9911796707
TMI Blog2011 (1) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In the decision of CIT vs. Steller Investment Ltd.[ 1991 (4) TMI 100 - DELHI HIGH COURT] , which has been affirmed by Hon ble SC in CIT vs. Steller Investment Ltd. [ 2000 (7) TMI 76 - SC ORDER] . It has been clearly held that s. 68 shall not apply on the share application money. It was also held that If the Department wants to proceed to unearth the truth about source of funds, then they can reopen the cases of the above three companies from whom the share application money have been received and shares have already been allotted to them. In view of these facts and circumstances, we delete the entire addition for asst. yr. 2005-06. Appeal for asst. yr. 2005-06 - HELD THAT:- In this case also no cross-examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only on the statement of Shri Mukesh Choksi. We further noted that all other necessary details have been filed before AO. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 ₹ 62.50 lacs as share application money @ ₹ 100 each (Rs. 10 fully paid-up share at a premium of ₹ 90 each) from the following companies : Name of the company Amount M/s Flex Mcrcantila India (P) Ltd., Mumbai ₹ 15 lacs M/s Micro Niryat Ltd., Mumbai ₹ 26 lacs M/s Antriksh Commerce (P) Ltd., Kolkata ₹ 21.50 lacs The AO observed that the documents as per Annexs. A9 to A12 seized from the residence of Shri Girdhar Nuwal contained share applications, share transfer forms and other related documents pertaining to the subscription to the shares of the assessee company by the three companies mentioned above. He made detailed analysis of these documents and observed that these annexures contained intra alia, the following documents : (1) Confirmation by the aforesaid companies regarding investment in M/s Bharti Syntex Ltd. (2) Blank share transfer deeds duly singed by the directors of the abovestated companies. (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etwork Ltd. had accepted the fact that the transactions were not genuine and it was merely accommodation entry. He also admitted to pay tax on ₹ 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 ₹ 62,50,000 under s. 68 after giving opportunity to the assessee company and after considering its submissions filed before him. Before learned CIT(A) it was contended that complete details of share application money received and evidences filed were filed before the AO. The detailed chart of the share application money was filed which is tabulated at pp. 4 and 5 of order of learned CIT(A) as under : Name, Add. PAN Co. Reg. No. Shares Shares Dist. No. Evidences applied/allotted capital Certificate No. aircady submitted Flex Mercantile (I) (P) Ltd. 308, 15,000 15,00,000 131003-146002 Confirmation Sona Chambers, 507/509 Chira Certificate No. affidavit bank Bazar, Mumbai-400 002. PAN : 21 account IT AACCE 8474B Co. reg. No. 11-return share 98363 certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 certificates is necessary to be given to the purchaser by the seller. The learned CIT(A) has also observed that the seller has to give physical delivery of shares to the buyer along with duly filled in share transfer deed containing the details of share certificate number, distinctive share numbers, signatures of the shareholder, signatures of the witness etc. However, all these documents are lodged either with the company or with the share transfer agents if any, for the purpose of transferring the shares in the name of the buyer. In the shareholder register of the company, entries regarding transfer of shares are made. The very fact that the blank transfer deeds signed by the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble 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 and bank account details filed before the AO was also not accepted that in response to enquiries made by Investigation Wing these parties were not traceable at the given address and. therefore, these contentions were also rejected by the learned CIT(A). Various case law relied upon by assessee before learned CIT(A) were also not found applicable on the facts of the present case and by giving his reasons and placing reliance on the decisions of Hon ble Supreme Court in the cases of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) and Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC), the learned CIT(A) confirmed the two additions as stated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, attention of the Bench was drawn on various pages of paper book i.e., 62 to 66, pp. 292 to 297, pp. 123 to 126 and so many other pages. The case was adjourned for 7th Jan., 2011 for filing rejoinder as learned counsel of the assessee wanted to file rejoinder in writing. On 1st July, 2011 the learned counsel of the assessee filed written rejoinder and learned CIT Departmental Representative has also filed copy of written submissions which in her view these are the same submissions which were advanced on 5th Jan., 2011 wherein date of hearing pronounced orally. The written submissions filed by learned CIT-Departmental Representative and whiten rejoinder filed counsel of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany 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 (supra) has held that cash credits- Share application money-If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, 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 assessee company. 18.2 The decision of Hon ble Supreme Court is squarely applicable on the facts of the present case. We are not convinced with the argument of learned CIT-Departmental Representative and the observations of learned CIT(A) that this case is not applicable in the facts of the present case. The Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh 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 regarded as undisclosed income under s. 68 of the Act, 1961? We further see no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the Department is free to proceed to reopen their individual assessment in accordance with law. Hence we find no infirmity in the order of learned CIT(A) with the impugned judgment. 19.1 These findings of Hon ble apex Court are also applicable on the facts of the present case. If the Department wants to proceed to unearth the truth about source of funds, then they can reopen the cases of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cash after reducing the commission amount deducted by the parties concerned. In our considered view the Department should have taken action against those parties who have issued cheques to the assessee company for allotting shares as the source of fund was required to be examined in their hands. We further find weight in the contention of learned Authorised Representative that nobody will loose such a huge capital for meager commission of ₹ 9,000 or ₹ 7,500. As observed in earlier paras these shares were allotted to the respective parties and the respective parties have shown these shares in the assets side of their bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foway 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 he is providing only entry. On this basis the addition was made by AO under s. 68. Further addition of ₹ 7,500 was also made on account of commission paid by assessee company on the amount of accommodation entry under the garb of share application money. The learned CIT(A) has confirmed the action of the AO by giving similar reason as given in asst. yr. 2005-06. The cases relied upon by assessee were found distinguishable for the reason that Shri Choksi himself admitted that he has provided only accommodation entry. 24.1 The facts and arguments of both the parties have already been discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on the statement of Shri Mukesh Choksi. We further noted that all other necessary details have been filed before AO. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation along with copies of share certificate bank statement memorandum of articles copy of share application money audited balance sheet and P L a/c of these parties were filed. These are similar details as were filed in case of three other companies for asst. yr. 2005-06. We have already disposed of the appeal for asst. yr. 2005-06 whereby we have held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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