Jai Durga Trade Link Pvt.Ltd., ... vs Assessee

ी एन0एस0 सैनी, लेखा सद य एवं ी कुल भारत, या%यक सद य के सम& BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 75/Ahd/2011 %नधा)रण वष)/Assessment Year: 2007-2008

Jai Durga Trade Link Pvt. Ltd. ITO, Ward-4(2) 704, Hare Krishna Complex Vs Ahmedabad. Opp: Kothawala Flats Pritam Nagar, Ellisbridge Ahmedabad.

PAN : AABCJ 8005 E

अपीलाथ,/ (Appellant) -.यथ,/ (Respondent)

Revenue by : Shri Asseem Thakkar, AR Assessee(s) by : Shri M.K. Singh, Sr.DR

सन ु वाई क तार ख/ Dateof Hearing : 07/04/2015 घोषणा क तार ख / Date of Pronouncement: 29 /04/2015

आदे श/O R D E R

PER N.S. SAINI, ACCOUNTANT MEMBER: This is an appeal filed by

the assessee against the order of the Commissioner of Income-Tax-VII, Ahmedabad dated 02.11.2010.

2. The sole ground of appeal taken by the assessee reads under:

"1. The ld.CIT(A) has erred in confirming the addition made by the AO of Rs.32,50,000/- being an amounts of share capital of Rs.6,50,000/- and share premium of Rs.26,00,000/- treating the same as alleged unexplained cash credits u/s.68 of the Income Tax Act, 1961."

3. Brief facts of the case are that during the course of assessment proceedings, the AO noticed that the assessee-company was ITA No.75/Ahd/2011 2

incorporated on 6.3.2007, and subsequently, introduced share capital of Rs.7,50,000/- and share premium of Rs.26,00,000/- in the month of March, 2007. The share capital and share premium claimed to have been invested by the following persons:

Name of the person Share Capital Premium (a) Sh Prakash S. Bagrecha (Director) Rs.50,000/- Nil (b) Smt Reetaben J. Patel (Director) Rs.50,000/- Nil (c) Ankush Finstock Ltd. Rs.4,00,000/- Rs.16,00,000/- (d) Marrot Stock Holding (P) Ltd. Rs.2,00,000/- Rs.8,00,000/- (e) Step Securities P. Ltd. Rs.50,000/- Rs.2,00,000/- TOTAL Rs.7,50,000/- Rs.26,00,000/-

4. The AO observed that the persons at Sr.No.(a) & (b) are the promoters of the company, and the persons at (c), (d) and (e) are not related to promoters. In order to verify the identity, credit-worthiness and genuineness of the transactions made by the investors, summons u/s.131 of the Act was issued to the director of the investor companies and their statement under oath were recorded, wherein the Director of Ankush Finstock Ltd., Shri Bharatbhai Manubhai Shah has stated in his statement dated 14.9.2009 as under:

"In fact as a chairman cum Managing Director of M/s Ankush Finstock Ltd wants to submit that the promoter of M/s Jay Durga Trade Link Pvt Ltd Shri Prakash S Bagrecha resident of Shahibaug of Ahmedabad each my old acquaintance and v/e know each other for 10 to 12 years he was engaged in investment business. In the month of March 20007 he made a proposal to my company for purchase of premium shares of his newly promoted company with a condition to issue cheques for Rs. 20 lacs from M/s Ankush Finstock Ltd in return he agreed to pay one percent of commission and twenty lacs in cash (shares of premium amount) which he paid before issue of cheques. In fact our company has not purchased or invested any amount as a share capital either on premium or otherwise in M/s Jay Durga Trade Link (P) Ltd. The transaction was made for earning one percent of total investment 'claimed as share premium by M/s Jay Durga Trade link (P) Ltd."

ITA No.75/Ahd/2011 3 5. The AO further observed that Shri Desai Pintoo Motibhai, director of Step Securities (P) Ltd. in his statement recorded under section 131 of the Act on 22.9.2009 on oath has stated that he has signed the confirmation dated 13.8.2009 on the instruction of Shri Samir P. Shah, director of Step Securities (P) Ltd.. He further stated that as per his knowledge, Step Securities (P) Ltd. has not purchased any shares with premium of Jay Durga Trade Link (P) Ltd.

