9911796707
TMI Blog2015 (12) TMI 1862X X X X Extracts X X X X X X X X Extracts X X X X ..... 81/- as on 31.03.2008 and the same was increased to ₹ 12489838/- as on 31.03.2009. That considering the long standing in the business and huge profit the amount of share premium is duly justifiable. That in case of private limited company the amount of share premium is mutually decided between the Management of the company and share applicant. Hence, the issue in dispute should not be the amount of share premium but the identity of the share holders who has applied in the share application money of the assessee company. Once the assessee has established the identity of the share holder in that case the amount of share premium is not an issue. If the assessing officer has not satisfied with the explanation of the share applicant, necessary addition is to be made in the hand of the share applicant but not in the case of the assessee. That as regard the blank transfer deed duly signed by the share applicant as found during the course of survey. The assessing officer himself after being satisfied not taking any cognizance for the same. Since, by the time of assessment proceeding these transfer deed was not used by the assessee and therefore after the date of Annual General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st Merine Street, Mumbai-400002 1000 10 10000 990000 3 Buniyad Chemical Ltd. Block-H, Shri Sadashiv CHS Ltd. 6th Road, Shantacruz (E), Mumbai-400055 2000 10 20000 1980000 4 Luxer Properties Pvt. Ltd. C-104, Rahul Appt., S.V.Road, Andheri (W) Mumbai-400058 1500 10 15000 1485000 5 Suresh Rathod Consultant Pvt. Ltd. C-104, Rahul Appt., S.V.Road, Andheri (W) Mumbai-400058 2500 10 25000 2475000 6 Elderadd Properties Pvt. Ltd. C-104, Rahul Appt., S.V.Road, Andheri (W), Mumbai-400058 1000 10 10000 990000 7 Ecro Artisons Pvt. Ltd. 26/28, Nirnay Sagar, 9/C, Satguru Baba, Kadam Lane, M.B. Velkar Street, Kalbadevi, Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 Shree Balaji Sainath Builders Pvt. Ltd. B-1058, Shastri Nagar, Karol Bagh, New Delhi 110005 1500 10 15000 1485000 19 Surbhi Networking Broadcasting Pvt. Ltd.(Formaly Known As R.J. Fabtex Pvt. Ltd.) A-115, Ground Floor, Vakil Chamber, Shakarpur, Delhi 110092 4000 10 40000 3960000 20 Uniword Barter (P) Ltd. 206, M.J. Shopping Centre, 3, Veer Sawarkar, Block, Shakarpur, Delhi 110092 900 10 9000 891000 21 Acil Cotton Industries Pvt. Ltd. (Formaly Known as Adeshwar Cotton Industries Ltd.) 87/404, Natraj Township Part-2, Parsuram Nagar Society Road, Sayaji Ganj, Vadodara 390005 1000 10 10000 990000 22 Alpha Graphic India Ltd. B7/403, Natraj Township Part-2, Parsuram Nagar, Society Road, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y it was revealed that assessee has not revised the return and not offered the income disclosed at ₹ 4,79,00,000/- on account of share capital and share premium for taxation. 2.2 That in the present case, the assessee had filed complete details as to justify the genuineness of the share application money. That in respect of share holders assessee had filed sufficient documents in form of Share Application money, bank statements, affidavit, Memorandum, Articles of Association, ROC detail and PAN detail as to justify the identity, genuineness and creditworthiness. Hence, the entire amount of share application money is treated as explained. 2.3 The amount of share capital as received by the assessee is legal and proper. For this reason, revised return was not filed by the assessee company . The submission of the assessee is considered. It is evident from the statement of Shri Rajesh Jain, Managing Director of the company that amount on account of share capital invested during the year was disclosed by him, when he failed to explain the source of investment in share capital made during the year. Statement was recorded without any undue pressure, duress, coercion etc. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pvt. Ltd., Vadodara 7. Acumen Paper Winders Pvt. Ltd., New Delhi 8. Startrans Logistics Pvt. Ltd., Delhi 9. Millennium Cybertech Ltd., Mumbai 10. Shree Balaji Sai Nath Builders Pvt. Ltd., Delhi 11. Alpha India Ltd., Vadodara 12. Surbhi Networking and Broad Casting Pvt. Ltd., Delhi Information u/s 133(6) is received from the following parties Before coming to the conclusion of the credit worthiness and genuineness of the transaction with these parties, it is worthwhile to analyze the networth of aforesaid companies from whom assessee has received Share Capital and share premium during the year Name of the company Share Capital Share Premium Loans and Advances Net Profit Bhagirathi Industries Ltd. New Delhi 4079290 1.26 Crore 3530000 3625 Happining Motors Pvt. Ltd., Delhi 1660000 6240000 -- 36540 Shyam Share Securities Pvt. Ltd., Delhi 100000 -- -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. Febtax Pvt. Ltd. Copy of returns are furnished for A.Y. 2010-11 that is not relevant for the year under consideration. Meanwhile report from Additional DIT (Inv.), Unit-I, Mumbai and Addl. DIT (Inv.), Unit-III, Delhi and Addl. DIT, Vadodara received on 21-10-2011, 09-12-2011 and 20-12-2011 respectively. Copy of report provided to the assessee and asked him to explain the position in respect of share capital and share premium in the light of above report as received from Investigation Unit, Delhi. The relevant portion of the report is reproduced as under:- As desired summon u/s 131(1)(a) of the I. T. Act. 1961 were issued to the 9 companies of Delhi after taking necessary approval of Addl. Director of Income Tax (Investigation) Unit-III, New Delhi and the Inspector of the Unit was deputed to the personally serve these summons to the Principle Officer of the aforesaid companies after conforming the antecedents w.r.t. the identity of the companies. He was also directed to submit a compliance report in respect of each company as to whether the company exits at the given address and who are the directors of the company with a brief note on the activity conducted by the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 20-12-2011 filed detailed reply, the relevant paras of the same is reproduced as under:- That you have provided report as received from the Income Tax officer (Inv), Unit-III (1), New Delhi in respect of share application money as received by the assessee from the following nine companies. S.No Name of the Company Address PAN No Amount 1 Acumen Paper Binder Pvt.Ltd. 109,Vakil Chamber, Gali No.1, Shakarpur, Delhi AAACA2172J 2000000 2 Bhagirathi Industries Ltd. 201,Malhotra Complex 2nd Floor, Chawla Gali, Shakarpur,Delhi AAACB2254N 2000000 3 Happening Motors Pvt.Ltd. S-205,Kanishka Complex, Saini Enclave Delhi AAACH4607F 2000000 4 Starvision Media Pvt.Ltd. D-25, Ist Floor ,Laxmi Nagar, Delhi AAKCS8003N 2000000 5 Startrans Logistics Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the above, the amount of share application money as received from Bhagirathi Industries Limited and Sayam Shares Securities P Limited of ₹ 20,00,000/- each totaling to ₹ 40,00,000/- requires to be accepted as genuine. That as regard share application money as received from all other seven companies are concerned. The authorized officer on the basis of report of his inspector reached to a conclusion that these companies does not found exist on the given addresses. That on perusal of the inspector report, it is noticed that the said summon was not affixed on the given premises. Signature and address of two independent witnesses as required was also not obtained. The letter as issued U/s 133(6) of the Income Tax Act was duly served on these shareholders. Replies from these shareholders have also been received directly in your office. Thus, probably at the time of visit of the inspector, may be the authorized person of these companies may not found available on the given address. That as far as Sign Board is concerned. In this respect it is clarified that most of these companies being the finance and investment companies deal with the close and associate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. This company has shown net profit ₹ 3,625/- and having share capital of ₹ 40,79,290/-. On the basis of the balance sheet and profitability creditworthiness of the company is not proved and moreover, investment is not appearing in the name of M/s Swift Intermedia Convergence Ltd. of Indore in the balance sheet. Report from Addl. DIT, Mumbai was received on 21.10.2011, copy of the report is provided to the assessee. Relevant portion of the report is reproduced as under:- Investigation wing, Mumbai has recorded the statement of Mr. Mukesh Choksi working in the capacity of director M/s Mahasagar Securities Pvt. Ltd. and other companies at Block No. H, Shri Sadashiv CHS, 6th Road, Santa Cruz (East), Mumbai during the course of search u/s 132 of the Income tax Act, 1961 on 25.11.2009. In case of seven companies, Mumbai investigation wing submitted its report wherein reference of the survey and search action on the premises of Shri