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TMI Blog2018 (4) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... s the appeal filed by the revenue. - I.T.A No.1946/Mum/2016 - - - Dated:- 28-2-2018 - Shri Mahavir Singh(JUDICIAL MEMBER) And Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Shri MC Omi Ningshen For The Revenue : Shri Prakash Jothwani ORDER Per G Manjunatha, AM : This appeal filed by the revenue is directed against order of the CIT(A)-2, Mumbai dated 15-12-2015 and it pertains to AY 2010-11. 2. The brief facts of the case are that the assessee company is engaged in the business of manufacturing, trading and exporting pharmaceutical items, filed its return of income for the assessment year 2010-11 on 05-10-2010 declaring total income of ₹ 32,81,207. The case has been selected for scrutiny and notice u/s 143(2) and 142(1) of the Act were issued. In response to the notices, the authorized representative of the assessee appeared from time to time and furnished details, as called for. The assessment has been completed u/s 143(3) on 04-03-2013 determining total income at ₹ 1,73,63,846 inter-alia making addition towards unexplained cash credits u/s 68, towards share application money received from 3 parties and disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arpita Tradelink Pvt Ltd.. The AO, on verification of bank statement furnished by ICICI Bank Ltd, observed that all three bank acccounts operated by these 3 share applicants were operated only for a limited period during which share application money has been received by the assessee and also those bank accounts have received money from some individual. The AO further observed that on further verification of source of money received from individuals, it was noticed that the individuals have deposited cash into their bank account either on the same day or immediately preceding the day on which the funds have been transferred to the share applicants bank accounts. Therefore, he opined that the assessee has failed to discharge the genuineness of transactions and creditworthiness of the parties. Accordingly, the amount received by the assessee from 3 parties to the extent of ₹ 1.15 crores has been treated as assessee s own undisclosed income and the same has been brought to tax u/s 68 of the Act. 4. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), assessee has reiterated its submissions made before the AO to argue that it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that out of three share applicants, two share applicants, viz. Avdhan Tradelink Pvt Ltd; and Arpita Tradelink Pvt Ltd, the names of these two companies have been struck off by the ROC from this, it is abundantly clear that those companies are shell companies engaged in providing accommodation entries under the guise of share application money which was further supported by the facts gathered by the AO during the course of assessment proceedings. Therefore, the CIT(A) erred in deleting addition without properly appreciating the facts and hence, the addition made by the AO should be sustained. 6. On the other hand, the Ld.AR for the assessee strongly supporting the order of the CIT(A) has submitted that the assessee has furnished enormous documents to prove the identity, genuineness of transactions and creditworthiness of the parties including share application forms, PAN, bank statements and their income-tax return acknowledgment copies. Therefore, the AO was incorrect in making addition merely because the notices issued u/s 133(6) were returned unserved and also the share applicants have received money from third parties where they have deposited cash into their bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the companies. The AO further observed that the share applicants have received money from certain individuals before the date of transfer of money to the assessee company and those individuals have deposited cash on the same day or a day before the date on which the money has been transferred to share applicants bank account. The AO further observed that notice u/s 133(6) were not served and the parties refused to accept the notice. The AO also observed that the assessee failed to explain how it has issued share having face value of ₹ 10 with a huge premium of ₹ 990 per share when it was an unlisted company. Therefore, the AO opined that the assessee has obtained accommodation entries from so-called share applicants to convert its own undisclosed income in the guise of share application money. Accordingly treated share application money received from all the three parties as unexplained credit and brought to tax u/s 68 of the Act. 8. The AO has made addition towards share application money on the basis of analysis of bank statements of share applicants and the source of applicants bank accounts. The assessee has filed various details including share applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses alongwith PAN of subscribers, then the AO is free to reopen the assessment of subscribers in accordance with law, but the share application money cannot be regarded as undisclosed income of the assessee. 10. Insofar as the argument of the Ld.DR in the light of Company Master Data taken from ROC website that the names of two companies have been struck off by the ROC, we find that the ROC has struck off the names of two companies for the reason that those two companies have not filed their annual accounts for few years, but fact remains that the assessee has furnished letters from those two companies wherein they have admitted that their names have been struck off by the ROC for non filing of annual accounts, but they are in the process of restoring the names by filing an application before NCLT. As regards the AOs observation with regard to the issue of shares at a face value of ₹ 10/- issued at a premium of ₹ 990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowledge of the company and the subscribers to the share application money and the A ..... 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