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TMI Blog2017 (1) TMI 1621X X X X Extracts X X X X X X X X Extracts X X X X ..... e share capital in accordance with law, but additions cannot be made u/s 68 of the Act as unexplained credits. In the present case, out of the total 20 subscribers to the share application money, two subscribers i.e. (1) Shri B. Maheshwar Goud and (2) Shri K. Shiva Kishore have denied investments in share application money. Shri B. Maheshwar Goud had given in writing that he had never made any investment in share application money of the company. Similarly, Shri K. Shiva Kishore also appeared before the A.O. and gave a statement that he never made any investment in the company. Therefore, we are of the view that wherever the subscribers have denied the investment in share application money, the A.O. was right in making additions towards unexplained credit u/s 68 of the Act. The CIT(A) without appreciating the facts, simply deleted additions made by the A.O. in total. Therefore, we uphold the additions made by the A.O. towards alleged bogus share application money in the case of Shri K. Shiva Kishore for the A.Y. 2006-07 and 2007-08 as unexplained cash credit u/s 68 - decided partly in favour of revenue - I.T.A.No.99&100/Vizag/2012 - - - Dated:- 12-1-2017 - SHRI V. DURGA RAO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are application form cannot be considered as confirmation letter, because it does not contain the required information like sources of money with supportive evidences, which is essential to determine genuineness and creditworthiness of the creditors. Therefore, issued one more letter and asked to furnish confirmation letter from the creditors. Later on, the assessee could submit confirmation with evidences of source of investment in a very few cases, however in majority cases the assessee failed to file confirmation letters. Therefore, based on the information available in the share application form in respect of contribution above ₹ 1 lakh, enquiries were conducted through the jurisdictional assessing officers, wherever the assessee has filed PAN nos. of the subscribers. In respect of non-assessees, the A.O. has caused enquiries by issuing summons to the subscribers and asked them to appear along with details of investment made in share application money. 4. The A.O. has issued summons to 20 persons. Out of the 20 cases to whom summons were issued, in seven cases summons were returned un-served with a remark not existing and not available . In the cases of 4 subscribers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the books of accounts. The assessee further submitted that when there are no adverse inference at all in the income from business returned by the assessee and also when there is no scope for any income having been earned not recorded in the books of accounts and also out of the contribution received towards share application money, substantial amount received by large number of persons has been found to be the satisfaction of the A.O., the A.O. was incorrect in making addition u/s 68 of the Act, only on assumption and suspicion basis. The assessee further submitted that all the share application money received is routed through bank account and the assessee has filed complete details of name and address along with PAN nos. of the subscribers. Once the identity of the creditor is proved by filing necessary details, the A.O. was incorrect in making additions by holding that the assessee has failed to discharge the genuineness of the transaction and creditworthiness of the parties. In support of its arguments, relied upon the decision of Hon ble Supreme Court, in the case of CIT Vs. Lovely Export Pvt. Ltd. 216 CTR 195 (SC). In addition, the assessee also submitted copy of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essees has furnished complete details of name and address along with PAN number/income tax ward no. of the share applicants and some of them are assessed to income tax. The share application money has been received through banking channel. In some cases, the confirmation/affidavits of share applicants containing the above details were also filed. It is seen that the A.O. did not carried any enquiry into the income tax records of the persons who have given the PAN no./ward no. in order to ascertain the non-existence of the share applicants in question. The A.O. has neither controverted nor disapproved the material filed by the assessee. The A.O. proceeded to make the impugned addition on the ground that in some cases summons were returned unserved and in some cases summons have served but there was no compliance. In the present case, the A.O. has caused necessary enquiries and after causing such enquiries came to the conclusion that the assessee has not proved the identity of the creditors. The A.O. had given a categorical finding that in few cases though assessees were responded to summons, the investment is made in cash and the subscribers have failed to file any evidences in supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d capacity of the creditor. In remaining cases, creditors have not responded to the summons, investment is made in cash and also the creditors have failed to prove the capacity to subscribe to the share application money. In few cases, the A.O. observed that the creditors have denied having made any investment in share application money. Therefore, opined that the assessee has failed to discharge initial burden by filing necessary identity, genuineness of the transactions and creditworthiness of the parties. It is the contention of the assessee that it has filed necessary details along with Xerox copies of share application form, wherein complete details of name and address of the subscriber and their PAN no. is given. The A.O. made additions merely on the ground that some of the subscribers have failed to respond to the summons issued by the A.O. But, the fact is that majority of the shareholders have filed confirmation letters and also all the share application money has been received through proper banking channel, therefore, the A.O. was erred in making additions towards share application money u/s 68 of the Act. 11. Having heard both the sides and considered material on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application money cannot be regarded as undisclosed income u/s 68 of the Act of the assessee company. Therefore, we are of the view that once the assessee has furnished correct name and address of the subscribers to the share application money, it is for the department to re-open the assessment of individual subscribers to the share capital in accordance with law, but additions cannot be made u/s 68 of the Act as unexplained credits. 13. In the present case on hand, on perusal of the details available on record, we find that the assessee has filed Xerox copies of share application forms containing details of name and address of the creditors. The assessee claims that share application form contain the complete details of name and address and PAN no. of the subscribers and also mode of receipt of money. We further observed that the A.O. also accepted that most of the share application money has been received through banking channels, but, disbelieved details filed by the assessee and made additions, merely on the ground that the subscribers have not responded to summons and also failed to file necessary evidence in support of source of income to prove the capacity of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ./ward no. in order to ascertain the non-existence of the share applicants in question. The A.O. has neither controverted nor disapproved the material filed by the assessee, instead he proceeded to make the addition on the grounds that in some cases summons issued were returned un-served and in some cases summons though served but there was no compliance. In the present case on hand, in some of the cases, the subscribers to the share application money have denied the investment made in the company. Therefore, we are of the view that the ratio laid down by the Hon ble Supreme Court, in the case of CIT vs. Lovely Exports Pvt. Ltd. cannot be applicable in total to the facts of the present case. 15. In the present case, out of the total 20 subscribers to the share application money, two subscribers i.e. (1) Shri B. Maheshwar Goud and (2) Shri K. Shiva Kishore have denied investments in share application money. Shri B. Maheshwar Goud had given in writing that he had never made any investment in share application money of the company. Similarly, Shri K. Shiva Kishore also appeared before the A.O. and gave a statement that he never made any investment in the company. Therefore, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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