6. In order to examine the veracity of statement made by Shri Desai Pintoo Motibhai, summons under section 131 of the Act was issued to Shri Samir P. Shah and his statement was recorded under oath on 23.9.200. He, inter alia, in his reply to question regarding investment made by the company stated that he was not aware, but Shri Bharatbhai Manubhai Shah resident of A/2/53, Arjun Tower, Ghatlodiya, Ahmedabad knew the affair of the Step Securities (P) Ltd. He further stated that he himself and Shri Desai Pintoo Motibhai were working on the instruction of Shri Bharatbhai Manubhai Shah. Shri Samir P. Shah has confirmed that statement made by Shri Desai Pintoo Motibhai regarding non-investment in shares and share premium in Jay Durga Trade Link (P) Ltd. was true and correct. The AO further observed that Shri Pankaj Manubhai Shah, Director of Marrot Stock Holding (P) Ltd. was summoned under section 131 of the Act and his statement was recorded under oath, and he, inter alia, stated that Marrot Stock Holding (P) Ltd. has not made any investment in shares of Jay Durga Trade Link (P) Ltd. during the year under consideration, and further stated that the confirmation letters were signed by him on the instruction of his younger brother Shri Bharatbhai Manubhai Shah and reiterated that there was no business connection between Marrot Stock Holding (P) Ltd. and Jay Durga Trade Link (P) Ltd.

7. The AO further observed that Shri Bharatbhai Manubhai Shah, director of Ankush Finstock Ltd. was re-summoned u/s.131 of the Act ITA No.75/Ahd/2011 4

and his statement recorded on 14.10.2009, and he, inter alia confirmed that whatever stated by Shri Shri Samir P. Shah and Shri Desai Pintoo Motibhai, both directors of Step Securities (P) Ltd. and Shri Pankaj Manubhai Shah, director of Marrot Stock Holding (P) Ltd. in their statement recorded u/s.131 of the Act on 23.9.2009 and 22.9.2009 respectively, was true and he abode by the statements made by them in respect of investment in share application and share premium of Jay Durga Trade Link (P) Ltd.. The AO, therefore, opined that in view of the above facts, it was crystal clear that share capital and share premium amounting to Rs.32.50 lakhs has not been invested by Ankush Finstock Ltd., Marrot Stock Holding (P) Ltd. and Step Securities (P) Ltd. as claimed by the assessee, and accordingly, show cause notice was issued to the assessee.

8. In reply to the show cause, the assessee vide letter dated 26.10.2009 asked for cross-examination of the investors. Request was granted and the assessee was intimated the date of cross-examination fixed on 5.11.2009 at 10:00 am. However, before availing the opportunity for cross-examination, the assessee contended vide letter dated 28.10.2009 as under:

"We are in receipt of your show cause notice dated 13.10.2009 proposing to consider Share Capital & Share Premium amount collected by the Company as Cash Credit u/s 68 which is totally arbitrary, illegal and against the principle of natural justice on the following proposition.

First of all, we had already furnished Xerox copies of Share Application Forms received by the Company from M/s Ankush Finstrock Ltd, M/s Marrot Stock Holding Pvt Ltd and M/s Step Securities Pvt Ltd vide out submission dated 24.06.2009.

Thereafter we had also submitted Bank Statements of these companies reflecting the cheques issued for subscribing the shares in the Company and also their Income Tax Return copy for said Financial Year. We are also submitting copy of Balance Sheet of M/s Ankush Finstock Ltd in which investment of 20 Lacs made by them in ITA No.75/Ahd/2011 5

our company is shown as Long Term Investment in Schedule-5 of the Balance Sheet, out of 166.25 lacs of investments made by the company in various companies.

Further we had also filed Minutes of the meeting in which shares are allotted and members register with our submission dated 24.06.2009.

Thus we had already proved the identity of the subscriber of shares, the genuineness of the transaction namely it has been transmitted through banking channels and credit worthiness or financial strength o the subscriber and furnished relevant details of the subscribers like PAN identity, copy of Shareholders register, share application forms etc and confirmation of the parties.

Now coming to the statement of SM Bharat M Shah dated 14.09.2009, it is observed that the statement is taken under threat and mental torturing condition, since he has answered up to questions No. 5 and two question on page no. 4 properly and only thereafter he has spoken something different which contradictory to his own earlier statements.

Accordingly, in answer to question 5, he affirms that he has business transaction with our company and in next question ie on page of his statement, in first question itself he affirms that he had invested Rs.20 Lacs in the Share Capital of our company at premium of Rs. 40 per share and also explained the source of investment out of his company's bank a/c with UTI Bank a/c No. 003010200031189, thus, all these affirmation tallies with his confirmations given to the company.

