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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-2’, NEW DELHI
Before: SHRI H.S. SIDHU
This appeal by the Department is directed against the Order dated 10/03/2014 of Ld. CIT(A)-VIII, New Delhi relevant to the assessment year 2004-05.
The grounds raised in the appeal of the Department read as under:
“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erre din deleting the addition of Rs. 10,00,000/- made by the AO u/s. 68 of the I.T. Act, 1961, relying on the submission of assessee only and ignoring the latest findings of High Court on this issue? 2. That the order of the CIT(A) is erroneous and is not tenable on facts and in law. 3. That the grounds of appeal are without prejudice to each other.
4. That the appellant craves leave to add, alter, amend or forgo any ground(s) of the appeal raised above at the time of the hearing. 3. The facts in brief are that the assessee has originally filed return on 1.11.2004 at a loss of Rs. 2,89,694/-, which was processed u/s. 143(1) on 28.3.2006. Later on an assessment order was passed u/s. 143(3)/148 of the Income Tax Act, 1961, assessing the total taxable income at Rs. 7,10,310/- for the assessment year 2004-05 thereby making an addition of Rs. 10,00,000/- u/s. 68 of the Act. Being aggrieved with the aforesaid assessment order, assessee appealed before the Ld. CIT(A), who vide impugned order dated 10.3.2014 has deleted the addition and partly allowed the appeal of the Assessee.
Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.
At the time of hearing Ld. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds of appeal and also relied upon the decision of the Hon’ble Jurisdictional High Court dated 25.8.2014 in the case of CIT vs. Navodaya Castles (P) Ltd.
In this case, Notice of hearing to the assessee was sent by the Registered AD post, in spite of the same, assessee, nor its authorized representative appeared to prosecute the matter in dispute, nor filed any application for adjournment. Keeping in view the facts and circumstances of the present case and the issue involved in the present Appeal, I am of the view that no useful purpose would be served to issue notice again and again to the assessee, therefore, I am deciding the present appeal exparte qua assessee, after hearing the Ld. DR and perusing the records.
I have heard the Ld. DR and perused and considered the relevant record available with me especially the impugned orders passed by the Revenue Authorities; case law cited by the Ld. DR. I find that the First Appellate Authority has discussed the elaborately discussed the issue in dispute by considering the submissions of the Ld. Counsel of the assessee and adjudicated the issue in dispute as under:-
“10.1 I have considered the submissions of the ld. AR and have also perused the assessment order and various judicial pronouncements 011 the issue.
10.2The appellant during the year has received share application money from two parties Sh. Dinananth Luhariwala Spinning Mills (P) Ltd. and Mis Chintpurni Credits & Leasing (P) Ltd. of Rs. 5,00,000/-- each. During the course of assessment proceedings the appellant filed various documentary evidences like affidavit, Bank Statement, its acknowledgment of return of income, PAN, Audited Balance Sheet and Company details generated from the website of Ministry of Corporate Affairs, board resolution confirming the payment of share application money which supported the identity of the investor company and also established genuineness of the share capital money transaction.
10.3 However, the AO while passing the order has stated that the appellant has not been able to establish the onus casted on it under section 68 of the Act. The AO has further stated that the copy of conformation from parties have not been filed and directors of the investor companies were not produced.
10.4From the evidences placed on record, it is observed that share application money was received from 2 entities by the appellant through cheques and such entities are registered and are active as per the company master details present at the website of Ministry of Corporate Affairs. It is noticed that the assessee has filed affidavits of the share applicants confirming the transaction. The assessee has also filed other relevant details confirming the identity, creditworthiness and genuineness of the transaction with the said share applicants.
10.6 From the perusal of the findings it is ascertained that: a. AO has primarily made the additions on the ground that the appellant was not able to produce its own shareholders for which the assessee has stated that it has provided the addresses of all share applicants and they may be called by the AO. b. AO has stated that the appellant has not filed confirmations to which the assessee has replied that the copy of affidavit filed by the assessee is as good as confirmation from the party as there is no specific format for filing confirmation. c. AO has stated that there is immediate cash deposit in the accounts of share applicants of the appellant company to which the AR has stated that there is no material/evidence available with the AO which suggests that the money introduced by share applicants was appellants own money, further assessee cannot be held liable for cash deposited in account of some other parties. The appellant has also cited various case laws in its submissions wherein it has been held that appellant having produced details and documents as filed by the appellant, share application money cannot be regarded as undisclosed income and cannot be added under section 68 of the Act.
10.9 The appellant in its submission has also relied upon the judgment of the Apex Court in the case of CIT V s. Lovely Exports Pvt. Ltd. 299 ITR 268 (SC) which has confirmed the order of the Delhi High Court. It has been held by the Hon'ble Court that once the identity of the shareholders have been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is not on record. In the instant case, the appellant has provided evidence in the form of PAN, confirmation, copy of IT return filed, ROC details to establish the genuineness of the transaction.
10.11 In view of the factual position as well as the judicial pronouncement on the subject discussed above, I am of the considered view that the appellant has discharged the initial onus of establishing the bona-fides of the transactions and the AO was not justified in ignoring various evidences provided to him by the appellant. Nothing adverse has been brought on record by the AO to establish that the amount of share application money of Rs. 10,00,000/- received by the appellant from the said parties represents its own undisclosed income.
If there was doubt about the source of investment of the said company, then additions should have been made in the case of Investor Company where cash was introduced in the bank, and not in the hands of the appellant company. In yet another decision as to the correctness treating share application money on par with cash credit, the Hon'ble Delhi High Court in CIT vs. Value Capital Services (P) Ltd. (2008) 307 ITR 334 (Delhi) found after referring to the two the decisions of the Delhi High Court on the subject that in respect of the share capital amounts, they cannot be assessed in the hands of the company, unless the department is able to show that the amount received towards share capital actually emanated from the coffers of the assessee company .
10.12 In the light if the above decision, I am inclined to agree with the arguments and evidences provided by the appellant to substantiate that the transactions regarding share application money received by it were genuine transactions and the same were not accommodation entries. I also do not find any evidence collected by the AO which could prove otherwise.
Accordingly, the AO was not justified in treating the mount of share application money received by the appellant as its undisclosed income.
In view of our aforesaid discussion, I delete the addition of Rs. 10,00,000/- made by the AO under section 68 of the Income Tax Act, 1961.”
In view of the above, I am of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), because the Ld. CIT(A) has decided the issue in dispute in favor of the assessee after appreciating the evidence filed by the assessee as well as various decisions rendered by the Hon’ble Supreme Court as well as Hon’ble High Court and the decisions of the ITAT Benches. I am also of the view that the share application money received in the hands of the assessee company is properly explained by the assessee during the course of assessment proceedings as well as before the Ld. CIT(A).
Therefore, I do not find any infirmity in the impugned order passed by the Ld. CIT(A) on the issue in dispute and hence, I uphold the same by dismissing the appeal filed by the Revenue.
In the result, appeal of the Revenue is dismissed.