Lakshmi Float Glass Ltd, New Delhi vs Department Of Income Tax

ITA No. 535/Del/2009 Assessment Year: 2000-01 Assistant CIT, vs. Lakshmi Float Glass Ltd., Circle-4(1), A-2/10, WHS, DDA Marble New Delhi. Market, Kirti Nagar, New Delhi. (PAN: Nil ) (Appellant) (Respondent)

Cross Obj. No. 28/Del/2009 ( In ITA No. 535/Del/2009 ) Assessment Year: 2000-01 Lakshmi Float Glass Ltd., Vs. Assistant CIT, A-2/10, WHS, DDA Marble Circle-4(1), Market, Kirti Nagar, New Delhi. New Delhi. (PAN: Nil ) (Appellant) (Respondent)

Revenue by: Shri P. Damkaunjma, Sr. DR Assessee by: Shri Ved Jain, CA

Date of hearing : 29.01.2015 Date of pronouncement: 31 :03.2015

ORDER

PER I.C. SUDHIR: JUDICIAL MEMBER ITA No.535/Del/2009: The Revenue has questioned First Appellate Order

on the following grounds:

"1. The order of the Learned CIT(Appeals) is erroneous & contrary to facts and law.

2 2. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in deleting addition made u/s. 68 of Rs.3,85,00,000 & of Rs.96,250 on account of unexplained expenditure ignoring:

a) that during the survey operation u/s. 133A carried out in this case, Sh. Arvind Kumar Gupta, Director made a voluntary surrender of Rs.3.85 crores on account of receipt of bogus share application money as recorded in the statement on oath. The said surrender was made as the Director admitted that the concerned share applicants were not known to him personally & he also showed his inability to produce them. The Director was also not able to explain the reasons why these applicants would invest money in their concerns which were not listed in the stock exchange nor had they floated any public issue.

b) the statement on oath of entry operators namely Mr. Mukesh Gupta, Surinder Pal Singh & Rajan Lasal who have categorically admitted on oath that they had floated the impugned entities from whom the said amount of Rs.3.85 crores was shown to be received by assessee only for giving accommodation entries & no real business was done by these entities.

c) that the assessee failed to produce the alleged share applicant for verification. Mere submission of documents & material is held to be insufficient in the case of Hindustan Tea Trading Co. vs. CIT 263 ITR 289.

d) the dictum given by the Hon'ble Supreme Court in CIT vs. Durga Prasad More 82 ITR 540 & Sumati Dayal vs. CIT 3

214 ITR 801 in which Apex Court has laid down the proposition that the Courts & Tribunals should see the preponderance of probabilities while considering the evidence furnished by the assessee.

e) that in respect of this case, the ratio of case laws relied upon by the first appellate authority are not applicable at all. The Learned CIT(Appeals) based his decision on the judgment of the Hon'ble Supreme Court in Divine Leasing & Finance Ltd. & Lovely Exports ignoring that the facts are essentially different inasmuch as this case the assessee is a pvt. Company and no member of the public participated. On the other hand in the case of Divine Leasing & Finance Ltd. & Lovely Exports, the share applications were made by way of public issues.

f) the finding of facts recorded by the A.O. & the investigation wing of the department that the assessee indulged in a notorious practice of resorting to accommodation entries in order to evade payment of legitimate tax.

g) that the A.O. is duty bound u/s. 68 to enquire into the creditworthiness, identity of the creditors & genuineness of the transactions. The CIT(A) has erred in ignoring such findings recorded by the A.O. in the assessment order."

2. Heard and considered the arguments advanced by the parties in view

of orders of the authorities below, material available on record and the

decisions relied upon.

4

3. The facts in brief are that the assessee company is engaged in trading

of various types of glasses. On 10.08.2006, survey proceedings under sec.

133A of the Income-tax Act, 1961 were conducted by the DIT(Inv.) at the

premises of the assessee which resulted in disclosure of a sum of Rs.3.85

crores which was received by the assessee as a share application money

from various concerns. Notice under sec. 148 was issued and assessment

was framed under sec. 147/143(3) of the Income-tax Act, 1961 on

17.12.2007. The Assessing Officer made addition of Rs.3,85,00,000 under

sec. 68 of the Act on account of unexplained cash credits. A further addition

of Rs.96,250 was made on account of unexplained expenditure being

commission @ 25 paise per hundred rupees paid for arranging entry of

Rs.3,85,00,000. The Learned CIT(Appeals) has deleted these additions

against which the Revenue is in appeal.