Kamal Kishore Rathi and Shri Mukesh Choksi was given and stated that both these persons have accepted to involved in providing accommodation entries. The said report was provided to the assessee for his comments. The assessee in reply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making any addition in respect of share application money as received from first five companies. That the DDIT in her report referred the search seizure action U/s 132 of the Income Tax Act in respect of last two companies. That statement of Shri Mukesh Choksi was recorded on 25-11-2009 wherein he has mainly accepted his involvement in the arrangement of Long term/ short term capital gain on sale of shares. That statement of Jayesh Krishnaraj Sampat was also recorded on 14-05-2010 wherein he has explained that he has managed certain affairs.That in reply to the question No 11, he has explained the mode of investment in the share application money for short period of 6 months and again buy back at much lower rate. That in the present case in hand, the share capital as issued still hold by these share holders. The assessee had also declared dividend which was also credited in the bank account of these share holders. Hence, the modus operandi as explained by Shri Sampat not applicable in the case of the assessee company. That in the case of investment in the share application money by M/s Buniyad Chemicals Limited and M/s Mihir Agencies P Limited, the assessee had obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roda is assessed with the ITO, Wd 1(1), Ahmedabad, whereas Acil Cotton Industries Pvt. Ltd., B7/404, Natraj Township Part-2, Parsuram Nagar Society, Siyaganj, baroda is assessed with the DCIT, Surendranagar. However, on the basis of the territorial, which rested with this office, summon notices dated 19.10.2011 were issued by this office in the case of' Alpha Graphic India Ltd, Baroda and Acil Cotton Industries Pvt. Ltd. Baroda, calling for relevant information and to appear before this office on 25.10.2011. Nobody attended in response to the above mentioned summons. Separate inquiry was conducted through inspector of this office, wherein it is stated that the offices remain closed. One of' the offices has already been rented. The mobile number of the accountant of the company was gathered and he was asked to produced the directors of the company in the office of the ADIT (Inv), Baroda, alongwith copy of balance sheet, P L account, directors report and share transaction details. However, no one appeared and one of the staff related to the accountant submitted the copy of Annual Report of these companies. On perusal of the Annual Report for F. Y. 2008-09 it is evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That as regard investment made by M/s Alpha Graphics India Limited is concerned. On perusal of the Balance sheet as on 31.03.2009 as attached with the report as received from the ADIT (Inv), Baroda, the name of the assessee company was duly reflected in the list of investment. The said company has invested , an amount of ₹ 500000/- in the share application money/ share capital of the assessee company. That in view of the, the amount of share application money as received of ₹ 15,00,000/- from these two companies Assessee vide his letter dated 20-12-2011 further submitted as under:- That in the present case, the assessee had filed complete details as to justify the geniuneness of the share application money. That in respect of the shsraholders assessee had filed sufficient documents in form of share application money, bank statement and Affidavit, Memorandum, Article of Association, ROC details and PAN details as to justify the identity, geniuneness and creditworthiness. Hence the entire amount of share application money is treated as explained. The amount of Share capital as received by the assessee is legal and proper. For this reason, revised return was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted the same without giving any plausible reasons. The persons who have provided bogus capital introduction to the assessee themselves have admitted before Investigation Unit, that they used to provide accommodation entries by opening various bank accounts receiving cash from the parties, genuineness of transaction could not claimed to be proved. Only furnishing informations i.e. copy of Return, Roc detail, bank a/c etc. could not make the transaction genuine. Similarly when companies did not find at the given address after making independent enquiry by the department, their identity could not be treated as established. Hence, considering the entire facts I treat the introduction of share capital of ₹ 4,79,00,000/- as unexplained u/s 68 of the I.T. Act. Thus, considering the all the facts discussed above, I hold share application money of ₹ 4,79,00,000/- claimed to have been received in the name of concern(s) appearing at serial no. 1 to 28 as unexplained and hence the same is added to the total income of the assessee u/s 68 of the I.T. Act. I am satisfied that the assessee had concealed the correct particulars of its income and furnished inaccurate particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and the submission made by the appellant correctly. I find that the appellant company has made a detailed submission with documents and also submission in the form of statutory compliance made by either the appellant or such share holders, which clearly suggests that these companies who made the investment in the appellant company in the form of share application money were in existence. Such documents and details, which were filed by the appellant company before the A.O. and also were subsequently filed in the appellant proceedings established the appellant contention of proving the identity of such share applicant i.e. Share Application form, Copy of board resolution as passed by the share holder company, Name and address change certificate from ROC if any (in case of share applicant), Master details of ROC, PAN detail, Copy of Bank Statement of the shareholder, Copy of Memorandum and Article of Association, Balance Sheet Copy of affidavit as signed by the director of the share holder company. Further to that, I am also not in agreement with A.O. s this proposition that the appellant was bound by its declaration as it was made in the survey proceedings. My this view gets sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney holder CA Shri Rajiv Bansal of appellant personally attended the office of the A.O. and filed complete set of paper to justify the identity of share holders and also genuineness of the transaction. Even the appellant s A/R also submitted that the A.O. received reply from such companies in respect to notice issued u/s 133(6) of the Act, which she did not took note of the same of such compliances, which clearly establishes the identity of such parties. Even I find that the report from investigation wing, Baroda was also not speaking the half truth as the A.O. concluded such share application unexplained merely on this presumption that the name of the appellant company was not appearing in the balance sheet of such share applicant whereas the appellant s claim that the appellant s name was appearing in the schedule of balance sheet and also in another company the consolidated amount were shown in the balance sheet and if the company not shown the name of the appellant in the balance sheet it will not amount to unexplained when the existence of the said company is proven is assessed to tax on specific PAN and also making investment in the form of share application with the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30 ITR 181 and also followed by the Hon ble Jurisdictional ITAT and Hon ble jurisdictional High Court in the case of STL Extrusions P Limited [333 ITR 269]. Even I find that when the appellant had received the amount of share application money through account payee cheques, specific PAN No. of the investing company has also been provided by the appellant with other documents as discussed in aforesaid para of this order. The identity of the share holders, genuineness of the transactions and creditworthiness of the shareholders stand proved. My view further supported by the decision of the Hon ble Delhi High Court in the case of Oasis Hospitalities (P) Ltd [Supra], Rock Fort Metal Mineral [Supra], Winstral Petrochemicals (P) Ltd [Supra], Gangour Investment Ltd [Supra] and Tulip Finance Ltd [Supra]. Even I find that the AO was not correct in doubting the identity of the share holders company merely for the reason that letter as issued u/s 133(6) of the Income Tax Act was returned unserved and inspector in his report in the commission proceeding not found proper addresses of the share holders companies. The appellant has provided the specific PA No of the share applicant and the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted [Supra] support the case of the appellant. In that decision Hon ble Tribunal has held to prove the identity of the share applicant