The ITO, Ward-4(1), Ahmedabad V. Gay Loard Industries Ltd., Ahmedabad

ITA 2004/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6367 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-06-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 28-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Assessee Lawyers: SHRIS N DIVATIA
• Keywords: Unexplained cash credit; Bogus Share capital; Depreciation; Share purchase agreement; Assessment record; Onus to prove; Set aside
• Section: 133(6); 195; 80IA; 207; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI G. D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI D. K. TYAGI, JUDICIAL MEMBER I.T.A. NO. 2004/ AHD/2008 (ASSESSMENT YEAR 1996-97 ) ITO WARD 41), AHMEDABAD VS. GAY LOARD INDUSTRIES LTD., 5227, PHASE IV, GIDC VATVA, AHMEDABAD PAN/GIR NO. : (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI PRAKASH DUBEY SR. DR RESPONDENT BY: SHRIS N DIVATIA, AR O R D E R PER SHRI D. K. TYAGI, JM: THIS IS THE REVENUES APPEAL FILED AGAINST THE ORD ER DATED 14.03.2008 OF CIT(A) VIII, AHMEDABAD FOR THE ASSESS MENT YEAR 1996- 97. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CLT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE ADDITION OF RS.95,22,3507-, IN RESPECT OF INCREASE IN SHARE CAPITAL. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 6- IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINA L ASSESSMENT WAS COMPLETED U/S 144 OF THE ACT AND THEREAFTER THE ASS ESSMENT ORDER WAS SET ASIDE BY THE ITAT ON THE ISSUE RELATING TO ADDI TION ON ACCOUNT OF I.T.A.NO. 2004/AHD/2008 2 SHARE CAPITAL, UNSECURED LOAN, DISALLOWANCE ON DEPR ECIATION, AS WELL AS CLAIM U/S 80IA OF THE ACT AND WERE RESTORED BACK TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION. ACCORDINGLY, FRESH ASSESSM ENT PROCEEDINGS WERE STARTED BY THE A.O. THE ASSESSEE WAS ASKED TO FUR NISH THE COMPLETE DETAILS OF ADDITION IN SHARE CAPITAL ALONG WITH NAM E AND FULL ADDRESS OF THE PERSON WITH CONFIRMATION, CONTRA ACCOUNT, SOURC E OF INVESTMENT, THEIR INCOME TAX ASSESSMENT PARTICULARS, GENUINENES S OF INVESTMENT BY THE PROMOTERS, SHAREHOLDING PORTION OF THE ASSESSEE , COPIES OF SHARE APPLICATION MADE BY THE PERSON ALONG WITH LETTER OF ALLOTMENT WITH LEDGER FOLIO NUMBER, DISTINCTIVE NUMBER OF SHARE CE RTIFICATE AND COPIES OF SHARE CERTIFICATES ALLOTTED ETC. THE ASSESSEE F ILED DETAILS BEFORE THE A.O. AND AFTER TAKING INTO CONSIDERATION OF THE DET AILS, THE A.O. OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED THE DE TAILS AS REQUIRED BY HIM AND, THEREFORE, THE GENUINENESS