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TMI Blog2010 (9) TMI 1211X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication money u/s 68 of the I.T. Act, 1961, ignoring the fact that since the assessee had failed to prove the genuineness of the deposits made by the subscribers in their respective bank accounts as also the creditworthiness thereof, the Assessing Officer was justified in taking an adverse view as per section 114 of the Indian Evidence Act. 3. In the facts and circumstances of the case, the CIT(A) has erred in deleting the additions of ₹ 43,49,920/- made by the Assessing Officer on account of unexplained share application money u/s 68 of the I.T. Act, 1961, ignoring the fact that unexplained share capital of a company is to be treated as unexplained cash credits in view of a plethora of judgments of the Hon'ble Apex Court and various High Court. 4. In the facts of the case, the CIT(A) has erred in deleting the addition of ₹ 93,672/- made by the Assessing Officer on account of disallowance of interest by holding that the FDRs were for the intervening period only, ignoring the fact that huge interest had been paid on borrowed fund, which had been diverted to funds yielding lower rate of interest without any commercial expediency. 3. The ground Nos. 1 to 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the assessment records. All the share applicants were income tax assessees and had filed confirmation with their PAN Nos. All the applicants had filed their bank statements from which amount had been paid as share application money and in case of individuals, transactions of credit entries had been explained. In the case of companies, copies of balance sheets were filed. The CIT(A) thus held that the Assessing Officer s objection for non production of evidence stands over ruled as the applicants had complied with the summons issued by the ADI(Inv), Delhi to whom Commission u/s 131(1)(d) of the Act had been sent. The commission was sent for 10 persons, out of which nine persons had submitted their statements before ADIT (Inv), Delhi. The CIT(A) further held that in the absence of any material to the contrary, the material placed on record could not be disbelieved. The CIT(A) relying on the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Lovely Exports (supra), which has been followed by the Jurisdictional High Court in CIT Vs. G.P. International [186 Taxman 229(P H)] and in view of the share holders being income tax assessees and having filed their confirmations, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification and out of ten persons against whom the commission u/s 131(1)(d) were issued, five persons had appeared at Delhi. The list of evidences furnished by the aforesaid share applicants to justify their investments is enlisted party wise at pages 2 to 11 of the appellate order. In respect of one person i.e. M/s VHQ Finance Pvt Ltd, it was informed by the assessee that the summons were not issued on the right person and same were returned back. During the course of appellate proceedings, the assessment records were perused by CIT(A) and all the documents/evidence were found available on the file of the Assessing Officer. The parties had furnished information in compliance to the summons issued by the ADIT (Inv), Delhi to whom commission u/s 133(1)(d) of the Act was referred by the Assessing Officer concerned. The report of the ADIT (Inv) Delhi alongwith enclosures were filed in all cases except one, who was not found available, and the said evidence was found on record of Assessing Officer. In the case of M/s VHQ Finance Pvt. Ltd, the assessee was found to have filed confirmation, current account details and copy of income tax return. The CIT(A) has considered the evidence fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuineness of the transactions stands established, there is no merit in any addition in the hands of the assessee company who had received share applications money. The Hon'ble Delhi High Court placed reliance on the ratio laid down in CIT Vs. Divine Leasing and Finance Ltd. and CIT Vs. Lovely Exports (P) Ltd. [299 ITR 268 (Del)], in which case, the Special Leave Petition filed by the Revenue had been dismissed by the Hon'ble Supreme Court vide its decision reported in CIT Vs. Lovely Exports (P) Ltd [(2008) 216 CTR 195]. The High Court in CIT Vs. Winstral Petrochemicals Pvt Ltd. (supra) observed as under:- 4. While dismissing the appeal of Revenue, it was noted by the Income Tax Appellate Tribunal that all the applicants were Private Ltd. Companies, whose new as well as old addresses, were provided by the assessee during the course of the assessment proceedings. It was further noted that besides filing confirmation from the applicants, copies of Share Application Money, PAN card, etc., were also filed. The Tribunal was of the view that in these circumstances, it cannot be said that the identity of the share applicants did not stand established. Relying upon the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication money was received by the assessee company by way of account payee cheques, through normal banking channels. It is not the case of the Revenue that the payment of Share Application Money was not made from the bank account of the applicant companies. Admittedly, copies of application for allotment of share were also provided to the Assessing Officer. It is not the case of the Revenue that the share applications were not signed on behalf of the applicant companies and were forged documents. It is also not the case of the Revenue that the shares were not actually allotted to the companies. Therefore, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, in our view, were justified in holding that the genuineness of the transactions had been duly established by the assessee. 8. As regards identity of the subscribers, the assessee filed copies of Certifications of Incorporation, PAN cards, PAN details and company details, downloaded from the site of Department of Company Affairs besides written confirmation from the applicants. It is not the case of the Revenue that the copies of Certificates of Incorporation, PAN cards, PAN details or company d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The Assessing Officer was not justified in adding the amount of share application money to the income of the assessee, merely because the applicants did not respond to the notices sent to them. If the Assessing Officer so wanted, he could have found out the current address of those applicants, who, according to the report of the Inspector, were not found functioning at the address given to the Assessing Officer, by summoning the Directors, etc. of those companies and asking them to furnish the current address of the company. The names and addresses of Directors, if not available with the assessee, could have been obtained from the office of Registrar of Companies or from the banks on which the cheques were drawn. No such attempt, however, was made by the Assessing Officer. In these circumstances, we found no reason to disturb the finding of fact recorded by the ITAT. 10. In the facts and circumstances of the present case, where the assessee has established the identity, creditworthiness of the share applicants and had also produced some of the said persons before the ADIT (Inv) Delhi and in respect of the balance total evidence including the source of deposit in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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