It is only after this question, his role changed duo to one or the other reason and given the statement which totally contradictory to the fact given earlier. Further as regards his denial to the confirmation given to the company in last question is also not tenable as the documentary evidence produced by him and by us support s the of investment and not otherwise."

9. The AO did not accept the explanation of the assessee for the following reasons.

"(a) The assessee has alleged that statement of Shri Bharat M Shah recorded on 14.09.2009 was taken under threat and mental torturing condition, which is far from truth. An opportunity for cross examination was provided to the director of the assessee which was availed by the assessee company and ITA No.75/Ahd/2011 6

in the cross examination, Shri Bharat M Shah stood by his statement recorded earlier. During the course of cross examination of Sh Bharat M Shah on 5lh November, 2009 by the director of assessee company, Sh Bharat M Shah categorily stated that whatever he stated in his statement recorded on 14.09.2009 was voluntary, in reply to the question of the director as to whether Sh Bharat M Shah has received cash from Jai Durga Trade Link (P) Ltd for issue of cheque from the assessee company.

(b) The so called investors have submitted that they have not invested any fund in the assessee company as share capital on premium. All the so called investor companies were being managed by one person Sh Bharat Martubhai Shah who has accepted the fact. The assessee company its self laundered its unaccounted fund by introducing the same via so called investor's bank accounts which is evident from the perusal of bank accounts of the investors.

(c) As regards to the contention of the assessee company that all so called investors had confirmed the investment. The confirmation of accounts was provided by the assessee company.

In the subsequent stage of investigation, the fact that these were accommodation entries has become clear from the statements of so called investors recorded u/s 131 of the act, the so called investors have accepted having given accommodation entries to the assessee by providing their bank accounts to launder unaccounted fund of the assessee on receipt of consideration.

(d) As regards to the decision of the Hon 'able Apex court, the facts are totally different from the case under consideration as in this case the so called investors have denied having invested any amount in the assessee company.

(e) Without prejudice to the above, it can be seen that the assessee company was incorporated in the month of March, 2007 and the total of balance sheet is merely Rs.1,05,400/- excluding so called new investment.

(f) It is noticed from the balance sheet of the assessee company for the year under consideration that the assessee company has invested in share of Navkar Reality Pvt Ltd amounting to Rs.10,00,000/- and made inter corporate deposit in Aakar Infrastructure Pvt Ltd amounting to Rs.20,07,076/-, both the concerns are associated with the promoters of the assessee company.

ITA No.75/Ahd/2011 7 (g) The assessee company was incorporated on 06.03.2007 with a share capital of Rs 1 Lac only. The so called investors have issued cheques on 12.03.2007 and 15.03.2007 for total amount of Rs.30,00,000/- that to for purchase of share on premium of Rs. 40.00 of each share of Rs. 10.00 without knowing the company back ground, its working etc. The assessee company had no assets which would invited premium of Rs. 40 on a Rs. 10/- share. The arrangement was to launder its own unaccounted funds by introducing the same in the form of interest free share and premium money."

10. Accordingly, the AO made addition of Rs.32,50,000/- as unexplained cash credit under section 68 of the Act.

11. On appeal, The CIT(A) confirmed the action of the AO by observing as under:

"I have carefully gone through the decisions relied upon by the Ld. Counsel. It was noticed on examination that except a few, all other decisions are not relevant to the facts of the case. The Ld. Counsel has not established as to how those decisions are relevant and how the same are applicable on the facts of the case. The Hon'ble Amritsar Tribunal has rightly observed in the case of Shree Balaji Alloys vs. ITO [2010] 127 TTJ 129 (Asr.) that "it is crucial to point out that the judicial precedents are to be applied with care and caution and not mechanically, as each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. It is cardinal principle in applying judicial precedent that one should avoid the temptation to decide cases, by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. The path of justice must be clear of obstruction which could impede it. The observations of the Court must be read in the context in which they appear to have been stated. The assessee has placed reliance on the above decisions without discussing, as to how, the factual situation of the present case fits in the fact- situation of the cases relied upon." Same is the position here in this case. The Ld. Counsel has placed reliance on the decisions without discussing, as to how, the factual situation of the present case fits in the fact-situation of the cases relied upon.

ITA No.75/Ahd/2011 8 7.4 In view of the detailed discussions held above, I am of the considered opinion that the additions made by the A.O. is justified and therefore confirmed. As such the addition of Rs. 32.50 lakhs is confirmed."

