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TMI Blog2017 (1) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) - Decided n favour of assessee - I.T.A. No. 5302/DEL/2016 - - - Dated:- 3-1-2017 - Shri H. S. Sidhu, Judicial Member Department by : Sh. S.K. Jain, Sr. DR Assessee by : Sh. Chaman Lal Sharma, Adv ORDER This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-I, New Delhi dated 01.7.2016 pertaining to assessment year 2010-11 on the following grounds:- 1. The Ld. CIT(A) erred in deleting the addition u/s. 68 of the Act amounting to ₹ 40,00,000/- received by the assessee company as a beneficiary of accommodation entries from 7 companies in question in the garb of share application money / premium. 1.2 Ld. CIT(A) has failed to appreciate that SK Jain/ V.K. Jain in their ITA Nos. 6991 to 6997/Del/2014 and ITA Nos. 6998 to 7004/Del/2014 admitted before ITAT that the nature of their activities was of entry operators, thus there was no sanctity of confirmation of share application money provided by 3 companies under their control. 1.2 Ld. CIT(A) erred in law and on facts in accepting the creditworthiness of the 7 companies based merely on their balance sheet entries despite the fact that these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Zenith Automotive Pvt. Ltd Rs.6,00,000/- 2 M/s Mega Top Promoters Pvt. Ltd Rs.7,00,000/- 3 M/s Victory Software Pvt. Ltd. Rs.7,00,000/- 4. M/s Trimurty Vinimay Pvt. Ltd. Rs.5,00,000/- 5. M/s Shyam Infratech Pvt. Ltd. Rs.5,00,000/- 6. MIs Trustworthy Viniyog Pvt. Ltd. Rs.5,00,000/- 7 M/s Deshbandhu Suppliers Pvt. Ltd RS.5,00,000/- ₹ 40,00,000I- It is mentioned by the Assessing Officer in the assessment order that the Investigation Wing carried out search in the case of Sh. Surender Kr. Jain and Sh. Virender Kr. Jain group of companies and it was revealed that companies controlled by them have provided accommodation entries in the form of share application money. On the basis of which it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector on test check basis on the entities namely Zenith Automotive Pvt. Ltd, Mega Top Promoters Pvt. Ltd. and Victory Software Pvt. Ltd. at the addresses provided by the appellant to obtain personal deposition of the Directors for verifying the genuineness of the share capital received from them and also to verify the creditworthiness in view of the findings of the Investigation Wing. The Inspector in his report dated 25.03.2015 submitted that said companies are not existing at the given address and from local enquiries in the neighborhood their whereabouts could not be ascertained. The report of the Inspector was shown to the appellant and it was informed to the appellant that it has failed to prove the source of the share capital received during the year. The appellant vide letter dated 27/3/2015 stated that details of share capital has already been filed. Appellant has also mentioned that it has filed confirmation of all the companies dated 17.03.2015. However, on enquiry by the Inspector the said companies were not found existing at the given addresses. With regard to above observations, the appellant has submitted that Assessing Officer has not proved that the documents f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Department, copies of the balance sheet of the companies to prove the identity, creditworthiness and genuineness of the transaction. On going through the details filed by Zenith Automotive Pvt. Ltd., it is seen that this company is assessed to tax and has filed its return of income for A.Y. 2010-11 and the money has been received from Axis Bank Ltd., Rajender Nagar West Delhi Branch on 2204.2009. On going through the balance sheet of the said company, it is s en that this company has got share capital of ₹ 1,81,87,000/- and reserve and surplus of ₹ 15,15,60,000/- as on 31.03.2010. It has shown investment of ₹ 16,34,00,000/- in the balance sheet at sl. NO.3 in which the appellant company's name also appears. On verification of the details filed by Mis Mega Top Promoters Pvt. Ltd., it is seen that this company has filed copy of return of income filed by it for AY 2010-11, confirmation of the share application money, copy of the bank statement of the said company with Axis Bank Ltd , Rajender Nagar West Delhi Branch wherefrom money of ₹ 7,00,000/- was given on 22.04.2009 to the appellant company. It is also seen from the balance sheet of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith Axis Bank Ltd , Rajender Nagar West Delhi Branch wherefrom money of ₹ 7,00,000/- was given on 22.04.2009 to the appellant company. It is also seen from the balance sheet of the investor company that this company has got share capital of ₹ 1.85.00.000/- and reserve and surplus of ₹ 14,76,41 ,809/-. I has shown investments of ₹ 11,69,50,000/- as per Schedule 3 of the balance sheet In the Schedule 3 name of the appellant company appears as invested company. On verification of the details filed by Victory Software Pvt. Ltd., it is seen th the said company has invested ₹ 7,00,000/- in the appellant company for which has filed confirmation copy of the return income filed for AY. 2010-11, copy of the Axis Bank statement, Rai.ender