4. The Learned CIT(Appeals), however, did not allow the objection of

the assessee on the validity of notice issued under sec. 148 of the Act and the

assessment made in furtherance thereto. Against this action of the Learned

CIT(Appeals), the assessee has preferred cross-objection before the ITAT. 5

5. In support of the grounds, the learned Sr. DR had reiterated the

contents of the grounds and has placed reliance on the assessment order. He

submitted that the assessee could not discharge its onus to establish the

genuineness of the claimed share capital , the Assessing Officer was justified

in making the addition of the claimed share capital investment under sec. 68

of the Income-tax Act, 1961.

6. The Learned AR on the other hand tried to justify the First Appellate

Order with this submission that all the necessary evidence to establish the

genuineness of the claimed investment of share capital by the parties were

furnished and in absence of rebuttal thereof by the Assessing Officer, the

Learned CIT(Appeals) was justified in deleting the addition by passing a

detailed order and discussing the objections raised by the Assessing Officer

and submissions of the assessee meeting those objections. He contended that

issue is covered by the judgment of Hon'ble jurisdictional Delhi High Court

in the following cases whereby it has been held that in case the Assessing

Officer does not carry out independent investigation after the assessee has

submitted the evidences, additions cannot be made:

1. CIT vs. Gangashwari Metal Pvt. Ltd. (ITA No.567 of 2012);

2. CIT vs. Fair Finvest Ltd. ( ITA No. 232 of 2012);

3. CIT vs. Expo Globe India Ltd. ( ITA No. 1257 of 2011);

6 4. CIT vs. Goel Sons Golden Estates Pvt. Ltd. ( ITA No.212 of 2012); &

5. ACIT vs. Panchanan Internatinal (P) Ltd. (Bench Bench) (ITA No. 50/Del/2011).

6.1 The Learned AR also referred page Nos. 1 to 425 of the paper book

filed on behalf of the assessee to support its claim. These documents are

copies of audited balance sheet with audit report for the years ending

31.3.2000, acknowledgment of return of income with computation of

income for the year, statements of Mr. Arvind Kumar Gupta during the

course of survey operation, sworn retraction statement by Arvind Kumar

Gupta dated 31.8.2006, Board's Resolution adopting retraction statement of

Mr. Gupta dated 31.4.2006, statements of departments witnesses, Shri

Mukesh Gupta, Rajan Jassal and Surender Pal Singh, letters of different

dates commenting upon the statements of the above persons submitted

before the Assessing Officer, several correspondences with the department,

latest confirmation of the transactions from the shareholders and statements

of share capital from the companies along with supporting documents

proving identity, creditworthiness and genuineness of the transactions.

7 7. We find that the assessee had filed return declaring the income of

Rs.11,59,090 which was processed under sec. 143(1) of the Act. Survey

under sec. 133A of the Act was conducted by the Investigation Wing of the

Department wherein director of the assessee company offered Rs.3.85 crores

for taxation in the hands of the company. The Assessing Officer initiated

reopening proceedings and made the additions in question being not satisfied

with the explanation of the assessee in this regard.

8. On perusal of orders of the authorities below, we find that during the

course of survey, it was revealed that the assessee company had received a

sum of Rs.3.85 crores as subscription to its share capital from 16 parties

during the relevant period under consideration. 38,50,000 shares of Rs.10

each were allotted to such parties. The Assessing Officer has noted that the

issued and subscribed share capital increased from Rs.6,62,45,000 to Rs.