12. Before us, the AR of the assessee contended that the assessee has discharged its burden regarding identity of the persons, genuineness of the transaction and capacity of the person investing in the share capital by furnishing confirmation of accounts, share application made by the investors, bank statement of such investors, copy of return of income for the said assessment year and the audited accounts of such investor reflecting the investment in assessee- company during the course of assessment proceedings. It was further submitted that the amounts were received as share application from investors through banking channels, and the assessee was required to prove existence of the person, in whose name, the share application was received. Once the existence of the investor is proved, it is not further the burden of the assessee to prove whether that person itself has invested the said money or some other persons has made investment in the name of that person. The burden then shifts on to the Revenue to establish that such investment has come from the assessee-company itself. Once the receipt of the confirmation letter from the creditor is proved and the identity and the existence of the investor has not been disputed, no addition on account of share application money in the name of such investor can be made in the assessee's hand, and for this, he relied on the decision of Hon'ble Rajasthan High Court in the case of Shree Barkha Synthetics Ltd. Vs. ACIT, (2006) 15 taxmann 289 (Raj.).

13. He further submitted that the AO being not satisfied by the submission of the aforesaid documents called each investor and recorded their statement under section 131 of the Act, and on the basis of such statement he had considered such share application money as credit and added the same to the income of the assessee. He argued ITA No.75/Ahd/2011 9

that from the statement of Shri Pankaj Manubhai Shah of Marrot Stock Holding (P) Ltd., it is to be noted that when the company had made investment in the assessee-company, he has not a director, as can be seen from share application made by the company, and the list of the directors provided to the AO during the course of assessment.

14. Further, it was contended that Shri Bharatbhai Manubhai Shah of Ankush Finstock Ltd. alleged that the share application money invested by the company was given in cash to him by Prakash Bagrecha for commission of 1%. However, nothing was shown by the AO that there was other material correlated with the document clearly showing that it belonged to the assessee. The AO had drawn inferences, made presumptions, relied on surmises and thus made unsustainable additions.

15. It was further submitted that in the bank statement submitted by Ankush Finstock Ltd. did not show any cash deposit in their bank account from which such cheque issued for investment. Further, there was no commission income shown in the books of Ankush Finstock Ltd. nor commission expenses shown in the books of the assessee's company.

16. It was further submitted that according to the AO, the company was newly incorporated and has no asset to charge premium on shares was also not tenable since the issuing of shares at a premium does not necessary to have some assets with the company or there is no definite guidelines for issue of shares at premium but it depends on promoters background and future of the company's working etc. The AO has assumed that the assessee has laundered its own unaccounted funds was also not true for the same reasons. It was further submitted that the AO has stated that the investment made by the assessee-company in the form of loans and advances to M/s.Navkar Reality Pvt. Ltd., and M/s.Aakar Infrastructure Pvt.Ltd. are associated with the promoters of ITA No.75/Ahd/2011 10

the assessee-company, is also not correct, as the directors and address of both the company is totally different and neither of the company has investment in assessee-company nor assessee company has investment in the form of shares in those companies which was given to the AO during the course of assessment proceedings.

17. Finally, it was contended that in the case of CIT Vs. Lovely Exports Pvt. Ltd., 216 CTR (SC) 195, it was held that the share application money received by the assessee-company from alleged bogus shareholders, the amount of share money cannot be regarded as undisclosed income under section 68 of the assessee-company, and it was submitted that therefore, the addition of Rs.32.50 lakhs made as unexplained cash credit under section 68 of the Act should be deleted.

18. He further relied on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Value Capital Services P. Ltd., reported 307 ITR 334, C|IT Vs. Stellar Investment |Ltd., 192 ITR 287 and CIT Vs. Sophia Finance Ltd., 205 ITR 98 and submitted that it has been held that if the existence of applications of share application money is proved, no further inquiry was necessary.

19. It was also argued that if the assessee has discharged prima facie onus by submitting various documents such as confirmations of accounts, share applications made by the investor, bank statement of such investors, copy of return of income for the said assessment year, and audited accounts of the investors to establish the identity of the investor and therefore, no addition can be made u/s.68 of the Act, and for this, he relied on the decisions of Hon'ble Delhi High Court in the case of CIT Vs. Illac Investment P. Ltd., reported in 287 ITR 135, CIT Vs. Antarctica Investment P. Ltd., 262 ITR 493 and CIT Vs. Sofia Finance Ltd., 205 ITR 98. It was also argued that when the initial burden has been discharged by the assessee in respect of identity of investors, and there is no presumption that the assessee is the benami ITA No.75/Ahd/2011 11

owner of the investment made by the existing persons, and therefore, addition could not be made u/s.68 of the Act, and for this, the AR placed reliance on the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. First Point Finance Ltd., 286 ITR 477.

