9911796707
TMI Blog2019 (8) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: "1. That the learned Commissioner of Income Tax (Appeals) - 5, Kolkata erred in confirming the addition of Rs. 90,00,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961 on irrelevant considerations and arbitrary grounds. 2. That the learned Commissioner of Income Tax (Appeals)-5, Kolkata erred in confirming the addition of Rs. 90,00,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961 on the basis of judgments which are distinguishable on facts as well as on law. 3. That the learned Commissioner of Income Tax (Appeals)-5, Kolkata erred in confirming the addition of share capital of Rs. 90,00,000/- made under section 68 of the Income Tax Act, 1961 in disregard to the binding judgments of Hon'ble Apex Court, Hon'ble Jurisdictional High Court and the Hon'ble Jurisdictional ITAT which directly lays down ratio on the merits of the addition of share capital under section 68 of the Income Tax Act, 1961." 2. Brief facts relating to the grounds for both the appeals are that the AO noted that the assessee company was incorporated on 14.08.2007 and is in the business activity of manufacturing "Gutkha". The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet of the share subscribing companies showed little or no tangible assets and they were mostly investments in unquoted shares which showed that principles of sound investing had not been followed. Thus, according to AO, these discrepancies raises question mark on long term viability of such companies in terms of returns on investments. According to AO, the income levels of many of these investors are either meager or negative and thus, according to AO, there was hardly any business activity to justify such large amounts of investments and premium. Thus, the AO made observations from (i) to (ix) which is evident from pages 2 and 3 of the assessment order, with those reasons AO was of the opinion that the assessee failed to show the genuineness and creditworthiness of the transaction and moreover, the assessee's failure to produce its own directors as well as the directors of the share subscribing companies made the AO drew adverse inference against the assessee and after citing few case laws made the entire addition of Rs. 2.40 cr. u/s. 68 of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to give partial relief to the assessee by deletin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s. 133(6) of the Act, and they have disclosed their source of funds etc. which, according to Ld. AR, the AO has not found any fault with, still the Ld. CIT(A) sustained the addition which, according to Ld. AR, the decision of Ld CIT(A) in respect to the three (3) other share subscribers is erroneous when the assessee has discharged the onus casted upon it to prove the identity, creditworthiness and genuineness of the transaction. Therefore, according to the Ld. AR, the confirmation of Rs. 90 lakhs by Ld. CIT(A) is erroneous and need to be deleted. Controverting the submissions of the Ld. AR in respect to the assessee's appeal the Ld. DR submitted that the Ld. CIT(A) rightly confirmed Rs. 90 lakhs from three share subscribers which action of the Ld. CIT(A) should not be disturbed. 5. Having heard both the parties, we note that the Ld. CIT(A) has given relief to the assessee to the tune of Rs. 1.5 cr. out of Rs. 2.40 cr. share capital and premium received by the assessee. We note that assessee collected Rs. 2.40 cr. in total which consists of share capital to the tune of Rs. 80 lakhs and share premium was Rs. 1.60 cr. We note that the assessee had allotted the shares to eight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g companies are (i) M/s. Fantasy Distributor Pvt. Ltd., (ii) M/s. Jaguar Housing Pvt. Ltd. and (iii) M/s. Sanskriti Housing Pvt. Ltd. Let us take the case one by one of these three share subscribers. (i) M/s. Fantasy Distributor Pvt. Ltd. filed the letter of confirmation of subscribing share capital plus premium to the AO directly pursuant to his notice u/s. 133(6) of the Act, is found placed at pages 131 to 132 of the paper book which is letter dated 20.11.2014 to the AO. We note that the share application forms submitted by M/s. Fantasy Distributor Pvt. Ltd. to the assessee company is found placed at pages 134 to 137 of the paper book. The income tax return acknowledgment of M/s. Fantasy Distributor Pvt. Ltd. is found placed at page 144 of the paper book wherein we note the PAN of M/s. Fantasy Distributor Pvt. Ltd. is AABCF3443Q and M/s. Fantasy Distributor Pvt. Ltd. is assessed by ITO, Wd- 9(1)-WBG/W/109/01, bank statement of M/s. Fantasy Distributor Pvt. Ltd. wherein it had account with Federal Bank is found at page 145 of the paper book. Its audited accounts are placed from pages 146 to 150 of the paper book and from a perusal of page 150, we note that the investment made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Pvt. Ltd. had written letter to the AO pursuant to 133(6) notice which is found placed at pages 221 to 222 of the paper book which is a letter dated 18.11.2014. The share application forms filed by M/s. Sanskriti Housing Pvt. Ltd. to the