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TMI Blog2011 (10) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the corresponding cross-objection[CO] filed on 9th November, 2010 by the assessee against an order dated 02.08.2010 of the learned CIT(A)-XVI, New Delhi, raise the following grounds:- I.T.A. No.4613/D/2010[Revenue] 1. That on the facts and circumstances of the case and in law the learned CIT(A) erred in deleting the addition of ₹ 54,00,000/- made u/s 68 of the Income-tax Act, 1961 on account of share application money. 2. That on the facts and circumstances of the case and in law the learned CIT(A) erred in ignoring the fact that the assessee failed to produce directors/authorized representative of the alleged applicants even after specifically being asked to do so by the AO and thus failed to discharge its onus to establish the identity and creditworthiness of the share applicants and/ the genuineness of transaction. 3. That on the facts and circumstances of the case and in law the learned CIT(A) erred in relying upon the decision given in the case of Lovely Exports (P) Ltd., the AO did not ask the assessee to produce any of the investor shareholders. However, in the instant case the assessee was specifically asked and given a number of opportunities to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, ND 1000000 13.3.02 D.K. Ispat Timber Ltd. SBP -do- 50090 HDFC -do- 650000 13.3.02 Kuberso Sales P. Ltd. SBP -do- 50084 HDFC -do- 1200000 14.3.02 Dinanath Luhariwal Spinning Mills Ltd. SBP -do- 50103 HDFC -do- 850000 33834 16.3.02 Technocom Associates P.Ltd. Innovative Wazirpur 220 HDFC -do- 1000000 18.3.02 Chintpuri Credits SBP DG 50058 Total 5400000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly ,added an amount of ₹ 54 lacs in terms of provisions of section 68 of the Act besides adding an amount of ₹ 1,08,000/- @2% of the aforesaid amount paid as commission to the entry operators. 3. On appeal, the learned CIT(A) deleted the addition in the following terms:- 4.5.0 I have considered the submissions of the learned AR of the appellant company. After considering the various judgments of jurisdictional High Court as well as of Hon'ble Supreme Court, I am of the view that no addition on account of share application money can be made in the hands of the appellant company. The Assessing Officer has not effected any enquiries to bring out any fact which could suggest that these parties have given accommodation entries to the appellant and that the money received from these parties is appellant's own undisclosed income and routed back to the appellant company in the guise of share application. Even appellant has not been provided with an opportunity to cross examine the so called entry providers and the fact is that the Assessing Officer has simply relied upon the information provided by the Investigating wing of the Department with no concre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Delhi High Court in the case of Divine Leasing and Finance Ltd. (supra) where the Apex Court, while dismissing the appeal filed by the Department held as follows:- We find no merit in this Special Leave Petition 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 A0, then the Department is free to proceed to re-open their individual assessments in accordance with law. Delhi High Court in the case of CIT vs M/s Pondy Metal and Rolling Mill Pvt. Ltd. (ITA No. 788/2006) dated 19.02.2007 has concurred with the findings of the Appellate Tribunal, Delhi Bench 'F', New Delhi that once the identity of the investor has been manifest and is proved, the investment cannot be said to be the undisclosed income of the assessee. At best, the amount could be added in the hands of the investor but it certainly could not be treated as undisclosed income of the assessee. The appeal filed against the said decision, was dismissed by the Hon'ble Supreme Court in C. C. 12860/2007 dated 08/01/2008. As no adverse/incriminating material has been gathered by the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed income , routed back in the guise of share application. On the other hand, the assessee submitted copies of share application forms, containing names, addresses, PAN, Bank details and confirmations of the investors. In these circumstances, relying on various decisions, including in Divine Leasing Finance Ltd. (2008) 299 ITR 268 (Del.), CIT Vs. Value Capital Service Pvt. Ltd. 307 ITR 334 (Del.) and CIT Vs. General Exports and Credits Ltd. (2008) 299 ITR 268 (Del.), the ld. CIT(A) deleted the addition while holding that the assessee discharged the initial onus of establishing the identity of the subscribers and the bonafide of the transactions. The Revenue have not controverted these findings of facts recorded by the ld. CIT(A) nor brought to our notice any contrary decision. On similar facts, a co- ordinate Bench in M/s MAF Academy Pvt. Ltd.(Supra) in their order dated 14th October, 2011, to which one of us i.e. JM is a party, concluded as under:- 6. We have heard the rival contention in light of the material produced and precedents relied upon. We find that assessee has submitted the following documents before the Assessing Officer, in support of the share applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of this Court in Divine Leasing and Finance Ltd. (Supra) after considering all the relevant judgements, we do not have to reconsider all the judgements referred to by Mr. Sahni which are prior in date and time to the aforesaid judgement. In fact, a Special Leave Petition filed against the said Division Bench Judgement was dismissed by the Supreme Court by way of speaking order in C.I.T. vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC). The Supreme Court in Lovely Exports Pvt. Ltd. (Supra) has held as under:- Can the amount of share money be regarded as undisclosed income under section 68 of the Income Tax Act, 1961. We find no merit in this Special Leave Petition 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 Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgement. 7. Consequently, the doctrine of merger would apply and the judgement of the Supreme Court in Lovely Exports (P) Ltd. (Supra) would cover the field with regard to interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entry operator issues demand draft, postal orders, cheques in the name of beneficiary. Most of these concerns / individuals also have obtained PAN from the department and are filing income tax returns, but what is shown in the return is not actual state of affairs. 28. The appellant filed copies of PAN, acknowledgement of filing of income tax returns of the companies, their bank account statements for the relevant period, i.e. for the period when the cheques were cleared. However, the parties were not produced in spite of specific direction of the Assessing Officer instead of taking opportunities in this behalf. Since the so called Directors of these companies were not produced on this ground coupled with the outcome of the detailed inquiry made by the investigation wing of the department, the Assessing Officer made the addition. This addition could not be sustained as the primary onus was discharged by the appellant by producing PAN number, bank account, copies of income tax returns of the share applicants, etc. We also find that the Assessing Officer was influenced by the information received by the Investigating Wing and on that basis generally modus operandi by su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are accordingly dismissed at the admission stage itself. 7. In the background of the aforesaid discussion and precedents, we uphold the order of the Ld. Commissioner of Income Tax (Appeals) directing that the addition of ₹ 3,43,00,000/- is liable to be deleted. Since the addition of ₹ 3,43,00,000/- u/s. 68 has been deleted, we agree that the there is no basis for sustaining the addition of ₹ 6,86,000/- u/s 69C, the same is also directed to be deleted. Hence, we uphold the order of the Ld. Commissioner of Income Tax (Appeals) and decide the issue in favour of the assessee. Hence, the Revenue's appeal stands dismissed. Assessee's Cross Objection No. (317) 8. In the cross objection the assessee has challenged the reassessment proceeding and appealed that reopening is bad in law and beyond the jurisdiction of the Assessing Officer . 9. We find that we have already decided the issue on merits and upheld the order of the Ld. Commissioner of Income Tax (Appeals), therefore, the issue of reopening has become academic and hence, infructuous. Hence, the assessee's C.O. stands dismissed as infructuous. . 6. In view of the foregoing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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