OF THE CLAIM CO ULD NOT BE VERIFIED. THE A.O. SENT LETTERS TO THE CONCERNED PARTIES U/S 133(6) OF THE ACT FOR VERIFYING THE GENUINENESS, IN RESPONSE TO WHICH ONL Y AFFIDAVITS OF THE PERSONS WERE FILED BY THE ASSESSEE AND THE AFFIDAVI TS FILED WERE ONLY NOTARIZED BUT NOT SWORN BEFORE ANY MAGISTRATE. THE SE AFFIDAVITS WERE DRAFTED IN A SIMILAR MANNER AND THE INFORMATION GIV EN IN THE AFFIDAVIT WERE GATHERED FORM THE ASSESSEE ITSELF AND THE REPR ESENTATIVE INVESTORS DID NOT HAVE EXACT DATE AND CHEQUES NUMBERS AND THE NAMES OF THE BANK. THEREFORE, A.O. DID NOT ACCEPT THE SAME AND HE CONCLUDED THAT THE GENUINENESS OF INVESTMENT MADE BY THE PROMOTERS OF THE COMPANY WAS NOT PROVED BY THE ASSESSEE BY GIVING NECESSARY EVIDENCE. THEREFORE, ADDITION WAS MADE FOR INCREASE IN SHARE CAPITAL UNDER PROMOTER QUOTA OF RS.95,22,350/-. 3. BEFORE CIT(A) IT WAS ARGUED ON BEHALF OF THE ASS ESSEE THAT THE ASSESSEE COMPANY WAS CLOSED IN 1999 AND ALL THE ASS ETS OF THE COMPANY I.T.A.NO. 2004/AHD/2008 3 WERE ATTACHED WITH THE BANK OF BARODA ON THE BASIS OF WHATEVER BOOKS OF ACCOUNT AND ALL DOCUMENTS WERE AVAILABLE WITH TH E DIRECTOR, THE DIRECTOR TRIED TO FURNISH THE DETAILS BEFORE THE A .O. THE ASSESSEE TRIED TO OBTAIN FINANCIAL STATEMENT FROM BANK OF BARODA B UT THE BANK REFUSED TO FURNISH THE SAME ON ACCOUNT OF CHANGE IN SYSTEM IN MAINTAINING THE RECORDS. THE ASSESSEE HAD FURNISHED COMPLETE CHAR T OF DEPOSITS WITH NAMES OF APPLICANTS BEFORE THE A.O. A COPY OF WHICH WAS ALSO SUBMITTED BEFORE HIM. IT WAS ALSO SUBMITTED THAT ALL THE DEP OSITS WERE RECEIVED BY CHEQUES AND FOR PROVING THE GENUINENESS OF THE RECE IPTS THE ASSESSEE FILED AFFIDAVITS AND CONFIRMATION OF PAYMENTS BEFOR E THE A.O. THE ASSESSEE FURNISHED THEIR PAN IN THE AFFIDAVITS. TH EREFORE, THE IDENTITY OF SHARE APPLICANTS, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE APPLICANTS HAVE BEEN PROVED AS THEY ARE ASSESSE D TO INCOME TAX. THUS, IT WAS CLAIMED THAT THE ASSESSEE HAS DISCHARG ED THE ONUS OF PROVING THE CREDIT/DEPOSITS. IT WAS ALSO SUBMITTED THAT THE A.O. HAD ISSUED SUMMONS TO THE APPLICANTS AND SOME OF THEM H AVE DIRECTLY REPLIED TO THE A.O. THAT THE ABOVE PAYMENTS WERE MA DE BY THEM FOR ACQUIRING SHARES IN THE COMPANY. REGARDING APPLICA TION MONEY RECEIVED FORM NRI, CERTIFICATES OF BANK OF BARODA M ENTIONING AMOUNT RECEIVED IN US$ THROUGH PROPER CHANNEL AND OTHER EV IDENCES BY CERTIFICATE FORM HONG KONG BANK HAS BEEN FURNISHED TO THE A.O. ALTHOUGH THE ASSESSEE HAS FURNISHED THE EVIDENCES I N RELATION TO SHARE APPLICATION MONEY THE A.O. HAD NOT MADE ANY