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TMI Blog2011 (1) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... notice was issued u/s 148 on 24.3.2009. In the course of assessment proceedings, the assessee was required to prove the identity of the creditor, his capacity and the genuineness of the transaction. It is mentioned that the assessee failed to prove the aforesaid ingredients necessary to discharge onus u/s 68. Therefore, the amount of ₹ 27,85,500/- has been brought to tax. A further sum of ₹ 41,782/- has been added to the income in respect of commission paid to these persons, calculated @ 1.5% of the aggregate of the entries amounting to ₹ 27,85,000/-. Taking into account the income of ₹ 255/- declared by the assessee, the total income has been computed at ₹ 28,27,530/-. 2. In appeal, the ld. CIT(A) came to the conclusion that Shri Ranjan Jassal and Shri Radhuvir Singh had contributed ₹ 4,50,000/- and ₹ 4,70,000/- respectively towards share capital of the company. Thus, the sum of ₹ 9,20,000/- was in respect of contribution towards share capital. Various amounts were received from four other persons, namely, M/s G.P. Enterprises, M/s Manak International, Shri Perminder Singh and Shri Kamal Dhawan. The amounts are ₹ 3,22,500/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Nagar Crossing, New Delhi-27 35000 3,50,000 Copies of Statement of Account, affidavit, Confirmation letter and sale bill were filed. PAN: ANAPS3632D 4 Shri Kamal Dhawan C-43,Vishnu Garden, New Delhi-18 10000 1,00,000/- Copies of statement of account, affidavit confirmation letter and sale bill were filed. PAN:AEKPD8587K Total: 18,65,500/- 2.3 On the basis of aforesaid details, the ld. CIT(A) has held that the assessee has provided requisite details of the share applicants. Thus, it has discharged the onus cast on it. Therefore, the addition of ₹ 9,20,000/- has been deleted. In the case of sale proceeds of the shares of Uttranchal Finance Ltd, it has been mentioned that the AO has not disputed the acquisition of shares by the assessee and the purchase consideration has been paid through cheques. Necessary evidence in respect of sale of 186550 shares has also been placed on record of the AO. The AO has not controverted these facts exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 27,85,500/- is nothing but a camouflage to introduce own unaccounted money in the business. 4.2 Our attention has also been drawn towards paragraph no. 3 of the impugned order, in which the details furnished by the assessee in respect of share application money and sale proceeds have been mentioned. Further, our attention has been drawn towards paragraph no. 17.2, in which the ld. CIT(A) has mentioned the findings of Hon ble Delhi High Court in the case of CIT Vs. Divine Leasing and finance Ltd., 207 CTR 38, which is reproduced below:- On appeal this Court held that:- There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the revenue s insistence that it should prove the negative. In the case of public issue, the company concerned cannot be expected to know every details pertaining to the identity as well as financial worth of each of its subscri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion received from the investigation wing without verifying the details furnished by the assessee. The findings of the investigation wing and information in possession have not been placed before the assessee, which violates the principles of natural justice. In paragraph no. 22 it has been mentioned that the AO has not doubted the identity of the applicants, which is the main issue in respect of which onus lies on the assessee. Finally, our attention has been drawn towards paragraph nos. 26 to 28, under which both the additions have been deleted. 4.4 The case of the ld. DR is that the assessee has not furnished bank statement of the contributors or purchasers of shares. Therefore, creditworthiness of the parties has not been established. Even if there was some lapse on the part of the AO in making full enquiry, the powers vested in the CIT(A) are co-terminus with the powers of the AO and, therefore, he should have made further enquiries or caused further enquiry to be made in the matter. In the case of sale of shares, it is submitted that additional evidence was filed regarding purchase of two lakh shares of Uttranchal Finance Ltd. This evidence was not forwarded to the AO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. Ajay Kapahi c. Perminder Singh d. Kamal Dhawan e. Rajan Jassal f. Raghubir Sing 5.3 In the course of hearing of the appeal, the ld. CIT(A) wanted proof in respect of purchase of two lakh shares of Uttranchal Finance Ltd. In view thereof, the application and the allotment advice were filed, which have now been placed in the paper book on page nos. 15 to 17. It is argued that the AO did not undertake any enquiry into all these evidences, which were rejected. Therefore, it is argued that the addition has been made on the basis of information received from the investigation wing, which has not been authenticated. Accordingly, it is strongly urged that the order of the ld. CIT(A) may be upheld. 6. We have considered the facts of the case and rival submissions. The facts in respect of ground no. 1 are that the assessee received share application money of ₹ 4,50,000/- from Shri Ranjan Jassal and ₹ 4,70,000/- from Shri Raghubir Singh. In the case of Shri Ranjan Jassal, copies of application, affidavit, confirmation and intimation u/s 143(1)(a) were filed. This person is assessed to tax and his permanent account number was also furnished. In ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the addition has been upheld. The facts of this case though apparently similar are distinguishable in material respect. The assessee had issued shares at a value 10 times the face value. The Tribunal distinguished the case of CIT Vs. Lovely Exports (P) Ltd. (2008) 299 ITR 268, by mentioning that the AO had issued summons in this case which returned unserved with the remarks no such person on the above address . The assessee has also failed to produce these persons. Some of the shareholders are apparently entry providers as stated by them before the investigation wing. Therefore, it cannot be said that the AO has not carried out any investigation. The facts of this case are also distinguishable. In the first place, the shares have been issued at par and not at premium at nine times the face value. The AO has not carried out any enquiry whatsoever to prove that shareholders are non-existent. 6.1 The ld. counsel has relied on the decision of Hon ble Supreme Court in the case of Lovely Exports (P) Ltd. (supra). The Hon ble Supreme Court affirmed the decision of Hon ble Delhi High Court by observing as under:- Can the amount of share money be regarded as undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in deleting the addition. The Assessing Officer proceeded to make the impugned addition on the ground that in some case some summons issued were returned unserved and in some case summons though served but there was no compliance. In this connection, it may be mentioned that in the case of CIT Vs. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC), the Hon ble court has held that when the assessee borrows the loan and if an assessee gives names and addresses of the creditors who are assessed to tax and full particulars is furnished, then assessee has discharged the duty. If the Revenue merely issues summons under section 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made u/s 68. 6.3 We find that the facts are similar to the facts of Lovely Exports (P) Ltd. (supra). The assessee has provided all the details necessary for establishing the identity of the contributors. The AO has discarded the whole evidence without any enquiry and chose to follow the findings of the investigation wing. This is not in accordance with the decision of the jurisdictional High Court an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of shares by the assessee so that credits in respect of sale proceeds of 186550 shares could be put in proper perspective. In so far as share application money is concerned, there was no reason to doubt the existence of the person and once the identity is proved, nothing further is required to be done. Action, if any, can only be taken in the hands of the contributors as per the decision of Hon ble Supreme Court. Therefore, while the argument of the ld. DR is valid, it has no application to the facts of the case. 8.1 As all the credits have been held to be satisfactorily explained, there is no reason for upholding addition in respect of commission. 9. Coming to the cross objection of the assessee, the ground regarding initiation of action u/s 148 has become infructuous in view of the fact that the case of the assessee has been accepted on merits. All other grounds support the order of the CIT(A), which has been upheld by us. Thus, these grounds are also infructuous. 10. In the result, the appeal of the revenue is dismissed and cross objection of the assessee is dismissed as infructuous. This order was pronounced in the open court on 21 January, 2011. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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