company which in the present appeal in hand has been proved by the appellant company with the ample documents, dividend and Bonus as declared in periodical intervals. Thus, I find the decision of the Hon ble Jurisdictional ITAT in the case of M/s Agrawal Coal Corporation Limited on the contrary support the case of the appellant. The order decisions as relied by the AO in her order are on general principle and clearly distinguishable on the facts of the present case. I also find that the appellant had filed ample documents as to justify the identity of the share holders, genuineness of the transaction and creditworthiness of the share holders which includes Bank account, PA No , Share application form and affidavit of the share applicant. The appellant has properly discharged onus lying on it. My view find support from the decisions of the Hon ble Apex Court in the case of Lovely Exports P Limited [Supra], decision of the Hon ble Jurisdictional High Court in the case of STL Extrusions P Limited [Supra] and Hon ble ITAT, Indore Bench in the case of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, in case of some of the companies, the informationthey have accepted that they have provided entry, therefore, Assessing Officer was of the view that assessee has proved genuineness and creditworthiness of share premium received by the assessee co. But Assessing Officer was of the view that person who has provided bogus capital introduced to the assessee has admitted that they used to provide accommodation entry by operative various accounts and receiving cash from the parties and Assessing Officer was of the view that copy of return roc and bank account cannot make transaction genuine. The ld. CIT(A) has,without any justification,ignored the decision in the case of M/s. Agrawal Coal Corporation. The ld. DR submitted that the ld. CIT(A) has wrongly relied upon the decision of Delhi High Court in the case of Oasis Hospitality and judgment of Lovely Export is wrongly relied on by the ld. CIT(A) and order of the Assessing Officer may be upheld. 1.6 The AR of the assessee has filed the written submission, which reads as under: The assessee in the present case assessee company had filed its return of total income for the A.Y. 2009-10 on 30-09-2009 declaring total income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of certain decisions , though not applicable on the facts of the case of the assessee,has added the additional income merely on the basis of statement as recorded during the course of survey. The facts of the decisions as relied by the assessing officer were on different facts the same are discussed hereunder:- Dr S C Gupta vs CIT reported in 248 ITR 782 [All] The assessee in that decision has not explained the reason for denial of the additional income declared during the course of survey and put extra burden on the AO. However, in the present case under appeal, the assessee has properly explained the source of share application money as received and credited in its books of account. Hence, the said decision is not applicable on the facts of the present case.The assessee has retracted the said declaration immediately by not filing the revised return as committed during the course of survey. That all other decisions as relied by the AO was with reference to the statement as recorded during the course of search and not with reference to the survey as executed u/s 133A of the Income Tax Act. The reference of all the decisions as referred are as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions as referred by the assessing officer. The decisions as relied upon by the assessee are as under:- [i] ITO vs Vijay Kumar Kesar reported in 327 ITR 497. [ii] M Narayanan Bros vs ACIT reported in 339 ITR 192. [iii] M/s Rank Shipping Agency P Limited [Appeal No ITA No 5946/ Mum/ 2008 dt 21-11-2012]. [iv] ACIT vs Lakshmi Float Glass Limited [ITA No 535/ Del/ 2009 dt 31.03.2005] [v] Paul Mathews Sons vs CIT as reported in 263 ITR 101. That from the judicial pronouncements reported at Paul Mathews Sons 263 ITR 10 1 (Ker); Ashok Manilal Thakkar 279 ITR (AT) 143 (Ahm), Mukund V. Kapadia 82 ITD 489 (Mum.), Hyundai Engineering Co. Ltd ITA no. 3006/D/2003' (Del) it is clear that Income tax authorities have no jurisdiction to record sworn statement u/s, 133A of the Act during the course of survey. Since the authority had no jurisdiction to administer oath and record swam statement so statement u/s, 133A(3) in the absence of any supporting material has no evidentiary value and could be said to be useful or relevant to assessment proceedings only when there was material on record to prove the basis on which disclosure was stated to be made. Thus, it could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten submission filed before the Hon ble Bench from time to time and on the basis of decisions as relied, it is submitted that the assessing officer was not justified in adding the amount of share application money to the income of the assessee merely on the basis of statement of as recorded during the course of survey even when the assessee has properly discharged onus lying on it by furnishing the ample documents as to justify the identity, genuineness and creditworthiness of the share holders. That it is settled position of law, in the case of share application money/ share capital, the assessee has to prove the identity of the share holders only. The decisions as referred in the assessment order are not applicable on the facts of the present case. The decision of the Hon ble Chattisgarh High Court in the case of ITO vs Vijay Kumar Kesar reported in 327 ITR 497 has held that confession made by the assessee during survey proceedings is not conclusive and it is open to the assessee to establish that the same was not true and correct by filing the cogent evidence. Hon ble High Court also referred the decision as relied by the assessing officer in the case of Dr S C Gupta vs CIT. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Room No.1, Near Swdeshi Market Kalba Devi Mumbai AAACE8119M 15,00,000 8. Pursuit Securities Limited 312,Kalbadevi Road, IIIrd Floor,Room No.1, Near Swdeshi Market Kalba Devi Mumbai AAACP3800E 22,00,000 9. Tribhuvan Housing Limited 23,Jalaram Society Chamunda Circle Boriwali (W) Mumbai -40001 AAACT7299M 10,00,000 10. Millenium Cybertech limited 38,Ganga Viahar,3rd Floor Rokandia Lane Borivalie,(W) Mumabai-400092 AABCMB8712D 10,00,000 11. Winfotech Systems P Limited 312,Kalbadevi Road, IIIrd Floor,Room No.1, Near Swdeshi Market Kalba Devi Mumbai AAACW3541K 30,00,000 12. Acumen Paper Binder Pvt.Ltd. 109,Vakil Chamber, Gali No.1, Shakarpur, Delhi AAACA2172J 20,00,000 13. Bhagirathi Industries Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000 25. Kinescope India Pvt limited Shop No.220, Labh Chambers, Station Road Aurangabad M.S. AABCK0527E 15,00,000 26 Volplast Limited 5/856,Kamla Apt. Second Floor , Ghasheri Surat-395009 AABCV8410D 23,00,000 27 Galaxy Devcom Pvt Limited Ganesh Bhawan, Chwadi Bazaar Gwalior AAECM8933D 25,00,000 28 Nimbus Stock Invest Limited ( Formally known as Rolledgold Industries Limited 207,Akansha Trade Centre ,156 Kanchanbagh Indore AADCR4275J 15,00,000 47900000 The assessing officer on Page Nos 11 and 12 of the assessment order has discussed about the factual part of all the companies from whom share application money were actually received by the assessee. The assessing officer on Page No 11 also list out the Name of ten companies to whom notice U/s 133(6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.No Facts of the case not in dispute by the AO 1 The amount of share application money were received through an account payee cheques 2 PAN No in respect of all the share holders have been provided 3 Copy of bank statement of all the shareholders have been provided 4 Copy of balance sheet of the share holders company also been provided as far as possible 5 Copy of affidavit as signed by the director has also been provided 6 Memorandum and Article of Association has also been provided 7 Detail as furnished by the assessee was found correct and proper. The documents as filed by the assessee not found wrong or fabricated. 8 The share of the assessee company still lying in possession of these share holder 9 Dividend was declared and duly credited in the bank account of the share holders and debited in the bank account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Shri Jayesh Sampat as recorded on 14-05-2010 were referred in the report as submitted by the AO. That in all their statement name of the assessee company was not referred. In the case of the assessee, affidavit from all the above companies were taken even after the date of statement as referred by the Investigation wing:- S.No Name of the Companies Name of the Director Date of Affidavit 1 Winfotech Systems P Limited Manish Rathi 24-08-2011 2 Luxer Properties P Limited Manish Rathi 24-08-2011 3 Suresh Rathod Consultants P Limited Manish Rathi 24-08-2011 4 Elderadd Properties P Limited Manish Rathi 24-08-2011 5 Ecro Artisons P Limited Manish Rathi 24-08-2011 6 Mihir Agencies P Limited Jayesh Sampat 16-08-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shree Balaji Sainath Builders Pvt.Ltd. AAJCS7086E 1500000 8 Surbhi Networking Broadcasting Pvt.Ltd.