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TMI Blog2014 (2) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal within the period of limitation. Hence, we condone the delay of 183 days in filing the present appeal. Unexplained cash credit u/s 68 - Revenue doubted the source of the share application money - whether transactions of allotment of share is a sham transaction? - HELD THAT:- Disallowance of the claim of the assessee and addition made by the AO under Section 68 is purely based on assumption, guess work without substantiated by any evidence or material. This is not a case of bogus shareholders as all these parties are the company, which are in existence and subjected to Income Tax as the assessee has produced the relevant evidence. Therefore, when the assessee has produced all the relevant evidences, and if the department has doubted the source of the share application money, then it is free to take necessary action in respect of these parties In the case of CIT Vs. Lovely Exports Pvt. Ltd. [2008 (1) TMI 575 - SC ORDER] has held that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO then the department is free to proceed to reopen their individual assessment in accordance with law b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has explained a reasonable cause for not filing the appeal within the period of limitation as there was an inadvertent mistake at the office of the Chartered Accountant of the assessee as explained in the affidavit. It is always a question as to whether the explanation and reason for delay was bonafide or was merely a device to cover an ulterior purpose or an underhand attempt to save the limitation. When it is brought on record that the party has not acted in malafide but the reasons explained are factually correct, then the court should be liberal in construing the sufficient cause and should lean in favour of such party. Whenever substantial justice and technical consideration are opposed to each other, case of substantial justice has to be preferred and justice oriented approach has to be taken while deciding the matter on codonation of delay. However, this does not mean that a litigant gets free licence to approach the court at its will. In the case in hand, we find that the reasons explained by the assessee are not malafide or a device to cover the ulterior purpose as there is nothing on record to infer that by filing a belated appeal the assessee could have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of share capital. Based on the report of the ADIT(Investigation) Kolkata, the AO made an addition of ₹ 95 lakhs as unexplained cash credit under Section 68 of the Act. This addition was made in respect of share application money with premium claimed to have been received from 7 parties, out of total 13 parties. 5. On appeal, the CIT(A) has confirmed the addition made by the AO. 6. Before us, learned AR of the assessee has submitted that these 7 parties are not bogus but the companies are duly identified and are in existence beyond any doubt. The authorities below have relied upon the general observation made by the ADIT(Inv.) Kolkata without giving any opportunity to the assessee. He has further submitted that the said report cannot be used against the assessee unless supported by a conclusive evidence. Learned AR has heavily relied upon the decision of the Hon ble Apex Court in the case of CIT Vs. Lovely Exports (P) Ltd., reported in 216 CTR 195 and submitted that the Hon ble Apex Court had held that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO then the department is free to procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f share application money and, therefore, the assessee has proved beyond any doubt the identity and creditworthiness of the creditors. Since the assessee has produced all the relevant record regarding issues and allotment of shares to these parties by filing the share application form, allotment letter, share certificate, therefore, the transaction cannot be regarded as non-genuine. Learned AR has further submitted that from the books of account and mainly the balance sheet and profit loss account, it was brought to the notice of the authorities below that these creditors were having sufficient funds for investing in the shares of the assessee. Learned AR has referred to the assessee s submission and explanation before the CIT(A) and submitted that for each and every 7 creditors, the assessee has filed all the details to prove its claim as genuine. The authorities below heavily relied upon the report of the ADIT(Investigation) Kolkata, which has doubted the existence of these companies, which is contrary to the evidence produced by the assessee. He has relied upon the decision of the Hon ble Madhya Pradesh High Court in the case of CIT Vs. STL Extrusion (P) Ltd., reported in (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 7 parties belong to Kolkata. The AO has decided to conduct an enquiry in respect of the 7 parties belong to Kolkata by writing a letter dated 15-11-2006 to ADIT(Inv.) Kolkata. The details of 7 parties from Kolkata are as under :- Sl. No. Name of the Shareholders Share Capital (Rs.) Share Premium (Rs.) 1. M/s Century Commo Trade Pvt. Ltd., 174, Rabindra Sarani, Kolkata-7 150000 1350000 2. M/s Fedder Tie up Pvt. Ltd., 174 Rabindra Sarani, Kolkata-7 100000 900000 3. M/s Nahar Viniyog Pvt. Ltd., 1, Old House Corner, 2nd Floor, Kolkata-7 150000 1350000 4. M/s Prime Capital Market Ltd. P27, Princess Street, 3rd Floor, Kokata-72 100000 900000 5. M/s Sigma Suppliers Pvt. Ltd. 27, Brabourne Road, Kolkata-1 150000 1350000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the bank account. Apart from this, the assessee has also produced the book of accounts of these parties to show the financial soundness of the parties and sufficient amount of reserve and surplus as well as capital of these companies. Thus, it is clear from the evidence produced by the assessee that the parties were very much in existence as these parties were assessed to income tax. The assessee has produced respective PAN and Income Tax Return along with other details. It is manifest from the evidence produced by the assessee that existence/identity and creditworthiness of the parties cannot be doubted. Thus, it appears that the report of the ADIT(Inv.) Kolkata in respect of these five parties, is contrary to the fact proved by the assessee with tangible and material evidence brought on record. Once the assessee has discharged its burden by producing the relevant evidence, then the onus is shifted on the AO to disprove the evidence produced by the assessee. In the case in hand, the AO has not proved that the evidence produced by the assessee is either bogus or false. The addition has been made by the AO only on the basis of doubt regarding the existence of the parties, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be arranged and, therefore, if an amount through cheque is deposited in the bank account before making the payment of share application money, in absence of any fact, material or finding, it cannot be said that the said money is assessee s own money. 11. We further note that the assessee produced the balance sheet, profit and loss account, income tax return, PAN and confirmation from these parties, which clearly discharge the assessee from its onus to prove its claim. When the assessee has brought on record the relevant evidence including the balance sheet and profit loss account and return of income of these parties, then in the absence of proving contrary by the AO these material evidence cannot be brushed aside merely on the basis of suspicious. Even otherwise, when the assessee has produced the share application form, allotment letter, share certificate as well as bank account, then the genuineness of the transaction cannot be doubted in the absence of any contrary finding. The evidence produced by the assessee is even otherwise cannot be doubted when the return of income is already by the parties are on the record of the department. Thus, we find that the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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