14,12,54,000 was resulted into an addition of Rs.7,50,00,000. Out of the

total addition, a sum of Rs.3.85 crores was found to have been received from

various outside parties about which the director of the assessee pleaded

ignorance in the statement recorded at the time of the survey. The Assessing

Officer had noted further that the survey action was based on the statements

of various entry operators, namely, Mr. Mukesh Gupta, Surender Pal Singh 8

and Rajan Jassal, wherein such entry operators categorically admitted

operating various concerns as dummy/fake enterprises using name to give

accommodation entries against cash received from the recipient of such

accommodation entries. They also admitted to have charged a commission

of 25 paise per hundred rupees of such conversion of undisclosed income by

the recipient of the relevant accommodation entries. The Assessing Officer

discussing the explanation of the assessee on the issue hold that the onus is

on the assessee and not on the department to establish that the entries routed

through such companies were not bogus entries as the entry-operator had

categorically admitted the fact to the prejudice of the assessee. The

Assessing Officer noted further that the assessee had provided evidences of

mere existence of such paper companies which fact was admitted by the

entry-operators themselves. No details of the sources from which the said

paper companies or bogus capital contributors received funds which were

spontaneously transferred to the assessee company as share capital were

provided by the assessee. The Assessing Officer noted further that the

assessee has also failed to establish the genuineness of the transactions by

failing to produce the secretarial records whereby presence of such

shareholders in any of the meetings held of the company could have been

ascertained. The Assessing Officer noted that it may be true that in the case 9

of a public issues, the company concerned cannot be expected to know every

detail pertaining to the identity as well as financial worth of each of its

subscribers. The company must, however, maintained and make available to

the Assessing Officer for his perusal all the information contained in the

statutory share application documents. In the case of private placement, the

legal regime would not be the same. The Assessing Officer has ultimately

made the addition under sec. 68 of the Act with this finding that the assessee

has failed to satisfactorily explain the real identity, creditworthiness and

genuineness of persons in whose names sums were found credited in the

books of account.

9. The Learned CIT(Appeals) has discussed the cases of assessee as well

as of the Assessing Officer on the issues and has deleted the additions vide

concluding para No.50 of the First Appellate Order. For a ready reference

the said para No 50 of the First Appellate Order is being reproduced

hereunder:

"50. I have considered the rival contentions and the documentary supporting evidences in paper book. On careful perusal of the above the following material facts have emerged, considered and are pertinent for decision on these grounds: companies as cash credit u/s. 68 is duly accounted for as share capital in the books of accounts

1. The addition of Rs. 3.85 crores considering the impugned share capital raised from 16 as cash credit u/s 68 is accounted for as share capital in the books of accounts duly disclosed as share capital in the 10

audited balance sheet filed along with the return of income for the pertinent assessment year before the date of survey.

2. As regards the statements of Mukesh Gupta, Surender Pal Singh, Rajjan Jassal it is seen that in the said statements the three deponents did not named the appellant company as hawala operator and have not denied the investment in the assessee company. The statements are definitely evidence but evidence befitting to take up the assessment or reassessment or initiate investigation however these statements cannot be the basis to make the additions in assessment specifically when assessee has shown that contents of the said statements are doubtful and distinguished from the facts of assessee company and that all the sixteen shareholder companies I have confirmed the transactions with assessee company vide latest confirmations. copies available at page number 256 to 271 of paper book and all confirmations are after the date of three deponents statements. and the same remained undisputed by any finding or material brought on record during the assessment. It is also seen that as regards the 5 investors M/s. Harpal Associates P. Ltd. M/s. Chitragandha Investment & Consultants p. Ltd. Mrs. Parvantra Capital and Fin Services P. Ltd, M/s. Vimka Impex P. Ltd and SGC Publishing P. Ltd these don't find any mention in the statement of Mukesh Gupta, Surender Pal Singh, Rajjan Jassal and no material in available on record during assessment proceedings for the basis to justify any addition in these companies.

3. As regards the survey u/s. 133A it correctly involves a comprehensive & extensive view of the business activities of the assessee & is carried only at places where the business is carried and the books of accounts etc are maintained. In the present case nothing was found and bought on record to suggest incriminating or defective books of accounts or any incriminating document or material that is found or any excess cash, inventory or other valuables may have been found so as to suggest any undisclosed income or undisclosed source of income or unexplained nature of share capital. There is no nexus between the additions of Rs. 3.85 crores and survey material that could support the addition. Therefore, the addition is made not on basis of any evidence during survey but on the basis of statement of Arvin Kumar Gupta recorded during the course of survey.

