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TMI Blog2016 (7) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient to hold that M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. were also engaged in providing accommodation entries, particularly when no evidence was brought on record in support of the said presumption. In the present case, as we have already noted that the assessee discharged the onus cast upon it to prove the identity of the share applicants, their creditworthiness and genuineness of the transaction. Therefore, the addition made by the AO u/s 68 of the Act was rightly deleted by the ld. CIT(A). In that view of the matter we do not see any merit in this appeal of the department. - Decided in favour of assessee - ITA No. 3810/Del/2011 - - - Dated:- 21-6-2016 - Sh. N. K. Saini, AM And Smt. Beena Pillai, JM For the Assessee : Sh. Alok Kumar Gupta, CA For the Revenue : Sh. P. Dam Kanunjna, Sr. DR ORDER Per N. K. Saini, AM This is an appeal by the department against the order dated 24.03.2011 of ld. CIT(A)-XVI, New Delhi. 2. The only effective ground raised in this appeal reads as under: 1. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of ₹ 1,00,000/- made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the inquiry with regard to source of share applicants could not be made from the assessee. The AO did not find merit in the submission of the assessee by observing that the onus of proving the genuineness, creditworthiness and identity of the depositor lies squarely on the assessee, who could not just walk away with a oral submission that enquiries with regard to source of share applicants could not be made from it. The AO pointed out that entry operator, Sh. Tarun Goyal in his statement given before the Investigation Wing had admitted that M/s Bhavani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. had provided accommodation entry and since the assessee company had received an amount of ₹ 50,00,000/- each from the said two companies, whose credentials were shady, therefore, there was all the more reason to prove the creditworthiness, identity and capacity relating to the share capital and share premium of ₹ 50,00,000/- each from the said two companies. The AO was of the view that the pattern and frequency of deposits and withdrawals at short intervals of the said entities lends further credence to the fact that account had been used only for the purpose of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of Balance sheet, PAL A/c for the year ended 3 1.03.2008 1-12 17-28 Confirmation for the investment in shares 13 29 Copy of Bank A/c 14-15 30 Copy of ITR 16 31 Copy of Form -2 filed with the Registrar of Companies Delhi Haryana in proof of shares allotted was also filed before the Id. A.O. during the assessment proceedings (copy enclosed vide page no.32-36). The Id. A.O. did not accept the share application money as genuine because of the following reasons:- a) As mentioned in para 4 of the assessment order there was a specific information from the Investigation Wing of the Department, New Delhi, that the assessee company received accommodation entry of ₹ 50 lacs each from M/s Bhawani Portfolio Pvt. Ltd, and M/s Thar Steels Pvt. Ltd., and these two companies are managed by Shri Tarun Goyal who is an entry operator and indulged in giving accommodation entries. b) In para 5 of the assessment order the observations have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned this fact in the assessment order and simply skipped it conveniently. He ought to have considered the outcome of this enquiry conducted while framing the assessment. During the assessment proceedings the Id. A.O. deputed his inspector to the office of DCIT/ACIT Central Circle 4, New Delhi. The enquiry did not yield any negative report regarding the share application money. Further the Balance Sheets of M/s Bhawani Portfolio Pvt. Ltd. and M/s Thar Steels Pvt. Ltd. fetched from the Central Circle 4 only confirmed the investment by these two companies in the appellant company. The Id. A.O. ignored this very important piece of evidence. He did not consider it while framing the assessment. The result of such enquiry was not given any cognition while framing the assessment. The appellant inspected the assessment record and got the copy of order sheet enclosed vide page no.37-40. From the Reasons for which case is required to be selected in scrutiny appearing on Page No.37 it may be noted that M/s Thar Steels Pvt. Ltd. should not be considered to be indulged in providing accommodation entries as in the list of such companies its name does not appear. Hence, it is a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was found to have unexplained investment, then addition of such investment was required to be made in the hands of shareholders and not in the account of the assessee. Money advanced by the creditor did not belong to him but to somebody else, onus is on the revenue that has to find the real investor as per the principle laid down by the Jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asst. CIT (2005) 197 CTR(Raj)432 Therefore the assumption by the Id. A.O. that only entry has been received by the assessee company in the assessment order is not all justified, and suffers from surmises and conjectures. The Hon'ble Delhi High Court in the case of Stellar Investment [1991] 192 ITR 287 had held that the share capital of a limited company cannot be brought to tax as unexplained cash credit on the same footing as spurious loan can possibly be assessed. The observations of the Hon'ble High Court are ..... if the assessments of the persons who are alleged to have really advanced the money are sought to be reopened that would have made some sense but we fail to understand as to how this amount of increased share capital be assessed in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. No negative evidence was collected by the Id. A.O. to support the information he alleged to have obtained from the Investigation Wing, New Delhi. Under these circumstances the Id. A.O. should have accepted the sum of ₹ 100 lacs received as share application money from M/s Bhawani Portfolio Pvt .Ltd. and M/s Thar Steels Pvt. Ltd. and its disallowance was needless, unnecessary and contrary to the law and facts of the case. Now each and every observation of the Id. A.O. as mentioned above is rebutted as under:- a. On inspection of the assessment it has been