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TMI Blog2016 (4) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... n securities. During the years under consideration, the assessee had raised capital by way of allotment of preference share capital and also through receipt of share application money. During the course of assessment proceedings, the assessee furnished all the details relating to the share application money as well as preference share capital., i.e., according to the assessee, it has discharged the initial burden placed upon it u/s 68 of the Act. It appears that the revenue has conducted investigation in the hands of some of the companies from whom the assessee had received share application money as well as the preference share capital. It appears that the directors of those companies had deposed that they were providing only accommodation entries only. Based on those statements, the AO assessed the cash credits in the hands of the assessee in both the years. The Ld CIT(A), however, deleted the addition on the basis of orders passed by the Tribunal in the hands of the sister concerns of the assessee, viz.,M/s Chat Computers Ltd (ITA No.3859/Mum/2009 dated 22-07-2011) and M/s Netscape Software Ltd (ITA No.3852/Mum/2009 dated 19-10-2011) and also the decision rendered by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, memorandum of association, acknowledgement of returns of income, annual accounts, net worth, balance sheet, bank statements as well as confirmations of various share holders or the persons making share application to whom shares were yet to be allotted. It has further been stated by the Ld. A.R. that the issue of share application money being taxed by the Ld.A.O. and which were received from several Kolkata based companies was also a subject matter of appeal before Hon'ble ITAT, Mmnbai in appellant's own case for A.Y.2005-06 2006-07 as well as in two other related cases viz. Chat Computers Ltd. and Netscape Software Ltd. in ITA Nos. 1715 and 3858/M/09 dated 25.01.2012 , ITA No.3859/M/09 dated 27.7.2011 and ITA No.3852/M/09 dated 19.10.2011 respectively. It has been stated that under similar circumstances where statements of various individuals were recorded by the Investigation Wing at Kolkata and where no opportunity was given to the appeellants to cross examine the share applicants during the course of assessment proceedings, Hon'ble ITAT deleted the additions made u/s.68 of the LT. Act on the ground that the entire share application money were received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of the order for the AY 2005-06, the coordinate Bench of the Tribunal was not having the benefit of the decision of the Hon'ble Delhi High Court in the case cited supra. Further in view of the decision of hon'ble Gujarat High Court in case of Rajeh Babubhai Damania (supra), we see no reason for giving the A.O. any further innings to fill up the lacunas or lapses in the assessment which would cause a great injustice to the assessee. 15. In view of the above discussion and the facts and circumstances of the case, the share application money cannot be treated as income of the assessee company until and unless it is proved beyond doubt that the assessee's own money has come back through some closely related applicant. Once the identity of the applicant. is disclosed and found as correct then, even if the said transaction is suspected by the revenue authorities, the same cannot be treated as income of the assessee company which is a public limited company. Accordingly, we delete the addition made by the Assessing Officer and confirmed by the CIT(A) on this account. However, we may clarify that our findings on the issue are based on particular facts of this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinise the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aspects, there have to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. 15. The Hon'ble Bombay High Court in the case of CIT Vs. Creative World Telefilms us. 333 ITR 100 (Bom) observed 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 can always proceed against them and if necessary reopen their individual assessments. The Hon'ble Court further observed that if the assessee had given the details of names and addresses of the shareholders, their PAN / GIR numbers and had also given the cheque numbers, name of the bankers. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without more, against the assessee; and (7) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income-tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company. ........................................................... .. 21. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that investigation by the ADIT(Inv) Unit 1, Kolkata is preliminary investigation only to verify the suspicion of any concealment of income. The Assessing Officer, during the course of assessment proceedings asked the assessee to produce the said directors for cross examination. It is evident from the letter of the Assessing Officer dated 01.10.2008 as well as dated 16.9.2008 that the Assessing Officer did not summon these directors to be present in the office of the Assessing Officer for the purpose of cross examination by the assessee; but on the contrary, the assessee was asked to produce these directors for cross examination purpose. This is a gross violation of principles of natural justice when the' Assessing Officer asked the assessee to produce the directors for availing opportunity of cross examination. The Assessing Officer relied upon the statement of the directors of the investing company recorded during the investigation proceedings by the ADIT(Inv) Unit 1, Kolkata. Instead of ensuring the presence of these persons for giving opportunity to the assessee to cross examine, the Assessing Officer asked the assessee to produce them, which in our considered opinion is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as found in the bank account of the investing companies not by any cash deposit; but through account payee cheques. Therefore, when al1 the documentary evidence contradicts the statements of the directors recorded by the investigation unit of the department then such statements alone cannot be taken as the basis much less a good or proper basis for any addition. 6.5 It is settled proposition of law that the statement recorded during the course of investigation without corroborative evidence has no evidentiary value. It is pertinent to mention that the statements recorded in this case are not under search or survey or assessment proceedings therefore the same cannot be used against the assessee without following the due process of corroboration and cross examination. Even otherwise, the statement without cross examination and corroborative evidence cannot be used against the assessee. 