating the share application money as unexplained money under s. 68, in our considered view is not correct. 18.1 The Hon'ble Supreme Court in case of Lovely Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Similar issue also came before the Jaipur Bench of the Tribunal in the case of Shalimar Buildcon (P) Ltd. (supra). In this case also the additions were made on account of share capital and share premium and the Tribunal after considering various case laws held that the assessee has discharged its onus by filing details of shares, therefore, the additions made and sustained by lower authorities were deleted. 19. In the case of Hotel Gaudavan (P) Ltd. though the reopening of assessment under s. 147/148 was held as valid, however, the additions on account of share application money was deleted by placing reliance on the decision of Hon'ble Delhi High Court in the case of Steller Investment Ltd. (supra) and on the decision of Hon'ble jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432. The decision of Hon'ble Supreme Court in the case of CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del) dt. 21st Jan., 2008 [sic-this should be the case of CIT vs. Lovely Export (P) Ltd. (supra)] was also taken into consideration where it was held that : "Can the amount of share application money can be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the shares have been allotted. The main basis of the Department for making the addition is blank transfer certificates duly signed by the directors which were found from the possession of the manager of the assessee company, in our view, is not a sound basis as by finding blank transfer certificates does not disprove the reality. Reality is that assessee company has received share application money through account payee cheque. Shares have been allotted to the respective companies. The assessee company is showing the shareholders in its balance sheet and these companies are also showing the assets in their balance sheet in the shape of shares in the assessee company. All these companies are assessed to tax and, therefore, in our considered view, the addition sustained by learned CIT(A) is not justified. 21.1 We are of the view that presumption may be so strong but it cannot partake the character of evidence. The AO and learned CIT(A) have presumed that the share application money received by assessee company is nothing but his own black money routed through share application money. As stated above, neither there was any evidence that assessee has received its own money in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main reason for making the addition that Shri Mukesh Choksi who is controlling authority of these two limited companies has stated that he was providing only entries on commission basis. He has issued affidavit also in favour of the assessee that the statements were recorded under duress. However, again he has stated to the Departmental authorities that he has signed affidavit on request of the assessee company. Other facts remain that he has provided entry only. As stated in his statement somewhere observed above, that the investment is not shown in the books of these companies i.e. M/s Talent Infoway Ltd. and M/s Buniyad Chemical Ltd. Further, summons issued to these companies were also returned unserved and thereafter on further enquiry the statement of Shri Mukesh Choksi was recorded. It is also a matter of fact that before search at the premises of the assessee, the statement of Shri Mukesh Choksi was also recorded earlier and in that statement also Shri Choksi has stated that he is only providing entry on commission basis. In one of the questions, he has admitted that he does not remember that he received money in cash or not from the assessee. However, he has admitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this affidavit was also signed by him on request of assessee. It is surprising to note that such a grave criminal action has been admitted by Shri Mukesh Choksi that he has signed affidavit on behalf of another director and no action has been taken against Shri Mukesh Choksi as nothing has been brought on record here before the Tribunal. As slated above, no cross-examination was allowed to the assessee. 24.3 The Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC) has held that without allowing cross-examination to the party, adverse inference cannot be drawn though the evidence may be so strong. In that case certain deposits in the account of the assessee were found. Statements of certain persons were recorded that they have deposited the assessee's own money. The addition was made by the AO which was confirmed upto the stage of Hon'ble High Court. However, on further appeal, the Hon'ble Supreme Court has held that without allowing cross-examination to the assessee addition cannot be made. 24.4 In this case also no cross-examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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