INQUIRY AND HAS MADE ADDITION OF RS.95,22,350/-. AS REGARDS THE AFFIDAV ITS AFFIRMED BY THE NOTARY IT WAS SUBMITTED THAT THE EVIDENTIARY VALUE OF AN AFFIDAVIT FILED BEFORE NOTARY IS NOT LESS THAN AFFIDAVIT BEFORE THE MAGISTRATE AND THAT IT IS HAD EQUAL EVIDENTIARY VALUE ON RECORD BEFORE THE MAGISTRATE. TAKING I.T.A.NO. 2004/AHD/2008 4 INTO CONSIDERATION THESE SUBMISSIONS OF THE ASSESSE E, THE LD. CIT(A) DELETED THE ADDITIONS BY OBSERVING AS UNDER: 7. I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTH ORISED REPRESENTATIVE CAREFULLY AND I HAVE GONE THROUGH TH E CHART FILED BY THE A.R. GIVING THE DATES OF RECEIPT OF SHARE AP PLICATION MONEY, CHEQUE NOS. AND NAMES OF THE ISSUING BANKS A ND ADDRESSES OF THE SHAREHOLDERS. THE AFFIDAVITS HAVE BEEN FILED BY ALL THE SHAREHOLDERS GIVING THEIR PANS AND CONFIR MING THE PAYMENTS MADE BY THEM AND GIVING THE CHEQUE NO., DA TE, AND DETAILS OF ISSUING BRANCH OF BANKS. THE ASSESSMENT RECORDS OF THE APPELLANT WERE CALLED FOR AND EXAMINED BY ME . IT I S FOUND FROM THE RECORDS THAT THE FOLLOWING SHARE APPLICANTS HAV E CONFIRMED BEFORE THE A.O. BY FILING AFFIDAVITS AND CONFIRMATI ONS I) KANDARP KINARIWALA II)KUSHKINARIWALA III) ASHISH KINARIWALA IV) PRADIP KINARIWALA V) SUJAL PALKIWALA VI) SAURIN PALKIWALA THE APPELLANT HAD ALSO FILED COPIES OF IT RETURNS O F HIMANSHU SHAH AND AMI H SHAH BEFORE THE A.O. 7.1 IN RESPECT OF DEPOSITS RECEIVED FROM NRI ACCOUN TS OF SIX SHAREHOLDERS SHRI JAGDISH R.SHAH AND OTHERS, THE A. R HAS FILED COPIES OF CONFIRMATION OF BANK OF BARODA FOR RECEIP T OF APPLICATION MONEY IN US DOLLARS. IN VIEW OF THE D ECISION OF RAJASTHAN HIGH COURT IN SHREE BARKHA SYNTHETICS AS THE PAN OF SHARE APPLICANTS, BANK DETAILS FOR RECEIPT OF SHARE APPLICATION MONEY HAVE BEEN FILED AND AFFIDAVITS HAVE BEEN FILE D CONFIRMING THE DEPOSIT OF SHARE APPLICATION MONEY OF THE SUBSC RIBERS AND GENUINENESS OF TRANSACTIONS HAVE BEEN PROVED, THE A DDITION OF UNEXPLAINED SHARE CAPITAL IS HELD TO BE NOT JUSTIFI ED. ALL OF THE SHAREHOLDERS ARE ASSESSED TO INCOME-TAX AND THEIR P ANS HAVE BEEN GIVEN IN AFFIDAVITS. 7.2 THE VARIOUS CASE LAWS IN THIS REGARD AR E DISCUSSED HEREUNDER; (A) CIT VS. DOWN TOWN HOSPITAL PVT. LTD. - 267 IT R 439 (GAUHATI ) I.T.A.NO. 2004/AHD/2008 5 HELD: NO ADDITION U/S 68 IS PERMISSIBLE WHERE THE S HAREHOLDERS ARE IDENTIFIED AND IT IS ESTABLISHED THAT THEY HAD INVESTED THE MONIES IN THE PURCHASE OF THE SHARE FOLLOWING THE R ATIO OF THE D'CCIDED CASES AS UNDER:- (I) CIT VS. STELLER INVESTMENT LTD. 1 92 ITR 287 (D ELHI } (II) CIT VS. STELLER INVESTMENT LTD. 25 1 ITR 263 ( SUPREME COURT) (B) CIT VS. DIVINE LEASING & FINANCE LTD.