noted that there is no letter/memo or information from the Investigation Wing of the Department New Delhi that Shri Tarun Goyal is an entry operator dealing through M/s Bhawani Portfolio Pvt. Ltd. and Thar Steels Pvt. Ltd. is in the assessment file. Further no statement of Shri Tarun Goyal as mentioned by the Ld. A.O. in the assessment order is in the assessment file. As such the observations noted by the Id. A.O. has no legs. The information/statement used by the Ld. A.O. has not been proved by him to even exist what to say it was applicable on the appellant. b. (i) Many transactions in the bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove. Thirdly, the inquiries conducted by the Id. A.O. did not support the accommodation entry theory; rather it proved the genuineness of the share application money and truthfulness of the documents filed by the appellant in its support. Keeping in view the above discussion, it is requested that the addition of ₹ 100 lacs made on account of unexplained share application money may kindly be deleted as it is baseless, only supposition and conjecture, without any finding, illegal and fit to be deleted. 6. The assessee also submitted to the ld. CIT(A) as under: While disallowing the share application money amounting to ₹ 100 lacs, the Id. A.O. has relied on CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 467 (Cal) case. In this matter it is submitted that the judgment passed in the instant case does not apply to the appellant due to the following reasons:- 1. In the Precision Finance Case the company accepted the unsecured loans from various persons, in the background of which the order was passed. However, in the appellant's case the issue is money received on account of share application money and these two situations cannot be equated beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee. If the A.O. harbors doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the A.O. 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. Now let us see how the conditions laid down in Divine Leasing case are met by the appellant company:- a. Due to transactions through banking channels i.e. cheque the identity of the creditor and genuineness of the transactions has been proved. b. The copy of bank accounts proves the creditworthiness of the subscriber. The copy of the Profit Loss account and the Balance Sheet of the subscriber available on the assessment record proves the genuineness, identity and creditworthiness of the subscriber as the investment made by them in the appellant companies are duly reflected in these financial statements and confirm the appellant's claim. c. The details of address and PAN of the subscribers and From No. 2 regarding the issuance of the shares were filed during the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company, but the aforesaid fact had not been discussed by the AO in his assessment order. The ld. CIT(A) categorically stated that the aforesaid two companies were filing their Income Tax Returns and the investments made by them in the assessee company were reflected in their balance sheets which proved their creditworthiness while the genuineness of the transaction was proved by the fact that the transactions were made through account payee cheques. Therefore, the assessee had been able to establish all the three ingredients of Section 68 of the Act i.e. the identity and capacity of the share applicants and the genuineness of the transactions. She further observed that the AO while making the addition u/s 68 of the Act had relied upon information received from Investigation Wing of the department that those two companies were controlled by one Sh. Tarun Goyal who was engaged in providing accommodation entries and on the fact that those two parties were not produced by the assessee. The ld. CIT(A) referred to the judgment of the Hon ble Jurisdictional High Court in the case of CIT Vs Oasis Hospitalities Pvt. Ltd. dated 31.01.2011 wherein after analyzing the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance was placed on the following case laws: CIT Vs Creative World Telefilms Ltd. (Del) CIT Vs Value Capital Services (P) Ltd. 307 ITR 334 (Del) 8. Now the department is in appeal. The ld. DR strongly supported the order of the AO and reiterated the observations made by the AO. It was further submitted that mere filing of the Income Tax Returns is not sufficient to prove the creditworthiness and that the AO not only acted upon the information received from the Investigation Directorate but also discussed the case in detail and made the addition u/s 68 of the Act and that the onus cast upon the assessee was not discharged. The reliance was placed on the judgment of the Hon ble Delhi High Court in the case of CIT Vs Navodaya Castles (P.) Ltd. 367 ITR 306 (Del). 9. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee furnished all the documents as an evidence in support of share application money received from M/s Bhavani Portfolio Pvt. Ltd. in the form of copy of audited balance sheet and profit and loss account for the year ended on 31.03.2008, confirmation let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s paper book, both the parties are regularly assessed to income tax and furnished the copies of the acknowledgment of filing their Income Tax Returns for the relevant assessment year which are placed at page nos. 16 31 of the assessee s paper book. Both the investors made the investment through cheque which is evident from the statements of account in their respective bank, copies of which are placed at page nos. 14 15 in the case of M/s Bhavani Portfolio Pvt. Ltd. and at page nos. 30 31 in the case M/s Thar Steels Pvt. Ltd. wherein the amounts have been debited in their respective bank accounts for the investment in M/s Ottoman Steel Tubes i.e. the assessee. Therefore, it is clear that the assessee discharged the onus cast upon it by furnishing the copies of balance sheets of the investors wherein they have disclosed the investment in the shares of the assessee, copies of their bank accounts disclosing this fact that the investments were made through cheques which proved their creditworthiness, since the sufficient balance was available in their bank accounts before issuing the cheques for investment in the shares of the assessee and the genuineness of the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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