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TMI Blog2012 (8) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... premium of Rs. 990/- for each share of face value of Rs. 10/-. The details of share application money were as under :- i. M/s. Impala Industrial Enterprises Ltd. Rs. 2,00,000/- ii. M/s. Jagdishwara Pharmaceutical Works Rs. 90,00,000/- iii. M/s. Online Information Technologies Ltd. Rs. 3,25,50,000/- 2.1 The AO noted that the assessee and received share application money on very high premium of Rs. 990/- per share on face value of Rs. 10/- only in the second year of formation, from various other companies in Calcutta and Bombay. The AO on the basis of post search investigation and enquiry during the assessment proceedings, observed that the assessee company was indulging in practice of providing accommodation entries of share capital, share premium and unsecured loans. The AO further noted that Shri J.P.Mahajan and his wife Smt. Jagruti J. Mahajan were the only directors in the company. He referred to the statement of Shri Paresh Mahajan recorded under section 131 in which in response to question No.6 he stated that he did not know anything about the entries in the bank transactions. He also stated that he was working as an employee of Hiamanshu Mehta who in good faith had taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded that the source of share application money was cash deposits and accommodation entries and received through entry operators. The AO also observed that burden was on the assessee to explain satisfactorily the cash credit in his books of account. He referred to the judgment of Hon'ble High Court of Calcutta in the case of CIT vs. Korlay Trading Company (232 ITR 820) in which it was held that mere filing of Income tax file number of creditors was not enough to prove the genuineness of cash credit. He also referred to the judgment of Hon'ble High Court of Calcutta in the case of United Commercial & Industrial Co. (P) Ltd. (187 ITR 596) in which it has been held that assessee is required to prove credit worthiness of creditors and mere proving the identity and fact that payment had been made by cheque was not enough. He also referred to the judgment of Hon'ble High Court of Delhi in the case of CIT vs. Sophia Finance Ltd. (205 ITR 98) in which it was held that it was open to the AO to enquire into the identity of the share holders and in case share holders are identified and it was established that they had invested money in the purchase of shares, the amount has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO for examination and submission of remand report. The AO reported that the assessee had not produced all the parties. In reply, the assessee submitted before CIT(A) that some of the parties could not be produced as they had stayed out of Mumbai but all documents such as P.A. No., income tax return acknowledgement etc. were filed which were part of public record and, therefore, their identity could not be questioned. The parties were also assessed to tax. The assessee also submitted that it had asked for copies of proceedings in which statement of certain witnesses were recorded. It had also asked for cross examination of such witnesses but the assessee had not been given copy of statements. CIT(A) after consideration of material on record observed that the share application money had been received from companies which were duly incorporated and once incorporated, a company exists until liquidated. CIT(A) also observed that once it is found that share holder exists, no addition could be made on account of share application money in case of the assessee. He accordingly directed the AO to delete the addition aggrieved by which revenue is in appeal before us. 5. Before us, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of High Courts. It was accordingly urged that order of CIT(A) deleting the addition should be upheld. 6. We have perused the records and considered the rival contentions carefully. The dispute is regarding addition of Rs. 6,15,50,000/- on account of share application money claimed to have been received by the assessee from three companies details of which have been given in para-2 earlier. The addition has been made on the basis of material found during the course of search conducted in case of SKS Ispat Group Ltd. which also covered the assessee and on the basis of statement recorded under section 131 of the Act. The search had been conducted under section 132 in the case of SKS Group of companies and their directors in which the assessee was also covered. During the course of search, it was found that Shri Suresh Jajodia and Shri Hiten Mehta and his brother Shri Himesh Mehta had created a large number of companies, firms and proprietary concerns which were only paper entities and were engaged in providing accommodation entries for share application money, share premium, share capital, inter-corporate deposit, unsecured loans, advances, bogus purchases, bogus sales and bogus tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O examined the bank accounts from which assessee received share application money. The AO has noted that these accounts were with Corporation Bank, Hill Road, Bandra having huge transactions running into several crores which included cash deposits and transfer entries. The AO has also given a finding that source of deposits in these accounts was receipt from other concerns whose accounts were located in the same bank and in which also there were huge cash deposits and transfer entries. The AO therefore held that the companies were providing only accommodation entries and share application money shown from the three companies were not genuine. The assessee had paid cash and obtained accommodation entries to show share application money. Accordingly he has treated the amount received as income of the assessee. CIT(A) has not agreed with the conclusion drawn by the AO. He has held that once a company is incorporated, it continues to exist unless liquidated and, therefore, once share holder company exists no addition could be made on account of share application money. He had referred to the judgement of the Hon'ble High Court of Delhi in the case of CIT vs. Sophia Finance Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Creative World Telefilms Ltd. (supra), the assessee had given name, address and P.A. No. of the share applicants. The AO had issued summons which had been returned and thereafter no further enquiry had been made. Hon'ble High Court of Bombay held that the AO ought to have found out their details through P.A. Card, Bank Account details so as to reach the share holders, since relevant material, details and particulars had been given by the assessee. Hon'ble High Court accordingly confirmed the order of the Tribunal deleting the addition made by AO. The issue regarding the genuineness of the share application entries were not before the Hon'ble High Court. Similar was the position in the case of Gujarat Heavy Chemicals Ltd. (supra), another judgment relied upon by the ld. AR. In that case also there was no material before the Court to show that share application money was only an accommodation entry. On the contrary, there are several judgments including those of Hon'ble Apex Court in which it has been held that even if the creditor exists and money is received through banking channel, addition can be made under section 68 of the Act if the transaction is not found to ..... 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