11 4. Arvin Kumar Gupta on the basis of whose statement the addition of Rs. 3.85 crores is made has specifically admitted at question number 18 and 21 of the statement that details and , genuineness of the share capital is as per the share holders register and there is no incriminating material during survey to disregard the above replies. Also, it is noted that the very basis of question no. 22 that cheques are 'accommodating entries in lieu of cash deposits with them in any of their accounts' and there is no material or bank statement of any account produced on record either during surveyor assessment to justify that question number 22 was factual and bonafide. As per material produced by assessee (page no 253 -255 of paper book) the sub- source of share capital Rs. 3.85 crores, except a insignificant amount of Rs.84,858 that too is sum total of miscellaneous small amounts, have been made through cheques duly credited in bank accounts of share holders.

5. 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, 13JA 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 said solely on the basis of statement during survey and without any supporting material any income was assessable as lawful income. The aforesaid trite law is also reiterated by CBDT at CBDT circular no. F.No.286/2/2003-IT (Inv.II) Dated 10th March 2003 in the following words

"Instances have come to the notice of the board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstances, 12

confessions during the course of search and seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income, which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statements during the course of search and seizure and survey operations no attempt should be made to obtain confessions as to the undisclosed income. Any action on the contrary shall be viewed adversely.

Further in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidence / materials gathered during the course of search / survey operations or thereafter while framing the relevant assessment orders."

Therefore, the statement of Arvin Kumar Gupta and which in this case is also been found to be forcefully retracted later on by assessee would not have much evidentiary value in quasi- judicial proceedings since not corroborated with material finding and documentary evidences either found during surveyor even brought on record later during assessment proceedings to indicate or support that assessee had undisclosed or unexplained income or assessee own funds have been rerouted to its own coffers in the form of share capital in the name of non-existing or fictitious entities or unidentifiable legal entities. These essential ingredients are lacking in the instant case. On the contrary the assessee has filed detailed particulars and documents of the 16 shareholders to corroborate the submissions and highlight the identity and creditworthiness of shareholders and genuineness of share subscription transaction as tabulated hereunder:

S. Name, Address and ROC Date of Status Income No. of Application Bank A/c No. Company Identification No. Incorp. as per Tax Share Money No., Bank (CIN) of Shareholder ROC Assessing Applied Amount Name & Record Officer (Rs.) Cheq Address No. Cheq Date

1. M V Marketing Pvt. Ltd. A-24, 11/12/92 Active Ward 6(1) 250,000 2,500,000 07CA1106624 Tagore Market, Kirti Nagar, Delhi Bank of New Delhi 276327 Punjab Ltd.

CIN: Sector-8, U51109DL1992PTC051334 19/01/2000 Rohini, Delhi 13

2. FNS Consultancy Pvt. Ltd. 27/02/89 Active Ward 100,000 1,000,000 2296 70/5391, Reghar Pura, Karol 11(3) Vijaya Bank Bagh, New Delhi Delhi 799694 Ram Nagar, CIN: Paharganj, U74140DL1989PTC035249 30/03/2000 New Delhi 3. Ethnic Creations Pvt. Ltd. WZ- 06/04/95 Active Ward 250,000 2,500,000 2834 134, Plot No.-170, Vishnu 11(2) Vijaya Bank Garden New Delhi Delhi 280103 Ram Nagar, CIN Paharganj, :151493DL1995PTC067204 17/02/2000 New Delhi 4. SGC Publishing Pvt. Ltd. A- 04/12/96 Active Ward 8(1) 250,000 2,500,000 2840 2/46C, MIG Flats, Paschim Delhi Vijaya Bank Vihar, New Delhi 820470 Ram Nagar, CIN Paharganj, :U22110DL1996PTC083625 28/02/2000 New Delhi Arun Finvest Pvt. Ltd. 24/01/97 Active Circle 1(3) 250,000 2841 50/12, Ashok Nagar, New Delhi Delhi 2,500,000 Vijaya Bank CIN:U67120DL1997PTC084638 Ram Nagar, 820470 Paharganj, New Delhi 24/02/2000 5. Baldev Harish Electricals Pvt. 26/07/90 Active Circle 1(5) 250,000 2,500,000 51887 Ltd.50/12, 3rd Floor, Ashok Delhi Corporation Nagar, New Delhi 111007 Bank Paschim CIN:U29303DL1990PTC040992 Vihar, New 11/03/2000 Delhi. 6. Chitragandha Investments & 11/03/88 Active Circle 1(5) 250,000 2,500,000 450833 Consultants H-23, Vikas Marg, Delhi Indian Bank Laxmi Nagar, New Delhi 376685 Main Branch, CIN:U65993DL1988PLC030924 Delhi. 14/03/2000 7. Polo Leasing & Finance Pvt. 03/08/95 Active Ward 250,000 2,500,000 2846 Ltd. A-4/181, Sector 17, Rohini, 14(3) VijayaBank New Delhi Delhi 821361 Ram Nagar CIN:U74899DL1995PTC071396 Paharganj, 15/03/2000 New Delhi. 8. Rajkar Electricals & Electronics 30/12/96 Active Ward 250,000 2,500,000 2242 Pvt. Ltd. 16B/9, DB Gupta Road, 15(2) VijayaBank Dev Nagar, New Delhi Delhi 454267 Ram Nagar Paharganj, CIN:U99999DL1996PTC084137 25/03/2000 New Delhi