(Formally Known as R.J. Fabtex Pvt.Ltd.) AADCR3947D 4000000 9 Uniword Bartercard Pvt.Ltd. AAACU9640D 900000 18400000 That in case of above companies in most of the cases letter as issued U/s 133(6) of the Income Tax Act was served to these companies, replies were also received by the Assessing officer directly either in receipt of the letter u/s 133(6) of the Income Tax Act or on request of the assessee. However, the assessing officer issued commission to the Investigation wing, Delhi. That inspector of wing visited to serve summon to these companies, summon to Bhagirathi Industries Limited and Sayam Shares Securities P Limited were served and statement of directors of both the companies were recorded. However, copy of the said statement was not provided to the assessee. It was informed by the directors of these compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 M/s Uniword Barter Card P Limited 2 M/s Star vision Media P Limited The assessee has also requested to the Assessing officer to provide copy of reply as directly received from all the share applicant but the same was not provided. It was intimated by the most of the shareholders that they have directly file reply to the assessing officer. That CA Shri Rajiv Bansal from delhi appeared on behalf of these companies personally before the assessing officer. He has submitted entire papers as to justify theinvestment made by these companies in the share application money/ share capital of the assessee company. Documents as filed by Shri Rajiv Bansal are enclosed for your kind reference. That authority letter in favour of Shri Bansal as executed on stamp paper is also enclosed with these documents. That from the personal presence of CA Shri Rajiv Bansal, the identity of the share holder company stand proved. The assessing officer added an amount of ₹ 15,00,000/- to the income of the assessee in respect of the following two companies on the basis of report as received from the Investigation wing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,Kalbadevi Road, IIIrd Floor,Room No.1, Near Swdeshi Market Kalba Devi Mumbai AAACP3800E 22,00,000 3 Tribhuvan Housing Limited 23,Jalaram Society Chamunda Circle Boriwali (W) Mumbai 40001 AAACT7299M 10,00,000 4 Millenium Cybertech limited 38,Ganga Viahar,3rd Floor Rokandia Lane Borivalie,(W) Mumabai-400092 AABCMB8712D 10,00,000 5 Mangal Murti Infrareal P Limited 241,Apollo Tower, M.G.Road Indore AAACC6705H 10,00,000 6 Naman Equipments and Constructions (India ) Pvt Limited Formarly Known as Housing Finance Limited 115, Diamond Trade Centre, New Palasia Indore AABCM1733A 5,00,000 7 Kinescope India Pvt limited Shop No.220, Labh Chambers, Station Road Aurangabad M.S. AABCK0527E 15,00,000 8 Volplast Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the judgement of Hon ble MP High Court in the case of Rathi Finlease Ltd. reported in 215 CTR 429 (MP). That the above order of ITAT Indore bench has also been confirmed by the Hon ble M.P. High Court in the case of CIT V/s STL Extrusion (P) Ltd reported in 53 DTR 97(2011). That ITAT, Indore Bench in the case of M/s Rajshree Finsec P Ltd [Appeal No 545/ Ind/2010 dt 06-02-2012 for the Asst Year 2007-08 ]. That ITAT, Indore Bench, Indore vide its order dt 28-03-2012 in the case of M/s Mittal Appliances Limited for the Asst Year 2004-05. That Jodhpur Bench of ITAT in the case of ACIT vs M/s Supertech Diamond Tools P Ltd [ Appeal No ITA No 211/ Jodh/ 2009 dt 19-01-2012 for the Asst Year 2004-05 ]. That ITAT Delhi Bench in the case of M/s Excellance Town Planner P Limited [ Appeal No ITA No 871/Del/ 2010 dt 25-05-2012 for the Asst Year 2003-04]. That GANGESHWARI METAL PVT LTD [ Appeal No ITA No 597/2012]. That CIT Vs. Oasis Hospitalities (P) Ltd reported in 333 ITR 119 (2011). COUNTER SUBMISSION ON THE ARGUMENTS OF THE LD CIT DR The Ld CIT DR during the course of hearing before the Hon ble Bench argued that share premium of ₹ 90/- Per share was rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltants P Limited [ Appeal No ITA 467/ 2014 dt 16-04-2015 ] has held. In the case of ACIT vs M/s Krishna Sheet Processors P limited [ Appeal No ITA No 546/ Mum/ 2013 dt 30-06-2015] the amount of share premium of ₹ 1000/- was duly accepted as genuine. That in view of the above, once the assessee has established the identity of the share holder in that case the amount of share premium is not an issue. If the assessing officer has not satisfied with the explanation of the share applicant, necessary addition is to be made in the hand of the share applicant but not in the case of the assessee. That as regard the blank transfer deed duly signed by the share applicant as found during the course of survey. The assessing officer himself after being satisfied not taking any cognizance for the same. Since, by the time of assessment proceeding these transfer deed was not used by the assessee and therefore after the date of Annual General Meeting , old date transfer deed has no legal value. GROUND No 2 of Department s Appeal The department in this ground of appeal has challenged the Rule 46A of the Income Tax Rules. That during the course of hearing also they have fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Devi Mumbai AAACP3800E 22,00,000 9. Tribhuvan Housing Limited 23,Jalaram Society Chamunda Circle Boriwali (W) Mumbai -40001 AAACT7299M 10,00,000 10. Millenium Cybertech limited 38,Ganga Viahar,3rd Floor Rokandia Lane Borivalie,(W) Mumabai-400092 AABCMB8712D 10,00,000 11. Winfotech Systems P Limited 312,Kalbadevi Road, IIIrd Floor,Room No.1, Near Swdeshi Market Kalba Devi Mumbai AAACW3541K 30,00,000 12. Acumen Paper Binder Pvt.Ltd. 109,Vakil Chamber, Gali No.1, Shakarpur, Delhi AAACA2172J 20,00,000 13. Bhagirathi Industries Ltd. 201,Malhotra Complex 2nd Floor, Chawla Gali, Shakarpur,Delhi AAACB2254N 20,00,000 14. Happening Motors Pvt.Ltd. S-205,Kanishka Complex, Saini Enclave Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited 5/856,Kamla Apt. Second Floor , Ghasheri Surat-395009 AABCV8410D 23,00,000 27 Galaxy Devcom Pvt Limited Ganesh Bhawan, Chwadi Bazaar Gwalior AAECM8933D 25,00,000 28 Nimbus Stock Invest Limited (Formally known as Rolledgold Industries Limited 207,Akansha Trade Centre ,156 Kanchanbagh Indore AADCR4275J 15,00,000 47900000 The Assessing Officerwanted to verify the share premium amount received by the assessee are by way of share premium earned from the above companies. The assessee co. had issued 47900 equity shares of 10 each at premium of 990 aggregating to 1000 per share, thus, the assessee has received the share capital and share premium at ₹ 4.79 crores. The Assessing Officer wanted to verify the identity, genuineness and creditworthiness of the creditors u/s 68 of the I.T. Act. The assessee has filed the return of income prior to date of survey and wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ITR 101 has held in para 11 has held:- 11.....Section 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133Ahowever, enables the IT authority only to record any statement of any person which may be useful, but does not authorize for taking any sworn in statement. On the other hand, we find that such a power to examine a person on oath is specifically conferred on the authorised officer only under Section 132(4) of the IT Act in the course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas Section 133A does not empower any ITO to examine any person on oath. Thus, in contra-distinction to the power under Section 133A, Section 132(4)of the IT Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement recorded under Section 133A of the IT Act is not given any evidentiary value obviously for the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Kerala High Court, the survey party is entitled to record the statement of any person, may be useful for relevant to any proceedings under the Act. We also find support from the Hon ble Chhatisgarh High Court wherein it is held that assessee during the survey proceedings, any confession made by him is not conclusive and it is open the assessee to establish that same was not true and correct by filing cogent evidence. We find that in this case, the assessee has given the statement only but after the statement, assessee has retracted from the statement, therefore, he has not filed the revised return, therefore, we are of the view that the assessee is justified in not filing revised return and we are deciding the appeal on merit. The Ld CIT DR during the course of hearing before the Hon ble bench placed reliance on the statement of the assessee as recorded during the course of assessment and also referred the following decisions:- S.No Reference of Decision Citation of decision 1 Zikrullah Chaudhary ITA No 669/PN/2012 dt 18-02-2014 2 