20. He also submitted that in the case of CIT Vs. P. Mohanakala, (2007 291 ITR 278 SC), the Hon'ble Supreme Court has held that the opinion of the AO is required to be formed objectively with reference to the material available on record, and only by saying that the explanation of the assessee is unsatisfactory, it does not automatically result in deeming amount of cash credit as assessee's income.

21. He further submitted that the Hon'ble Gujarat High Court in the case of DCIT Vs. Rohini Builders Vs. DCIT, reported in 256 ITR 360 (Guj) has held that the Tribunal found that the assessee had discharged the initial onus lies on it in terms of section 68 by providing identity of the creditors, by giving their complete address, GIR numbers, PAN and copies of assessment orders, wherever readily available with it, and also proved capacity creditors by showing that the amounts were received by the assessee account payee cheques drawn on bank accounts of the creditors, and that the assessee is not accepted to prove the genuineness of cash deposits in the bank account of these creditors, because under the law, the assessee can be asked to prove the source of credits in its books of accounts, but not the source of source. Thus, taking into consideration totality of the facts of the case, and in particular, the fact that the AO has not disallowed the interest claimed/paid in relation to these creditors, in the assessment year under consideration, or even in the subsequent year, and the tax at source has been deducted out of the interest paid/credited to the creditors, the Tribunal held that the departmental authorities were not justified in making the addition of Rs.12.85 lakhs, and therefore, the Tribunal was justified in deleting the addition.

ITA No.75/Ahd/2011 12 22. He submitted that in the case of the assessee also, the assessee has filed complete address of share applicants, PANs., copies of income- tax returns along with their balance sheets and has also shown the capacity of creditors by showing that all the amounts were received by the assessee by account payee cheques drawn from bank accounts of the share applicants, and that, as alleged by the AO that the share application was received by the assessee on payment of 1% commission to the person from whom the assessee received share application money, but no addition for this has been made by the AO in the hands of the assessee. The facts of the case of the assessee are identical to the facts before the Hon'ble Gujarat High Court in the case of Rohini Builders (supra), and therefore, no addition on account of share application and share premium amount was warranted under section 68, as unexplained cash credits.

23. The DR, on the other hand, supported the orders of the lower authorities.

24. We have heard rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the assessee has claimed to have received share capital and share premium aggregating to Rs.32.50 lakhs from the following three persons:

Name Share Premium Total Capital Ankush Finstock Ltd. 4,00,000/- 16,00,000/- 20,00,000/-

Marrot Stock Holding Pvt. 2,00,000/- 8,00,000/- 10,00,000/- Ltd.

Step Securities Pvt. Ltd. 50,000 2,00,000/- 2,50,000/-

Total 6,50,000 26,00,000 32,50,000/- ITA No.75/Ahd/2011 13

25. The assessing officer relying on statement of Shri Bharatbhai Manubhai Shah director of Ankush Finstock Ltd., Sri Desai Pintoo Motibhai director of Step Securities Pvt. Ltd., and Sri Pankaj Manubhai Shah director of Marrot Stock Holdings Pvt. Ltd. made addition of share capital and share premium aggregating to Rs. 32.50 lakhs as cash credit.

26. Before us the authorised representative of the assessee filed a copy of balance sheet of M/s Ankush Finstock Ltd. and pointed out there from that they have duly shown their investment of Rs. 20 lakhs made in the shares of the assessee company. Similarly the authorised representative from the audited accounts of Marrot Stock Holdings Pvt. Ltd. and Step Securities Pvt. Ltd. pointed out there from that they have also shown therein their investment of Rs. 10 lakhs and Rs. 2.50 lakhs respectively in the shares of the assessee company. The authorised representative of the assessee pointed out from the bank statement of Ankush Finstock Ltd. placed at paper book page number 74 that the investment of Rs. 20 lakhs made by Ankush Finstock Ltd. in the assessee company is duly entered therein. He also pointed out from the bank statement of Marrot Stock Holdings Pvt. Ltd. and Step Securities Pvt. Ltd. placed at page numbers 43 and 24 respectively that their investment of Rs. 10 lakhs and Rs. 2.50 lakhs was also evidenced from their bank statements.