- 207 CTR (DEL) 38: HELD: BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO T HE HILT BY THE ASSESSEE. IF THE AO HARBOURS DOUBTS OF THE LEGI TIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CA RRY OUT THOROUGH INVESTIGATIONS. BUT IF THE AO FAILS TO UNE ARTH ANY WRONG OR ILLEGAL DEALING, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. (C) SHREE BARKHA SYNTHETICS LTD. VS. ACIT - 183 IT R 377 (RAJASTHAN ) HELD: WHERE THE SHARE APPLICATION MONEY IS RECEIVED THROUGH BANKING CHANNEL, THE ASSESSEE HAS ONLY TO PROVE THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICATION IS RECEI VED. ONCE THE EXISTENCE OF THE INVESTOR IS PROVED, THERE IS NO FU RTHER BURDEN ON THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HA S INVESTED THE SAID MONEY OR SOME OTHER PERSON HAS MADE INVESTMENT IN THE NAME OF THAT PERSON. (D) HINDUSTAN TEA TRADING CO.LTD. VS. CIT - 263 ITR 289 (CALCUTTA ) HELD: ONCE THE NATURE AND SOURCE OF THE FUND IS EXP LAINED, IT IS INCUMBENT ON THE AO TO CONSIDER THE SAME AND FORM A N OPINION WHETHER THE EXPLANATION IS SATISFACTORY OR NOT. (E) SUMAK POWERCAP LTD. VS ACIT - 90 TTJ (LUCKNOW ) 420 HELD: ASSESSEE HAVING PROVED THE GENUINENESS OF THE INVESTORS, BURDEN LYING ON HIM STOOD DISCHARGED AND IT WAS NOT REQUIRED TO FURTHER PROVE THE SOURCES OF INVESTMENT MADE BY THE SUBSCRIBERS. THEREFORE, ADDITION MADE BY THE A.O. AND SUSTAINED BY CIT(A) WAS TO BE DELETED. (F) SWAGAT SYNTHETICS (P) LTD. VS.ITO - 77 TTJ (JOD HPUR ) 987 I.T.A.NO. 2004/AHD/2008 6 HELD: ASSESSEE COMPANY NOT ONLY DISCLOSED THE IDENT ITIES OF THE SHARE APPLICANTS BUT ALSO PROVED THAT THE MONEY WAS INVESTED BY THEM - THEREFORE, THE ONUS SHIFTED TO THE DEPARTMEN T -DEPARTMENT HAS NOT DISCHARGED THE ONUS CAST UPON IT AFTERFRTIT IAL ONUS WAS DISCHARGED BY THE ASSESSEE BY FILING NECESSARY PART ICULARS. - ADDITION WAS, THEREFORE, LIABLE TO BE DELETED. (G) CIT VS. PRAGATI CO-OPERATIVE B_ANK LTD. - 278 I TR 170 (GUJARAT) HELD: THERE WAS NO OBLIGATION ON THE AO TO TREAT FI XED DEPOSITS AS INCOME OF THE ASSESSEE MERELY BECAUSE H E DID NOT FIND THE ASSESSEE'S EXPLANATION SATISFACTORY. ADMIT TEDLY, AO HAS NOT DISCHARGED THE ONUS OF PROVING THAT THE APP ARENT WAS NOT REAL. ON THE OTHER HAND THE ASSESSEE HAS FURNIS HED THE DETAILS WHICH WOULD DISCHARGE THE ONUS THAT L.AY ON THE ASSESSEE. (H) CIT V.ELECTRO POLYCHEM LTD. (294 ITR 661 ) (MAD) (I) S. HASTIMAL VS CIT REPORTED IN 49 ITR 273 (MADRAS ) HELD: AFTER THE LAPSE OF A DECADE, AN ASSESSEE SHOU LD NOT BE PLACED UPON