Nagar West Delhi Branch wherefrom money of ₹ 7,00,000/- was given on 22.04.2009. It is also seen that this company has got a share capital of ₹ 1,92,32,0001- in its balance sheet and has got reserve and surplus of ₹ 17,22,26,886/-. It has shown investment in schedule 3 of ₹ 18,70,00,500/- in its balance sheet. On going through schedule 3, it is seen that appellant company has shown investment of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re capital of ₹ 33,24,250/- and reserve and surplus of ₹ 6,13,08,639/- in its balance sheet. It has shown investment of ₹ 4,81,50,000/- in its balance sheet which includes the investment of ₹ 5,00,000/- made in the appellant company. On the basis of above observation, it can be said that these investor companies have got their bank account, wherefrom the money was paid to the appellant company as share application money and such investments are reflected in their balance sheets. It is also seen that these companies have not only invested in the appellant company but they have also invested in the shares of other companies and such investments are reflected in their Balance Sheets. The investments have been made out of the authorized share capital or loan received by these companies from other companies. The transactions have been done through account payee cheque and / or pay order issued from the bank accounts of the investor companies or through RTGS. Therefore, the observations of the Assessing Officer that the identity, capacity to advance money and genuineness of the transactions was not proved by the appellant is not based on the proper appreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and genuineness of the transactions by filing necessary documents before the AO as well as before me, therefore, the ratio of the above judgment is squarely applicable to the facts of the appellant's case and the addition made on account of share application money cannot be sustained. (b) ITAT Delhi, ITO v . N.C. Cables Ltd. ITA No. 4122/0ell2009 dated 2210.2014 It was held Arguments and evidences provided by Assessee to substantiate transaction are genuine. AO did not find any evidence and had not given any basis. No detail of investigation done by Investigation Wing was brought on record . In the case of appellant no evidences has been brought on record by the AO to prove that share application money received by the appellant was accommodation entry. On the contrary the appellant has filed the copies of the balance sheet, copies of the return of income filed, confirmation of the transactions with the appellant company and copies of the bank statement wherefrom the money was received by the appellant. The AO has not brought any adverse Information on record to prove it otherwise, therefore, the ratio of this judgment is fully applicable to the appellant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istrar of Companies in relation to share application and affidavits of directors, Assessing Officer could not make addition on account of share application money solely on basis of investigation report [In favour of assessee} Where assessee adduces evidence in support of share application monies, it is open to Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on report of investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between assessee and alleged hawala operators. Where assessee had filed documents including certified copies issued by Registrar of Companies In relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors, etc, Assessing Officer was not justified in making addition under section 68 on account of share application money merely on general inference to be drawn from the reading of the investigation report The least that Assessing Officer ought to have done was to enquire into matter by, if necessary, invoking his powers under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may Pvt. l.td., M/s Shyam Infratech Pvt. Ltd., M/s Trustworthy Viniyog Pvt. Ltd., MIs Deshbandhu Suppliers Pvt. Ltd. Therefore, the finding given by the AO that these were accommodation entries and appellant had invested its own money was not based on any material fact available on record and same was not justified. Hence, the addition made by the AO of ₹ 40,00,000/- on account of share application money is deleted. 5.1 On going through the aforesaid finding of the Ld. CIT(A), I find that assessee company has filed source to prove the genuineness of the funds invested in the shares of the assessee company. The Assessing Officer had no information about the accommodation entry alleged to have been received by the appellant. There is no statement with reference to these companies that they were providing accommodation entries. There was no cash deposit found in the bank accounts of these companies. Therefore, the addition made by the Assessing Officer on the basis of simply a letter received from Investigation Wing cannot be treated as accommodation entry and the addition cannot be sustained on the basis of such letter without bringing adverse materials on records. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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