assessee company is found placed at pages 223 to 226 of the paper book. The income tax return acknowledgment is found placed at page 232 of the paper book wherefrom we note that the PAN of M/s. Sanskriti Housing Pvt. Ltd.. is AANCS7871B. We note that the AO of M/s. Sanskriti Housing Pvt. Ltd. is ITO, Wd. 5(1)/WBG/W/105/01. Bank statement of M/s. Sanskriti Housing Pvt. Ltd. is found placed at page 233 of paper book which is maintained at Federal Bank. The audited accounts are found placed from pages 234 to 238 of paper book and the investment made by M/s. Sanskriti Housing Pvt. Ltd. on the assessee company is to the tune of Rs. 30 lacs which is found placed at page 238 of the paper book which is a part of the audited accounts. The Memorandum & Articles of Association is found placed at paper book pages 239 to 243 of the paper book. From a perusal of the page 236 of the paper book, we note that M/s. Sanskriti Housing Pvt. Ltd. had share capital of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 11. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... **** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order." 13. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmation-certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 18. Our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 207 232 5. Bank Statements 145 206 233 6. Audited Accounts 146-149 209-215 234-238 7. Details of investment as appearing in audited accounts showing investment in Assessee company 150 - 238 8. Memorandum & Articles of Association 151-155 216-220 239-243 21. From the aforesaid chart we note that the assessee has discharged its onus casted upon it to prove the identity, creditworthiness and genuineness of the transaction. Since we have already discussed about the creditworthiness of the three assessee companies namely M/s. Fantasy Distributors Pvt. Ltd., M/s. Jaguar Housing Pvt. Ltd. and M/s. Sanskriti Housing Pvt. Ltd. pertaining to the assessee's appeal, we would like to see the creditworthiness of the remaining five share subscribers which are involved in the revenue's appeal in the following manner: i) In respect of M/s. Mukesh Lifestyle pvt. Ltd., on perusal of the Balance Sheet as at 31.03.2012 placed at paper book page 77 reveals that it had a share capital of Rs. 33,65,000/- and Reserve & Surplus of Rs. 2,25,68,054/- totaling to Rs. 2,59,33,054/- and whereas it has invested share capital of only Rs. 10 lacs and share premium of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above. 23. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditwort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned Ld. CIT(1) on the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ud reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. 3.4. 1. We also find that the impugned issue is also covered by the decision of Hon'ble Calcutta High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.1.2011, wherein the- questions raised before their lordships and decision rendered thereon is as under:- "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sum of Rs. 57,00,000/- to tax as unexplained cash credit u/s 68 of the Act. 4.2. On first appeal, the Learned CIT(A) observed that entire share application monies of Rs. 57,00,000/- we received during the previous year 2004-05 relevant to Asst Year 2005-06 from 20 persons and the shares were allotted to them during the asst year under appeal. He observed that the assessee had furnished details of the share applicants giving the date wise receipts, mode of payment, amount, name, address, income tax returns, PA No. of share applicants along with their balance sheet. The Learned CITA also observed that the assessee in its reply to show cause notice before the Learned AO had requested him to use his power and authority for the physical appearance of the shareholders which was not exercised by the Learned AO. Instead the Learned AO continued to insist on the assessee to produce the shareholders before him. He ultimately concluded that the assessee had duly discharged its onus of providing complete details of the shareholders and in any case, no addition could be made u/s 68 of the Act in the asst year under appeal as no share application monies were received during the asst year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and written submissions and paper book already available on record. The facts stated in the Learned CIT(A) were not controverted by the Learned DR before us. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned CITA on the decision of the Hon'ble Apex Court in the case of CIT vs Lovelv Exports (p) Ltd reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. 6. 