6.6 As pointed out by the ld AR of the assessee the credibility of the statements is also not free from doubt as it appears that all the statements are prepared by the department in an identical fashion and manner before those were got signed on. different dates. It is apparent that certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of natural justice by not providing seized material to the assessee as well as cross examination of the persons on whose statements, the Assessing Officer relied upon, amounts to denial of opportunity and would be fatal to the proceedings. The Hon'ble Delhi High Court has observed in para 7 as under: 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the Principles of natural justice in as much as seized material is not provided to an assessee nor is crossexamination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following the approach adopted by us in SMC Share Brokers Ltd. (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration. 8 Similarly, in the latest decision, the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra), after considering all the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alm of suspicion. 15 At this stage, we would like to refer to the judgment of the Bombay High Court in the case of CIT v. Creative World Telefilms Ltd. (in L T. A. No. 2182 of 2009 decided on October 12,2009) [2011J 333 ITR 100. The relevant portion of this order is reproduced below: In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable'. In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the-assessee to the Assessing Officer . In the above circumstances. the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the identity and the financial worth of the subscribers. Further the initial burden on the assessee would be somewhat heavy in case the assessee is a private limited company where the shareholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstance, the assessee cannot feign ignorance about the status of these parties. 21 We may also usefully refer to the judgment of the Supreme Court in the case of CIT Y. P. Mohanakala /[2007] 291 ITR 278. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the legal position contained in section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of section 68 of the Act suggests that (iJ there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer and rejected by the Commissioner of Income-tax on the ground that a detailed investigation was required regarding the genuineness of subscribers to share capital, as there was a device of converting black money by issuing shares with the help of formation of an investment which was reversed by the Tribunal, this court held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This view was confirmed by the apex court in CIT v. Steller Investment Ltd. [2001] 251 ITR 263. 24. Having taken note of the legal position in detail, we now proceed to decide each appeal on the application of the aforesaid Principles. I T. A. No. 2093 of 2010 and I T. A. No. 2095/2010 9. It is clear from the decision of the Hon 'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra) that once the assessee filed copy of PAN, Acknowledgement coy of the return of income of the investing companies, their bank accounts statements for the relevant period; then even the parties were not produced in spite of the specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-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 the same cannot be regarded as undisclosed income of the assessee. In this view of the situation, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) vide which addition made on account of share application money has been deleted. 34. Having regard to the decisions noted above, we are of the view that the addition was rightly deleted by the Commissioner of Income-tax (Appeals) and the Tribunal. Requisite documents were furnished showing the existence of the shareholders from bank accounts and even their income- tax details. From bank accounts of these shareholders, it was found that they had deposed certain cash and source thereof was questionable. The Assessing' Officer should have made further Probe which he failed to do. Moreover, the remedy of the Department lies in reopening the case of these investors and the addition cannot be made in the hands of the assessee. Thus in view of the above observation of hon 'ble High Court when requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue and the reliance place by the AO on such statements is highly misplaced and improper. When the stand of the revenue is in total contraction of the material on record then in view of the latest decision of the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (supra), We are of the considered opinion that the issue can be decided on merit and need not to be remand to the record of the AD because at the time of the order for the AY 2005-06, the coordinate Bench of the Tribunal was not having the benefit of the decision of the Hon ble Delhi High Court in the case cited supra. Further in view of the decision of Hon 'ble Gujarat High Court in case of Rajeh Babubhai Damania (supra), we see no reason for giving the A.O. any further innings to fill up the lacunas or lapses in the assessment which would cause a great injustice to the assesse; 15. In 'View of the above discussion and the facts and circumstances of the case, the share application money cannot be treated as income of the assessee company until and unless it is proved beyond doubt that- the assesse's own money has come back through some closely related applicant. Once the identity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, we set aside the order of the CIT(A) and delete the additions made by the AO u/ s 68 of the Act in both the years under consideration . .. .. . . . . .. . . . . .. . .. . .. . .. .. .. . . . .. . . . . . . . . . . . .. . . . .. . . . . (Emphasis supplied) From the facts emanating in this year, it is evident that the Ld.A.O's case is on a much weaker footing as he has relied on the statement of one Kishan Kumar Verma dt.13.10.2006 whereas the share application money received during the impugned assessment year were after that date. The statement relied upon is not at all relevant as it is not in respect of companies regarding which additions were made in this year. Nevertheless, as the other facts of the case in current year are identical to the facts in appellant's own case decided by the Hon'ble ITAT, Mumbai as well as in two other group cases viz. Chat Computers Ltd. and M/s. Netscape Software Ltd. referred to earlier,respectfully following the decision of Hon ble ITAT this ground of appeal is allowed. 5. We notice that the co-ordinate benches of the Tribunal are consistently taking the view that the assessing officer has not disproved the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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