9. Maestro Marketing & 31/03/97 Active Ward 6(1) 250,000 2,500,000 07CA1106866 Advertising P. Ltd W/58, Janki Delhi Bank of Vihar, Prem Nagar, Nangloi, 55833 Punjab Ltd. New Delhi. Sector-8, CIN:U99999DL1997PTC086268 28/03/2000 Rohini, Delhi 10. Fair And Square Export Pvt. Ltd. 28/07/89 Active Ward11(2) 250,000 2,500,000 VijayaBank A-24, Tagore Garden Ext., New Delhi Ram Nagar Delhi 884907 Paharganj, CIN:U51909DL1989PTC037147 New Delhi 04/02/2007 11. Satwant Singh Sodhi 08/03/88 Active Ward 7(4) 250,000 2,500,000 07CA1106425 Constructions Pvt. Ltd. Delhi Bank of W2-134, Plot No.170, Vishnu 275275 Punjab Ltd. Garden., New Delhi Sector-8, CIN:U45201DL1988PTC030886 31/01/2000 Rohini, Delhi 12. Tashi Constructors Pvt. Ltd. 22/07/96 Active Ward 250,000 2,500,000 2837 8 Nat Raj, Apartments, Plot 16(1) VijayaBank No.67, I.P. Ext., Delhi 820378 Ram Nagar New Delhi Paharganj, CIN:U99999DL1996PTC080536 21/02/2000 New Delhi 14

13. Vimka Impex Pvt. Ltd. 26/05/94 Active Ward 9(4) 250,000 2,500,000 19982/10 1756, Nai Basti, Naya Bazar, Delhi Punjab Delhi - 6 625260 National Bank CIN:U99999DL1994PTC59246 Chandi 01/03/2000 Chowk, Delhi 14. Parivartan Capital & Financial 14/12/94 Active Ward 250,000 2,500,000 01/003317 Services Pvt. 1798/52, H S Road, 15(1) Corporation Nai Wala, Karol Bagh, Delhi 491564 Bank Kamla New Delhi Nagar, Delhi CIN:U99999DL1994PTC063475 03/03/2000 15. Harpal Associates Pvt. Ltd. 01/02/95 Active Ward 250,000 2,500,000 2047 A-24, II-F, Tagore Market, 12(1) Vijaya Bank New Delhi-29 Delhi 821380 Ram Nagar CIN:U33111DL1995PTC064906 Paharganj, 21/03/2000 New Delhi

I have noted from above that all the share holders are incorporated and registered with the concerned registrar of companies, under the Companies Act, 1956and are allotted unique company identification number by the ROC, Ministry of Corporate Affairs, Government of India after they having completed necessary formalities and there status shown is Active. This indicates that company are regularly getting accounts audited and filing with ROC and also indicates that companies were existing at their addresses at the material time. All the shareholders are Income tax assessee and are assessed to tax under jurisdiction of different assessing officer as tabulated above. The genuineness of the share subscription transaction is verifiable from IT records, bank statements of the subscribers and all the shareholders share application forms, board resolution etc. Most important of all that the shareholders through latest confirmations confirmed share money transactions, which were filed before AO and are also available at page number 256-271 of paper book. The assessee's retraction and above submissions and documentary evidences have remained uncontroverted from AO and there is nothing on record from AO to disbelieve the IT assessment status or the bank account statements or the ROC certificate or share application forms or the latest confirmations of transactions of the shareholders. In the facts and circumstances I concur with the decision of Gujrat High Court at Kailashben Manharlal Chokshi 174 Taxman 466 (Guj) though rendered in context of admission u/s, 132(4) and which has greater legal sanctity than admission u/s. 133A which is not on oath that assessee could not be subjected to addition merely on the 15

basis of admission which is retracted and where revenue could not furnish any corroborative evidence in support of such admission.