THE RACK AND CALLED UPON TO EXPLAIN NOT MERELY THE ORIGIN AND SOURCE OF A CAPITAL CONTRIBUTION BUT THE ORIGIN AND SOURCE OF SOURCE AS WELL. THE DIFFICULTY ON THE PAR T OF ANY ASSESSEE TO EXPLAIN A TRANSACTION WHICH TOOK PLACE BEFORE A DECADE HAS TO BE BORNE IN MIND BY THE DEPARTMENT AN D SHOULD, UNDER NO CIRCUMSTANCES, BE UNDERESTIMATED OR TAKEN ADVANTAGE OF BY THEM. 7.3 IN THE INSTANT CASE THE APPELLANT HAD FURNISHED THE AFFIDAVITS OF THE APPLICANTS WHO HAD CONTRIBUTED TO THE SHARE CAPITAL OF THE COMPANY. THE A.O.DID NOT APPRECIATE THE ABOVE EVIDENCE ON RECORD BUT DECIDED THE ISSUE AGAINST TH E APPELLANT ALTHOUGH THE HON'BLE ITAT HAD RESTORED THE MATTER TO THE A.O. SO THAT HE COULD APPRECIATE THE EVIDENCE . 7.4 AS IT IS HELD BY THE DELHI HIGH COURT IN TH E CASE OF DOLPHIN CANPACK LID. 204 CTR 50 /283 ITR 190 (DEL), IF MONEY HAS BEEN RECEIVED IN CASH OR D.D. THEN THE ST ANDARD OF PROOF REQUIRED WOULD BE MORE VIGOROUS BUT IN THE IN STANT CASE THE I.T.A.NO. 2004/AHD/2008 7 SHARE APPLICATION MONEY HAS BEEN RECEIVED BY CHEQUE S THROUGH PROPER BANKING CHANNELS. IT HAS BEEN HELD IN THIS C ASE AS UNDER ; 'IN CASES WHERE THE CREDIT ENTRY RELATES TO THE ISS UE OF SHARE CAPITAL, THE INCOME-TAX OFFICER IS ALSO ENTITLED TO EXAMINE WHETHER THE ALLEGED SHAREHOLDERS DO IN FACT EXIST O R NOT. SUCH AN INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER I N THE PRESENT CASE. IN THE COURSE OF THE SAID INQUIRY, TH E ASSESSEE HAD DISCLOSED TO THE ASSESSING OFFICER NOT ONLY THE NAMES AND THE PARTICULARS OF THE SUBSCRIBERS OF THE SHARES BU T ALSO THEIR BANK ACCOUNTS AND THE PERMANENT ACCOUNT NUMBERS ISS UED BY THE INCOME-TAX DEPARTMENT. SUPERADDED TO ALL THIS W AS THE FACT THAT THE AMOUNT RECEIVED BY THE COMPANY WAS AL L BY WAY OF CHEQUES. THIS MATERIAL WAS, IN THE OPINION OF DI E TRIBUNAL, SUFFICIENT TO DISCHARGE THE ONUS THAT LAY UPON THE ASSESSEE. THIS IS EVIDENT FROM THE PASSAGE EXTRACTED FROM THE ORDER PASSED BY THE TRIBUNAL EARLIER. IN THE ABSENCE OF A NY PERVERSITY IN THE VIEW TAKEN BY THE TRIBUNAL OR ANY THING TO ESTABLISH CONCLUSIVELY THAT THE FINDING REGARDING T HE GENUINENESS OF THE SUBSCRIBERS AND THE TRANSACTION SUFFERS FROM ANY IRRATIONALITY, WE SEE NO SUBSTANTIAL QUEST ION OF LAW ARISING FOR OUR CONSIDERATION IN THIS APPEAL TO WAR RANT INTERFERENCE. THIS APPEAL ACCORDINGLY FAILS AND IS HEREBY DISMISSED.' 