Mahe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee merely on the basis of statement of as recorded during the course of survey even when the assessee has properly discharged onus lying on it by furnishing the ample documents as to justify the identity, genuineness and creditworthiness of the share holders. That it is settled position of law, in the case of share application money/ share capital, the assessee has to prove the identity of the share holders only. The decisions as referred in the assessment order are not applicable on the facts of the present case. The decision of the Hon ble Chattisgarh High Court in the case of ITO vs Vijay Kumar Kesar reported in 327 ITR 497 has held that confession made by the assessee during survey proceedings is not conclusive and it is open to the assessee to establish that the same was not true and correct by filing the cogent evidence. Hon ble High Court also referred the decision as relied by the assessing officer in the case of Dr S C Gupta vs CIT. Accordingly, addition made on the basis of statement of director of the assessee company as recorded during the course of survey is not binding and cannot be sole basis of addition to the income of the assessee. On merit, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of balance sheet of the share holders company also been provided as far as possible 5 Copy of affidavit as signed by the director has also been provided 6 Memorandum and Article of Association has also been provided 7 Detail as furnished by the assessee was found correct and proper. The documents as filed by the assessee not found wrong or fabricated. 8 The share of the assessee company still lying in possession of these share holder 9 Dividend was declared and duly credited in the bank account of the share holders and debited in the bank account of the assessee company 10 1(One) Bonus shares were allotted to the share holders having 10( Ten) shares of the assessee company The assessing officer in the case of following seven companies, the amount of share application money was added to the income of the assessee based on the report of the Investigation wing of the Mumbai:- S.No Name of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Luxer Properties P Limited Manish Rathi 24-08-2011 3 Suresh Rathod Consultants P Limited Manish Rathi 24-08-2011 4 Elderadd Properties P Limited Manish Rathi 24-08-2011 5 Ecro Artisons P Limited Manish Rathi 24-08-2011 6 Mihir Agencies P Limited Jayesh Sampat 16-08-2011 7 Buniyad Chemical Limited Jayesh Sampat 16-08-2011 In view of the above, the addition of ₹ 13500000/- made to the income of the assessee in respect of seven companies of Mumbai without making any independent inquiry was wrong, therefore, ld. CIT(A) has deleted the addition. The assessing officer has added an amount of ₹ 18400000/- to the income of the assessee in respect of amount received from the following companies:- S.No Name of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. The assessee in its reply as reproduced on inner Page No 18of the assessment order in Para 2.1.1 has stated that director of M/s Bhagirathi Industries Limited and M/s Sayam Shares Securites P Limited were appeared to which the assessing officer himself has not disputed. The inspector in his report has submitted that other seven companies werenot found on the addresses as provided by the assessee. The said factual finding of the inspector was not correct. That when letter was issued by the assessing officer U/s 133(6) of the Income Tax Act, the said letter was duly served but inspector has submitted his negative report which is contrary to the facts of the present case. However, the assessing officer acted on the report as submitted by the Investigation wing of the delhi and added the entire amount of share capital as received from all the nine companies of delhi as non- genuine. On perusal of the inspector report, it is noticed that the said summon was not affixed on the given premises. Signature and address of two independent witnesses as required was also not obtained. The letter as issued U/s 133(6) of the Income Tax Act was duly served on these shareholders. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Vadodara:- S.No Name of the share holder Amount (Rs ) 1 ACIL Cotton Industries P Ltd [ Formerly known as Adeshwar Cotton Industries Limited ] 10,00,000 2 Alpha Graphic India Limited 5,00,000 15,00,000 The letter as issued U/s 133(6) of the Income Tax Act was duly served upon the share applicant and reply for the same was also filed by the investor companies. That in commission proceeding balance sheet and assessment details were obtained and provided by the investigation wing in its report. Hence, identity of both these companies stand proved. That in the report as received from the Investigation wing it was pointed out that the investment made in the assessee company was not separately reflected in the Balance Sheet. However, on perusal of the Audited balance sheet it was noticed that the name of the assessee company was separately reflected in the Audited balance sheet of M/s Alpha Graphic India Limited. Hence, the very basis of addition as proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 5/856,Kamla Apt. Second Floor , Ghasheri Surat-395009 AABCV8410D 23,00,000 9 Galaxy Devcom Pvt Limited Ganesh Bhawan, Chwadi Bazaar Gwalior AAECM8933D 25,00,000 10 Nimbus Stock Invest Limited ( Formally known as Rolledgold Industries Limited 207,Akansha Trade Centre ,156 Kanchanbagh Indore AADCR4275J 15,00,000 1,45,00,000 The assessee during the course of assessment proceeding filed complete detail as to justify the genuineness of the share application received by it by filing ample documents. The assessing officer simply rejected the submission of the assessee and added the entire amount of share application money to the income of the assessee which in any case was not correct. Hon ble Apex Court in the case of Lovely exports P Limited as reported in 11 ITJ 357 has held that:- 2. Can the amount of share money be regarded as undisclosed income under s. 68 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tious persons or that any part ofthe share capital represented company's own income from undisclosed sources. The similar view hasbeen taken by the other High Courts. As the Apex Court has considered the law in Lovely Exports (supra) and in view of law laid downby the Apex Court, we find that the substantial questions framed in these appeals do not arise forour consideration. Accordingly, all these appeals are dismissed with no order as to costs. Hon ble Delhi High Court vide order dt 21-01-2013 in the case of GANGESHWARI METAL PVT LTD [ Appeal No ITA No 597/2012] has discussed the similar issue in detail and after considering the decision in the case of Nova Promoters P Limited has held that :- Mr. Sabharwal, appearing on behalf of the revenue/ appellant sought to place reliance on a Division Bench decision of this Court in CIT v. Nova Promoters and Finlease (P) Ltd.: (2012) 342 ITR 169 (Del.). However, on going through the said decision in Nova Promoters and Finlease (P) Ltd. (supra) we find that the facts are clearly distinguishable. In fact, in Nova Promoters and Finlease (P) Ltd. (supra) itself this Court has observed, in the context of Lovely Exports (P) Ltd. (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall under this category and it would be a travesty of truth and justice to express a view to the contrary. (emphasis supplied) As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer sits back with folded hands till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer 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 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 allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) credit worthiness of shareholders; (a) The identity of the shareholder can be proved by either (if individual) producing him before the AO or by way of documents, registered address, PAN etc; (b) The genuineness of the transaction can be shown from the fact that the money has been received from the shareholder. If the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc; (c) The creditworthiness or financial strength of the creditor / subscriber can be proved by producing the bank statement of the creditors / subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. The AO can discredit the documents produced by the assessee with cogent reasons and materials but not on the realm of suspicion; (ii) If the assessee has produced documents like PAN Card, bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted on 31.12.2007, the investigation report which was specifically called from the concerned department in Kolkata was available but not discussed by the AO. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. While arriving at the conclusion that he did, the AO did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee s account to the share applicants account. As held concurrently by the CIT (Appeals) and the ITAT, these conclusions were clearly baseless and false. This Court is constrained to observe that the AO utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. We place these observations on the record and direct a copy of the judgment to be furnished to the concerned income tax au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee for obtaining the Hawala entry in dispute, the ld. CIT(A) observed that the Assessing Officer was not able to brought anything on record that it was assessee's own money which was rooted in the form of share application money and has rightly deleted the same. In the case of CIT vs Korlay Trading Co Limited as reported in 232 ITR 820, Hon ble Calcutta High Court observed that in case of unsecured loan mere providing of PA No was not sufficient. In that case the assessee utterly failed to furnish even confirmation letter.In the present appeal, the matter in dispute is not unsecured loan but share capital and it was categorically held that the assessee need to prove the identity of the share holders only. The assessee in present case not only filed confirmation letter but ample documents as to discharged the onus lying on the assessee. Hence, decision of the Hon ble Calcutta High court are distinguishable on the fact of the present case. In case of N Tarika Property Investment (P) Ltd , Hon ble Delhi High court as reported in 40 taxmann.com 525 and by the Hon ble Apex court as reported in 51 taxmann.com 387 has observed that the bank account as provided was forged and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer.In the present appeal in hand, the assessee company has explained the correct nature of transactions though the same was not accepted by the Assessing officer but by the Ld CIT[A]. Since, the assessee company has filed ample documents to support its claim. Hence, rather decision of the Hon ble Apex Court support the case of the assessee company. In the case of MAF Academy (P) Limited as reported in 42 taxmann.com 377, Hon ble Delhi High Court on the basis of its finding in the case of N R Portfolio [P] Limited [ Supra] reached to a conclusion that the assessee has failed to provide the identity, genuineness and creditworthiness of the share application money.In the present case as stated the assessee has extend its full co-operation and also filed ample documents as to prove the ingredients of provision of section 68 of the Act. The share of the assessee company still in possession of the share holders and dividend and bonus was declared by the assessee company. Hence, fact of the case of MAF Academy (P) Limited was distinguishable with the fact of the present case of the assessee. In the case of Subhlakshmi Vanijya ( P) Ltd as reported in 60 taxmann.com 60 , Hon ble Kol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Gangeshwari Metal P. Ltd. Dated 21.1.2013 and also after taking note of a decision of Apex Court in the case of Kishan Chand Chellaram vs. CIT, 125 ITR 713. Therefore, ld. CIT(A) has deleted the addition and our interference is not required. We also get support from the decision of ITAT, Indore Bench in the case of STL Extrusion (P) Limited vide order dated 10.05.2010 being ITA no.(SS) 259, 260 /Ind/2008 after considering the judgement of Hon ble MP High Court in the case of Rathi Finlease Ltd. reported in 215 CTR 429 (MP) held as under:- Page 7 In the present appeal, since the assessee has discharged its onus by proving the identity of subscribers and even otherwise had any suspicion still remained in his mind, nothing prevented him to initiate action as per the provisions of the Act. The existence of subscriber to share application is not in doubt as the assessee duly furnished their names, age, address, date of filing the application, number of shares for which respective applications were made, amount given and the source of income of the applicant. In view of these facts, we are of the considered opinion that there is no justification for making the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing Finance Ltd. (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. 17. As the Apex Court has considered the law in Lovely Exports (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs. Hon ble Apex Court in the case of Lovely exports P Limited as reported in 11 ITJ 357 has held that:- 2. Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961? We find no merit in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is by the Revenue challenging the order of learned Commissioner of Income Tax(Appeals)-II, Indore, dated 31.5.2013. 3.2 Following grounds have been raised by the Revenue: Ld. CIT(A) has erred in deleting the additions of ₹ 1,75,00,000/- and ₹ 2,00,00,000/- totaling to ₹ 3,75,00,000/- made by the Ld. A.O. u/s 68 on account of share application money received by the assessee company. 3.3 The short facts of the case are as under: The assessee company is a limited company engaged in the business of Manufacturing of HDPE/PP Woven Sacks/Fabric. It has filed its return of total income for the year under consideration on 29.09.2009 declaring total income at ₹ 37,23,060/- u/s 28 to 44 D of the Income Tax Act and ₹ 1,90,60,610/- u/s 115JB of the Income Tax Act along with its Audited accounts. The case of the Assessee company was selected for scrutiny and assessment order U/s 143(3) was passed assessing total Income of ₹ 4,14,23,060/-. The assessing officer while framing the assessment order had added the following amount to the Total income of the appellant:- S.No Nature of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x and also filed their income tax return regularly. Copies of income tax return were filed before the AO and also in the appellate proceeding. No adverse finding about the income and investment was recorded by the assessing officer where the share holders are regularly assessed. The AO also failed to collect any information from his counterpart about the genuineness of the investment made by these share holders. The AO also failed to point out cash deposited if any in the bank account of any of these share holders companies directly or failed to refer to any other account in which cash was deposited by these companies. The appellant during the course of assessment proceeding provided complete details which also includes share application money form, confirmation, affidavit, bank statement, income tax return and audited balance sheet, memorandum and article of association etc. The AO could have forwarded these information to the assessing officer where the share holders company are regularly assessed to tax and obtained factual report where the investment was shown by these companies in the name of the appellant company were reflected in their books of account or not but the AO fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited 333 ITR 19(Del) is also squarely applicable on the facts of the present case because in that case directors of said companies were not produced^ and there was adverse finding regarding such share holders by investigation wing, yet the addition of share application could not be sustained as the Hon'ble High Court held that primary onus was discharged by assessee by producing PAN, bank account details copies of income tax returns of share applicants etc. Hon'ble Gujarat High court in the case of Ranchod Jivabhai Kanhava reported on 21 taxmann.com 159 also defines the procedures for making addition u/s 68 wherein it was categorically mentioned by the Hon'ble Court that the assessing officer of the appellant company must refer the matter to the assessing officer of the share holders company and on receipt of the negative finding the same was. made available to the assessee for his comments and proceed accordingly but in the present case, the AO utterly failed to examine the issue in right prospect and merely on account of non- service of the letter u/s 133(6) of the Act, taken a negative note which in my considered opinion was not justifiable. I am therefore of the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commission. He simply relied on the statement previously recorded which in my view is not the correct approach. It is also settled position of law that ho statement can be used against the assessee;-until and unless an opportunity for cross examination was allowed. Accordingly, statements of Shri Mukesh Choksi and Shfi Jayesh Sampat as recorded behind the back of the appellant cannot be validly used against appellant as the principal of natural justice is not satisfied. For this proposition reliance is placed on the decision of apex court in case of Kishan Chand Chelaram 125 ITR 713 (SC). The; appellant had filed copy of share application form, confirmation letter, copy of bank account of the share holders, memorandum and article of association and Income Tax return. The AO also failed to refer the matter to the assessing officer where such share applicants .are regularly assessed to tax. The Appellant also relied on the decision of the Hon'ble Mumbai Bench in the case of Mrs Rasila N Gada [ Appeal No ITA No 1773/Mum/ 2010 dt 08-08-2012 ], in that case on the basis of statement of Shri Mukesh Choksi, the amount of long term capital gain was assessed as non- genuine and added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of share application money of ₹ 2,00,00,000/- to the income of the appellant. I therefore direct the AO to delete the addition so made to the income of the appellant because without any further examination by AO finding of investigation wing cannot be taken as gospel truth when name of assessee does not appear in statement as held in case of Excellence Town Planning P. Ltd. [appeal no. ITA No. 871/Del/2010 dated 25.02.2012], Oasis Hospitalities P. Ltd. 333 ITR 119 (Del) and Gangeshwari Metal P. Ltd. ITA No. 597/2012 dated 21/01/2013 reported in 84 CCIT 037.The appellant accordingly get relief of ₹ 2,00,00,000/-. 