Now, I proceed to check material facts w.r.t section 68 which provides where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source or explanation offered by him is not satisfactory in the opinion of AO the sum so credited may be charged to income tax as the income of assessee of that previous year. Therefore, tilt: section deal with circumstances in which the AO may consider such sum as cash credit due to lack of sufficient evidence. In this background and regarding the circumstances and sufficient evidences, it is noteworthy that Supreme Court has held in the case of Rohini Builders 254 ITR (st) 275 (SC) that it is not the business of the assessee to find out source of money of his creditors or genuineness of their transactions in case the AO was not satisfied with the cash amount deposited by those alleged creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under s. 69. The assessee had furnished complete details of the creditors along with their GIR numbers and the PAN numbers, as well as the confirmations with the copies of the assessment orders of the individual creditors.

The cash credits could not be said to be non-genuine on the ground that the summons that had been issued to some of the creditors could not be served or they failed to appear before the AO. The assessee has discharged his onus. In Nemi Chand Kothari 264 ITR 254 (Gau) it was held that where assessee had given full particulars of the creditors and the credited amounts were paid by creditors by account payees cheque and the assessee has established the identity of creditors, genuineness of transaction and creditworthiness of creditors. The burden has shifted to AO to prove the contrary. The same high court in the case Jalan Timbers 223 ITK 11 (Gau) has held that where ITO accepted returns of creditors it should go to mean that the amounts given by creditors are genuine. The same court in the case Khandelwal Constructions 227 ITR 900 (Gau) has laid down that section 68 empowers AO to make enquiry regarding cash credit. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee explanation the AO must make proper enquiries.

And in the absence 16

of proper enquiries addition cannot be sustained in appeal. Also, in the stated case Lovely Exports P. Ltd 216 CTR 195 (SC) Supreme Court held that where the assessee had given details of the subscribing share applicants. In case the Department alleged that applicants were bogus, it was free to proceed against the applicants. The share application money received could not be regarded as undisclosed income of the assessee company.

After considering the material facts and following pronouncements of courts in similar facts and circumstances, I am of the view that assessee has established the identity of the 16 share subscriber's, their creditworthiness and the genuineness of the share transaction with documentary evidence and as per law. Also, the assessee explained and substantiated the nature and source of credits found credited in the books of accounts during the relevant financial year as per requirements of section 68 of the IT Act,1961. I therefore hold that addition ofRs. 3.85 crores as unexplained cash credits is not maintainable as per law and facts of the case. Accordingly, the said addition of Rs.3,85,00,000/- is directed to be deleted.

51. Ground Nos.6 & 7 are in respect of addition of Rs.96,250/- as unexplained expenditure being commission @ 25 paise per 100 rupees paid for arranging entries of Rs.3,85,00,000/-. Since this addition is consequential to the addition of Rs.3,85,00,000/- being the accommodation entry, same is directed to be deleted as the main addition of Rs.3,85,00,000/- has already been directed to be deleted in view or the detailed reasons contained in my preceding paras".

10. On perusal of the First Appellate Order on the issue, we find that the

Learned CIT(Appeals) has discussed the issue in detail and has incorporated

the case of the Assessing Officer and of the assessee meeting out the

objections raised by the Assessing Officer justifying the additions which

runs in page nos. 1 to 42 of the First Appellate Order. In his findings, in para

No. 50 which also runs in seven pages, the Learned CIT(Appeals) has met 17

out the every important aspect of the case satisfying the ingredients of sec.