7.5 I DO NOT ACCEPT THE CONCLUSION OF THE ACX THAT THE AFFIDAVITS FILED BEFORE THE NOTARY HAVE NO EVIDENTIARY VALUE. THE AFFIDAVITS ARE AFFIRMATIONS CONFIRMING THE DEPOSITS BEFORE NOT ARY. THE APPELLANT HAS DISCHARGED ITS ONUS OF PROVING THE GE NUINENESS OF SHARE APPLICATION MONEY. THE A.O. HAS NOT COME OUT WITH ANY EVIDENCE TO SHOW THAT THE AFFIDAVITS GIVEN ARE NOT CORRECT. THE FACTS STATED IN THE AFFIDAVITS CAN NOT BE REJECTED IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY. THE ON OF PROVING TH E GENUINENESS OF THE SHARE CAPITAL RECEIVED BY IT HAS BEEN DISCHA RGED. THEREFORE, THE ADDITION MADE BY THE A.O. IS HELD TO BE NOT JUSTIFIED. 7.6 AS HELD IN THE CASE OF SHREE BARKHA SYNTHETICS LTD. VS. AC1T - 283 ITR 377 (RAJASTHAN) ,WHERE THE SHARE APP LICATION MONEY IS RECEIVED THROUGH BANKING CHANNEL, THE ASSE SSEE HAS ONLY TO PROVE THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICATION IS RECEIVED. ONCE THE EXISTENCE OF THE INVESTOR IS PROVED, THERE IS NO FURTHER BURDEN ON THE ASSESSEE TO PROVE I.T.A.NO. 2004/AHD/2008 8 WHETHER THAT PERSON ITSELF HAS INVESTED THE SAID MO NEY OR SOME OTHER PERSON HAS MADE INVESTMENT IN THE NAME OF THA T PERSON. THUS MAJORITY OF THE COURTS ARE OF THE VIEW THAT ON CE THE SHAREHOLDERS ARE IDENTIFIED, NO ADDITION CAN BE MAD E FOR UNEXPLAINED SHARE CAPITAL. THE APPELLANT HAS DISCHA RGED THE ONUS OF PROVING THE IDENTITY OF THE SHAREHOLDERS BY FURN ISHING CONFIRMATIONS AND AFFIDAVITS AND ALSO PROVED CREDIT WORTHINESS OF THE SHAREHOLDERS BY GIVING THE PAN OF THE APPLICANT S. AFTER THAT IT WAS THE DUTY OF THE A.O. TO DISPROVE THE SAME BY MAKING INQUIRIES, BUT THE A.O. HAS NOT MADE FURTHER INQUIR IES. IN VIEW OF THE ABOVE FACTS , AFTER EXAMINING THE AFFIDAVITS FI LED BY THE SHARE HOLDERS , 1 COME TO THE CONCLUSION THAT ALL THE SHA RE HOLDERS HAVE BEEN IDENTIFIED AND THEY HAVE ALSO CONFIRMED HAVING INVESTED IN SHARE CAPITAL . THUS THEIR IDENTITY IS CLEARLY ESTA BLISHED AND GENUINENESS OF THE TRANSACTIONS AND THEIR CREDITWOR THINESS HAS BEEN ESTABLISHED BY GIVING THEIR PAN. IN VIEW OF TH E ABOVE FACTS AND THE CASE LAWS DISCUSSED AS ABOVE, THE ADDITION MADE BY THE A.O. TOWARDS UNEXPLAINED SHARE CAPITAL IS DELETED. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS, WE FIND THAT THE ABOVE FINDINGS OF LD. CIT(A) ARE IN CONFOR MITY WITH THE RATIO LAID DOWN BY THE HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS LOVELY EXPORTS PVT. LTD. AS REPORTED IN 216 CTR 195 WHEREIN IT WAS HELD THAT IF THE IDENTITY OF SHARE HOLDER IS BROUGH T OUT ON RECORD, NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY WH O HAVE RECEIVED THE SHARE APPLICATION MONEY AND THE REVENUE IS FREE TO INITIATE PROCEEDINGS IN THE HANDS OF INVESTORS. 