4.2] In ground No 2 of the present appeal, the appellant has challenged the addition of ₹ 2,00,000/- made on account of alleged expenses as incurred for arranging the share capital of ₹ 2,00,00,000/- from seven companies of Shri Mukesri Choksi. The said addition was made by the AO on mere; presumption which in any case is not sustainable, I therefore direct the AO to delete the addition so made to the income of the appellant company. 3.5 The Ld CIT DR during the course of hearing before the Bench argued that share premium of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i] 3.6 The ld. AR has filed written submission which reads as under: As mentioned above that Ld. Assessing officer has added an amount of ₹ 1,75,00,000/- being share application money/ share capital received from persons mentioned in S.No. 1 to S. No. 3 of above table for the reason that Notice issued by him u/s 133 (6) of the Income Tax Act were received unserved.The assessee had came to know that in case of Share Applicants mentioned at S.No. 1 of the Above mentioned table there was typographical error in mentioning the postal address. As regards Parties mentioned in S.No. 2 3 it was submitted to the Ld. A.O. that name of the said companies and postal address both have been changed hence it was requested to the AO. to issue fresh notice u/s 133(6) to the said parties. However, the Ld. A.O. had not issued the same.That Investment of ₹ 50,00,000/- ,₹ 75,00,000/- and ₹ 50,00,000/- were made in the share capital of the assessee company by M/s Doldrum Investment Finance Limited, M/s Sidh Housing Development Co. Ltd. and M/s Gyaneshwar Trading finance Co. Ltd.The assessee during the course of assessment proceeding and also before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare applicants to appear personally before the A.O. and provide all the information as demanded by the Assessing officer who in turn had appointed a C.A. having valid power of attorney on their behalf to appear before A.O. That Shri Sunil Kumawat C.A. , as appointed by all these three companies had personally appeared before the A.O. on behalf of these share Applicants and filed confirmation letters, Photocopies of Income Tax Returns, Balance Sheets and Bank Statements of these companies as demanded in the letter as issued u/s 133(6) of the Income Tax Act. That in the case of the above assessee following facts were duly accepted by the assessing officer and these facts are not in dispute:- S.No Facts of the case not in dispute by the AO 1 The amount of share application money were received through an account payee cheques 2 PAN No in respect of all the shareholders have been provided 3 Copy of bank statement of all the shareholders have been provided 4 Copy of balance sheet of the shareholders com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Alliance Intermediateries Network P. Ltd. AACCA9750E 25,00,000 07. M/s Talent Infoway Ltd. AACCT9444L 25,00,000 Total 2,00,00,000 The assessee during the course of Assessment proceedings had filed complete details in respect of Share Application Money received from all the said parties Including the following:- S.No. Particulars 1 Balance Sheet Profit Loss Account 2 Copy of PAN Card 3 Acknowledgment of Income Tax Return 4 Copy of its Bank Account duly reflecting the Share Application money received from said companies. 5 Copy of Share Application Form along with enclosures like board resolution. Thus the assessee had filed sufficient documents as to justify the identity of the shareholders and genuineness of the share application money r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Applicants companies have stated in the statement recorded that they are involved in providing certain accommodation entries in LTCG and STCG etc. it cannot be presumed they have provided accommodation entry to the appellant also in the form of Share Application Money. The Ld. A.O. had provided Copy of Statement of Shri Kamal Kishore Rathi ,Shri Shri Mukesh Chowksi and Shri Jayesh Sampat to the assessee for its comments.The assessee at the time of assessment proceedings itself has clarified the position that it has not received any Share Application Money from any of the Companies belonging to Shri Kamlal Kishore Rathi. Thus his statement has not relevant for making any addition in its hands.5.7.3] Shri Mukesh Choksi also his statement also has nowhere committed that he has given any accommodation entry to the assessee company. Thus no addition is justifiable on the basis of his statement. Likewise Shri Jayesh Sampat has also in his statements has nowhere mentioned to have entered into any bogus transaction with the assessee. The Assessing officer issued commission in favour of Addl DIT [Investigation] ,Mumbai. The report was also received from the investigation wing Mumbai. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s companies have been filed 5 Memorandum and Article of Association 6 Balance Sheet of all the companies have been filed 7 Income Tax Returns of all the Companies have been filed The assessee has also filed a chart of the share capital as received by the assessee company in the year under consideration with the following information is enclosed:- S.No Particulars 1 PA No of the share applicant 2 No of shares allotted 3 Breakup of share capital and Share premium 4 Folio No of the shareholder 5 Certificate No 6 Distinctive Nos of the share certificate Copy of return of allotment as filed with the registrar of companies wherein the name of all the share applicant had duly been reflected is also enclosed. That Mumbai Bench of ITAT in the case of ACIT vs Krishna Sheet Processors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Limited 24,05,62,507 50,00,000 2 M/s Sidh Housing Development Co Limited 45,83,90,000 75,00,000 [Now known as BhadrawatiIspat Energy Ltd] 3 M/s Gyaneshwar Trading Finance Ltd 48,08,55,000 50,00,000 [Now known as M/s Bhadrawati Steel Urja Ltd] The Assessing Officer observed ath the bank statements of these investors show very petty credit balances in the bank accounts and only at the time of issue of cheque to the assessee the balances get populated by deposit if equal amount. However, the amount as credited in the bank statement is through cheques. The shareholders companies planned their affairs in such a manner that their funds not kept idle in their bank account. Hence, nothing wrong was done in it. That no cash were deposited, pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Gyaneshwar Trading Finance Ltd 46,163 40,921 [Now known as M/s Bhadrawati Steel Urja Ltd] The Assessing Officer observed that the share applicant had invested the amount in hafty premium of ₹ 90/- per share of face value of ₹ 10/- without expecting any return for the same. However, the assessee company is belonging to the Agrawal group of Indore. The total turnover and profit of the assessee company is regularly increasing from year to year. That in case of a Private limited company, the amount of share premium is to be decided mutually by the share applicant and the assessee company depending upon the various factors. In the present case, Shri Purshottm Agrawal, father of one of the director Shri Pravin Agrawal, himself applied shares at a same premium on which these were allotted to the other share applicant. The turnover and the profit of the assessee company for the year ended on 31.03.2007, 31.03.2008 and 31.03.2009 are as under:- S.No Particulars 31.03.2007 31.03.2008 31.03.2009 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen their individual assessments in accordance with law but in no case the same is to be added to the income of the assessee. Apex Court in the case of Lovely exports P Limited as reported in 11 ITJ 357. Jurisdicitonal high Court in the case of CIT vs People General Hospital Ltd [ Appeal No M.A.I.T No 27/ 2008 dt 27-06-2013]. Indore bench in the case of STL Extrusion (P) Limited vide order dated 10.05.2010 being ITA no.