68 of the Act to justify the deletion of the addition. He noted that the share

capital of Rs.3.85 crores raised from sixteen companies is duly accounted for

as share capital in the books of account duly disclosed as share capital in the

audited balance sheet filed along with the return of income for the

assessment year under consideration before the date of survey. S/Shri

Mukesh Gupta, Surender Pal Singh and Rajan Jassal in their statements has

not named the assessee company as hawala operator and they have not

denied the investment in the assessee company. He noted that the statement

of the above parties cannot be the basis to make the additions in assessments

especially when assessee has shown that contents of the said statements are

doubtful and distinguished from the facts of the assessee company and that

all the sixteen shareholder companies have confirmed the transaction with

the assessee company vide latest confirmation and all confirmations are after

the date of the statements of the above three persons. He noted further that

those confirmations remained undisputed. The Learned CIT(Appeals) has

noted further that five investors, namely, Harpal Associates (P) Ltd.,

Chitragandha Investments & Consultants (P) Ltd., Parvantra Capital & Fin

Services (P) Ltd., Vimka Impex (P) Ltd. and SGC Publishing (P) Ltd. do nor

find any mention in the statements of above three persons and no material is 18

available on record during assessment proceedings for the basis to justify

any addition in these companies. The Learned CIT(Appeals) has noted

further that there is no nexus between the additions of Rs.3.85 crores and

survey material that could support the addition. The addition was made not

on the basis of any evidence found during the course of survey but on the

basis of statements of Shri Arvind Kumar Gupta recorded during the survey.

Shri Arvind Kumar Gupta on the basis of whose statements, the addition is

made has specifically admitted in question Nos. 18 & 21 of the statements

that details and genuineness of share capital is as per the shareholders

register and there is no incriminating material found during survey. Also that

the very basis of question No. 22 that cheques are accommodation entries in

lieu of cash deposit with them in any of their accounts is not supported by

material or bank statement of any account produced on record either during

survey or assessment to justify that question No.22 was factual and bona

fide. The Learned CIT(Appeals) has noted further that as per material

produced by assessee (page Nos. 253 to 255 of the paper book ), the sub-

source of share capital of Rs.3.85 crores, except an insignificant amount of

Rs. 84,858 that too is sum total of miscellaneous small amounts have been

made through cheques duly credited in bank accounts of shareholders.

Thereafter the Learned CIT(Appeals) at page Nos.44 to 46 of the First 19

Appellate Order has noted about the particulars and documents of 16

shareholders furnished by the assessee to corroborate the submissions and

highlighting the identity and creditworthiness of the shareholders and

genuineness of shares subscription transactions. The Learned CIT(Appeals)

has noted further that all the shareholders are incorporated and registered

with the concerned registar of companies under the Companies Act, 1956

and are allotted company identification number by the ROC, Ministry of

Corporate Affairs, Government of India after they having completed

necessary formalities and their status shown is active. He noted further that

all the shareholders are income-tax assessees and are assessed to tax under

jurisdiction of different Assessing Officers. The genuineness of the share

subscription transaction is verifiable from I.T. Records, bank statements of

the subscribers and all the share holders share application form, board's

resulation etc. Besides, the shareholders have confirmed the share money

transaction which were produced before the Assessing Officer. At the

conclusion of the paragraph, the Learned CIT(Appeals) has directed the

Assessing Officer to delete the addition on the basis that the assessee has

established the identity of the 16 share-subscribers, their creditworthiness

and genuineness of the share transactions with documentary evidence as per

law. Also that the assessee explained and substantiated the nature and source 20

of credits found credited in the books of account during the relevant

financial year. In absence of rebuttal of these material findings of the

Learned CIT(Appeals) by the Revenue, we do not find reason to interfere

with the First Appellate Order in this regard. The same is upheld. The

grounds are accordingly rejected.

11. In result, the appeal is dismissed.

C.O. No.28/Del/2009:

12. During the course of hearing, the Learned AR did not press this cross-

objection. We thus dismiss the cross objection as having been withdrawn.

13. In result, both the appeal and cross-objection are dismissed.

Order pronounced in the open court on 31.03.2015

Sd/- Sd/-

( PRAMOD KUMAR ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 31/03/2015 Mohan Lal Copy forwarded to: 1) Appellant 2) Respondent 3) CIT 4) CIT(Appeals) 5) DR:ITAT ASSISTANT REGISTRAR 21

Date Draft dictated on computer 18.03.2015 Draft placed before author 18.03.2015 Draft proposed & placed before the second member Draft discussed/approved by Second Member. Approved Draft comes to the Sr.PS/PS 31.03.2015 Kept for pronouncement on 31.03.2015 File sent to the Bench Clerk 31.03.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.