27. He submitted that in view of the above documentary evidence evidences along with the confirmations furnished by those companies where in they confirmed of making investment in shares of the assessee company establishes the genuineness of the transaction. He contended that in view of above overwhelming documentary evidences the assessing officer was not justified in treating the un-substantiated and unreliable statements of directors of those companies as correct.

ITA No.75/Ahd/2011 14 28. The directors in their statements could not bring any material to corroborate their statement and their statement being contrary to evidence on record were not reliable and therefore in admissible. He contended that the assessing officer was not justified in ignoring the various documentary evidences filed before him only on the basis of unsubstantiated statement of the directors. He pointed out that director of Ankush Finstock Ltd. had given a statement that he received Rs. 20 lakhs in cash from Sri Prakash S Bagrecha who is one of the promoter of the assessee company before issuing cheque for making investment in the assessee company. However, the bank statement of M/s Ankush Finstock Ltd. shows that there was no cash deposit before issuing of cheque for making investment in the assessee company. Still further the director of Ankush Finstock Ltd. has stated in his statement that cheque was issued for earning commission of 1% but the audited accounts of Ankush Finstock Ltd. does not show any such commission income. No material could be brought on record by the Director of M/s.Ankush Finstock Ltd. to show that the claim made by him in the statement given before the AO of actually receiving of any cash from the assessee-company before the issue of cheques to the assessee- company. Further, on examination of statement of three directors of Step Securities P. Ltd. and Marrot Stock Holdings Pvt. Ltd., it is observed that the directors have simply stated that no investment was made in the shares of the assessee-company. We find that from the bank statement of Marrot Stock Holdings Pvt. Ltd. that cheque was issued to the assessee-company and the investment in shares of the assessee-company was also appearing in the balance sheet of Marrot Stock Holdings Pvt. Ltd., we find that the recorded statement of Shri Pankaj Manubhai Shah, director of Marrot Stock Holdings Pvt. Ltd. could not explain the circumstances in which cheque was issued to the assessee company, and the circumstances in which the investment in the shares of the assessee-company was reflected in their audited accounts. In the circumstances, in our considered view, the testimony ITA No.75/Ahd/2011 15

of Shri Pankaj Manubhai Shah cannot be held to be reliable and the same is merely un-substantive statement. Similarly, we find that the recorded statement of Shri Desai Pintoo Motibhai, director of Step Securities P. Ltd. could not explain the circumstances in which the cheque was issued to the assessee-company and the circumstances in which the investment in the shares of the assessee-company was reflected in their audited accounts. In the circumstances, in our considered view, the testimony of Shri Desai Pintoo Motibhai cannot be held to be reliable, and the same is merely an un-substantive statement. Thus the statement of the director of Ankush Finstock Ltd. was not at all reliable and therefore on the basis of such unreliable statement the fact revealed by documentary evidences on record cannot be ignored.

29. In reply the departmental representative supported the orders of the lower authorities.

30. We find that in the instant case there is contradiction between the statement deposed by the directors of the alleged three investment companies and the audited statement, bank accounts, confirmations and share application forms executed by the three investor companies. In the above circumstances, it is to be adjudicated that which is to be believed, the fact revealed by various documents or the facts claimed by three deponents without any corroborative evidences.

31. We find that the Honourable Bombay High Court in the case of ACIT Vs. Miss Lata Mangeshkar 97 ITR 696(Bom) held that once the testimony of the witness is unreliable, then the addition on the basis of such testimony cannot be made.

32. In view of the above decision of the Honourable Bombay High Court in our considered view the facts disclosed by the documentary ITA No.75/Ahd/2011 16

evidences on record cannot be ignored merely on the basis of unsubstantiated statement of the directors.

33. Further, we find that the identities of the three investors in the shares of the assessee company are not in dispute and the investment were made through their bank accounts is also established from their bank statements as well as their audited financial statements. The Honourable Supreme Court in the case of CIT versus Lovely Exports (P) Ltd.S.L.P. (CIVIL)no.11530 of 2008 order dated January 11, 2008 held as under:

"Can the amount of share money be regarded as undisclosed income under section 68 of the I.T.Act, 1961 - we find no merit in this special leave petition for the simple reason 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 assessments in accordance with law. Hence, we find no infirmity in the impugned judgment."

34. In view of the above we find that the addition of Rs 32.50 lakhs made in the instant case cannot be sustained. We therefore delete the addition of Rs 32.50 lakhs and allow this ground of appeal of the assessee.

35. In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on Wednesday the 29th April, 2015 at Ahmedabad.

Sd/ Sd/- (KUL BHARAT) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Ahmedabad; Dated 29/04/2015