(SS) 259, 260 /Ind/2008. M.P. High Court in the case of CIT V/s STL Extrusion (P) Ltd reported in 53 DTR 97(2011). ITAT, Indore Bench in the case of M/s Rajshree Finsec P Ltd [Appeal No 545/ Ind/2010. ITAT, Indore Bench, Indore vide its order dt 28-03-2012 in the case of M/s Mittal Appliances Limited for the Asst Year 2004-05. Hon ble Delhi High Court vide order dt 21-01-2013 in the case of GANGESHWARI METAL PVT LTD [ Appeal No ITA No 597/2012]. Hon ble Delhi High Court in the case of CIT Vs. Oasis Hospitalities (P) Ltd reported in 333 ITR 119 (2011). The assessee also placed reliance on the decisions as reproduced on inner Page Nos 10 to 28 and 37 to 45 of the order of the Ld CIT[A]. List of few decisions also enclosed with this synopsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,00,000 02. M/s Sidh Housing Development Co. Ltd. AAKCS6606H 75,00,000 03. M/s Gyaneshwar Trading Finance Co. Ltd. AACCG7998L 50,00,000 Total (1 to 3) (A) 1,75,00,000 S.No. Name of Share Applicant Amount Added u/s 68 04. M/s Buniyad Chemical Ltd. AABCB6954G 50,00,000 05. M/s Alpha Chemie Trade Agencies P. Ltd. AADCA9890L 25,00,000 06. M/s Gold Star Finvest P. Ltd. AAACG3432H 25,00,000 07. M/s Mahasagar Securities P. Ltd. AABCR1593B 25,00,000 08. M/s Mihir Agencies P. Ltd. AABCH7898H 25,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04. M/s Mahasagar Securities P. Ltd. AABCR1593B 25,00,000 05. M/s Mihir Agencies P. Ltd. AABCH7898H 25,00,000 06. M/s Alliance Intermediateries Network P. Ltd. AACCA9750E 25,00,000 07. M/s Talent Infoway Ltd. AACCT9444L 25,00,000 Total 2,00,00,000 3.10 The assessee during the course of Assessment proceedings had filed complete details in respect of Share Application Money received from all the said parties Including the following:- S.No. Particulars 1 Balance Sheet Profit Loss Account 2 Copy of PAN Card 3 Acknowledgment of Income Tax Return 4 Copy of its Bank Account duly reflecting the Share Application money received from said companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served or where it has not been served the Authorized representative has appeared personally before the Ld. A.O. Thus there is no reason to disbelieve on the amount of share application money as received by the assessee. Merely because the Directors of the Applicants companies have stated in the statement recorded that they are involved in providing certain accommodation entries in LTCG and STCG etc. it cannot be presumed they have provided accommodation entry to the appellant also in the form of Share Application Money.The Ld. A.O. had provided Copy of Statement of Shri Kamal Kishore Rathi ,Shri Shri Mukesh Chowksi and Shri Jayesh Sampat to the assessee for its comments. The assessee at the time of assessment proceedings itself has clarified the position that it has not received any Share Application Money from any of the Companies belonging to Shri Kamlal Kishore Rathi. Thus his statement has not relevant for making any addition in its hands.Shri Mukesh Choksi also his statement also has nowhere committed that he has given any accommodation entry to the assessee company. Thus no addition is justifiable on the basis of his statement. Likewise Shri Jayesh Sampat has also in his sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 PAN No of all the companies have been provided 4 Copy of affidavit of the some of the directors of the shareholders companies have been filed 5 Memorandum and Article of Association 6 Balance Sheet of all the companies have been filed 7 Income Tax Returns of all the Companies have been filed 3.13 The assessee has also filed a chart of the share capital as received by the assessee company in the year under consideration with the following information:- S.No Particulars 1 PA No of the share applicant 2 No of shares allotted 3 Breakup of share capital and Share premium 4 Folio No of the shareholder 5 Certificate No 6 Distinctive Nos of the share certificate Copy of return of allotment as filed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 16] :- 16. The aforesaid judgment has been followed by all the Courts and the judgments relied on by the appellants relates to the period prior to the judgment in Lovely Exports. As the Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. However, in the present appeal, since the identity of such share subscribers, as we have discussed above, was established, therefore, no addition u/s 68 is warranted in the case of the assessee company. So far as the decision from Hon'ble jurisdictional High Court in the case of CIT vs. Rathi Finlease Limited (2008) 215 CTR (MP) 249 is concerned, in that case, despite several opportunities, the assessee was unable to provided confirmations from the concerned parties, therefore, the Hon'ble Court reached to a particular conclusion, whereas in the present appeals, the identity of share applicants, namely, M/s. Shrilal Traders Private Limited, M/s Lakeview Vinimay Private Limited, M/s Saharsh Suppliers Private Limited and M/s Ambitions Tie Up Private Limited was established, therefore, in view of the decision from Hon'ble Apex Court in the case of Lovely Exports Private Limited (supra), this judicial decision from Hon'ble High Court may not help the revenue. 6. So far as the argument of the learned Sr. DR and the objections / observations of the learned Assessing Officer/learned Commissioner of Income Tax (Appeals) that these are paper companies only, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc; (c) The creditworthiness or financial strength of the creditor/subscriber can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. The AO can discredit the documents produced by the assessee with cogent reasons and materials but not on the realm of suspicion; (ii) If the assessee has produced documents like PAN Card, bank account details or details from the bankers the onus shifts upon the AO and it is for him to reach the shareholders and the AO cannot burden the assessee merely on the ground that summons issued to the investors were returned back with the endorsement not traceable (v) There is an additional burden on the Department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such entry providers . The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a premeditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. As can be seen from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. The appeal is dismissed. Hon ble Delhi High Court in the case of CIT (Central)-III vs Anshika Consultants P Limited [ Appeal No ITA 467/ 2014 dt 16-04-2015 ] has held that Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of Section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed on 31.12.2007, the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee utterly failed to furnish even confirmation letter.In the present appeal, the matter in dispute is not unsecured loan but share capital and it was categorically held that the assessee need to prove the identity of the share holders only. The assessee in present case not only filed confirmation letter but ample documents as to discharged the onus lying on the assessee. Hence, decision of the Hon ble Calcutta High court are distinguishable on the fact of the present case. In case of N Tarika Property Investment (P) Ltd , Hon ble Delhi High court as reported in 40 taxmann.com 525 and by the Hon ble Apex court as reported in 51 taxmann.com 387 has observed that the bank account as provided was forged and fabricated bank account. In the present appeal in hand the assessee has provided copy of bank statement, PA No and various other documents and the assessing officer failed to pointed out any defects in these documents. Hence, the facts of the case of N tarika Property Investment [P] Ltd is distinguishable with the facts of the present appeal in hand. In case of CIT vs N R Portoflio (P ) Limited as reported in 42 taxmann.com 339, Hon ble High Court has observed that mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has failed to provide the identity, genuineness and creditworthiness of the share application money.In the present case as stated the assessee has extend its full co-operation and also filed ample documents as to prove the ingredients of provision of section 68 of the Act. The share of the assessee company was not buy back by the assessee company but the transactions were executed between the share holders in the previous year relevant to the Asst Year 2006-07. Hence, fact of the case of MAF Academy (P) Limited was distinguishable with the fact of the present case of the assessee. In the case of Subhlakshmi Vanijya ( P) Ltd as reported in 60 taxmann.com 60 , Hon ble Kolkata Bench observed that insertion of the proviso to section 68 was retrospective in nature.That proviso to section 68 of the Income Tax Act was inserted by the Finance Act 2012 w.e.f 01-04-2013. Since, the date of applicability was clearly mentioned with this amendment, Hence, the said insertion of the proviso have prospective applicability. That Hon ble Mumbai Bench of ITAT in the case of Veedhata Tower P Limited [ ITA No 7070/ Mum/ 2014 ] dt 21-01-2015 has discussed the issue of share applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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