1. We also find that the impugned issue is also covered by the decision of Hon'ble Calcutta High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of share subscribers would not serve any purpose as the ratio decided in the above cases is that in any case, no addition could be made in the hands of the recipient assessee. In view of the aforesaid findings and respectfully following the decision of the apex court (supra), Jurisdictional High Court (supra) and Delhi High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the grounds raised by the Revenue are dismissed." (c) The Ld. ITAT Kolkata in ITA No.1061/Ko1/2012 in the case of ITO Wd.3(2) Kol, vs. M/s. Steel Emporium Ltd dated 05-02-2016. In this the decision the Ld. Tribunal held as follows: "10. We have heard both the rival parties and perused the materials available on record. The Ld. DR vehemently supported the order of the AO. Before us the Ld. AR submitted that the assessee raised share application money during the year from 25 applicants. The AO was furnished with the copy of Form 2 of Allotment of Shares to the Applicants as filed with the Registrar of Companies, West Bengal. On the date of receipt of Share applications from the Applicants, they furnished their addresses, which were recorded in the Register of Members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice of the applicants for change of address subsequent to the date of allotment, i.e. 31.03.2009 (copies enclosed) d) Members register e) Share application & Allotment Register f) Copy of board resolution. g) Replies from Share applicants to the notice u/s. 133(6) issued to them by the AO seeking information and documents about the sources and to examine their identity, genuineness of the transaction and their creditworthiness. (copy enclosed). h) Copy of audited accounts. i) Copy of bank statements. j) Copy of Income tax acknowledgment of return filed for AY 2009- k) Copy of PAN Card. l) Details of sources of funds. m) Copy of covering letter for delivery of shares. n) Copy of master data as per ministry of Company Affairs records. o) Copy of Annual return. p) Copy of Memorandum and articles of Association. Finally the Ld. AR relied on the order of the Ld. CIT(A 10. 1 From the aforesaid discussion we find that the AO has made the addition of the share application money because all the nine companies were having the common address and the notice sent under section 133(6) was received by the single person. Accordingly the AO opined that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant companies were not in existence. The assessment orders were completed on the address as provided by the appellant company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies were not in existence at the given address. Since the appellant company had provided sufficient documentary evidences in support of its claim of receipt of share application money, I am of the opinion that the no addition u/s.68 could be made in the hands of appellant company. On going through the various judicial pronouncements relied upon by the appellant, it is observed that the view taken as above is also supported by them. In view of above the AO is directed to delete the addition of Rs. 54,00,000/ -. The ground Nos. 2 and 3 are allowed, " 7. Aggrieved by the order of CIT{A) the Revenue is in appeal before the Tribunal. 8. We have heard the submissions of the learned DR, who relied on the order of AO. The learned counsel for the assessee relied on the order of CIT(A) and further drew our attention to the decision of Hon'ble Allahabad High Court in the case of CIT vs Raj Kumar Agarwal vide ITA No. 179/2008, dated 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and treated the share application as unexplained cash credit thereby making addition under Section 68 of the Income-tax Act, 1961. On appeal the CIT(Appeals) deleted the aforesaid addition holding that the identity of the share applicants stood established beyond doubt, all the payments were through account payee cheques and the share applicants were regular income-tax assessees. The CIT(Appeals) further held that the Revenue did not bring any evidence on record to suggest that the share application had been received by the assessee from its own undisclosed sources nor any material was brought on record to show that .the applicants were bogus. The Revenue was neither able to controvert the documentary evidences filed by the appellant nor prove that the share application were ingenuine or the applicants were non-creditworthy. The findings of the CIT(Appeals) were upheld by the Income-tax Appellate Tribunal. On appeal to the High Court, the Revenue placed strong reliance on the decision of another coordinate Bench of the same Court in the" case of CIT Vs Novo Promoters & Finlease (P) Ltd (342 ITR 169). The High Court however held that the aforesaid judgment was distinguishable fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order to the following effect:- ''Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000/-. The assessee has further tries to explain the source of this amount of Rs. 55,50,000/- by furnishing copies of share application money, balance4 sheet etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr.Mahesh Garg that the income sought to be added fell within the description ofS.68 of the Income Tax Act 1961. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). The decision in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators, such a link was shown to be present in the case of Nova Promoters & Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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