5. IN VIEW OF ABOVE, WE FIND NO INFIRMITY IN THE OR DER OF LD. CIT(A) AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN T HE CASE OF LOVELY EXPORTS PVT. LTD. (SUPRA), ORDER PASSED BY LD. CIT( A) IS UPHELD. 6. GROUNDS NO 2 & 3 READ AS UNDER: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FAC TS OF THE CASE IN DELETING THE ADDITION OF RS.5,01,200/- MADE U/S 68 OF THE ACT, BEING UNSECURED LOAN FROM M/S SARTHAK SECURITIES LT D AND M/S AMA FINVEST PVT. LTD. I.T.A.NO. 2004/AHD/2008 9 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN HOLDING THAT THE ASSESSING OFFICER HAD ACCEPTED SHA RE APPLICATION MONEY FROM M/S SARTHAK SECURITIES LTD, AND M/S AMA FINVEST PVT. LTD. AS GENUINE, WHERE NO SUCH EXAMINATION HAD BEEN CARRIED OUT BY THE ASSESSING OFFICER IN RESPECT OF SHARE AP PLICATION MONEY. 7. THE A.O. DURING THE ASSESSMENT PROCEEDINGS OBSER VED THAT THE ASSESSEE HAD NOT FURNISHED ANY DETAIL IN RESPECT OF UNSECURED LOANS AND NOT FURNISHED CONFIRMATION OF THE CONCERNED PARTIES , THEREFORE, HE MADE ADDITION OF RS.5,01,200/- AS UNEXPLAINED CASH CREDI T. BEFORE CIT(A), IT WAS ARGUED THAT UNSECURED LOANS OF RS.5 LACS HAS BE EN RECEIVED FROM SARTHAK SECURITIES LTD. AND RS.25,000/- FROM AMA FI NVEST PVT. LTD. THESE AMOUNTS WERE RECEIVED BY CHEQUES AND THE SHAR ES WERE REQUIRED BY THE ABOVE TWO PARTIES AT THE BOUGHT DEAL OF RS.7 WERE CHARGED AS PREMIUM BY THE SAID INVESTOR. THE ASSESSEE FURNISH ED COPIES OF ACCOUNTS OF THE SAID PARTIES AND SUBMITTED THAT AT PRESENT THE ASSESSEE DID NOT HAVE ANY IDEA ABOUT THE WHEREABOUTS OF THES E TWO PARTIES. WHEN ASKED TO FURNISH THE COPIES OF LEDGER ACCOUNT, THE SAME WERE PRODUCED BEFORE THE LD. CIT(A) AND THE ASSESSEE ALSO FILED C OPIES OF ACCOUNTS OF SARTHAK SECURITIES AND AMA FINVEST PVT. LTD. TAKIN G INTO CONSIDERATION THESE SUBMISSIONS, THE LD. CIT(A) DELETED THE ADDIT ION BY OBSERVING AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R CARE FULLY. THE A.R. HAS POINTED OUT THAT AN AMOUNT OF RS.3 CRORES HAS BEEN RECEIVED FROM SHARTHAK SECURITIES LTD AS SHARE APPL ICATION MONEY AND AN AMOUNT OF RS.62,80,0007- FROM AMA FINV EST PVT. LTD AS SHARE APPLICATION MONEY THROUGH CHEQUES . THE SAID SHARE APPLICATION MONEY HAVE BEEN ACCEPTED BY THE A .O AS GENUINE, WHEREAS THE CREDITS OF RS.5 LAKHS AND RS. 25,000/- RECEIVED FROM THESE TWO PARTIES RESPECTIVELY BY CHE QUES HAVE NOT BEEN ACCEPTED AS GENUINE. AS THE A.O. HAS ACCEP TED THE SHARE APPLICATION MONEY RECEIVED FROM THESE TWO PAR TIES AS I.T.A.NO. 2004/AHD/2008 10 GENUINE, I AGREE WITH THE CONTENTION OF THE A.R. TH AT THE CREDITS FROM THESE TWO PARTIES ARE GENUINE. ACCORDINGLY THE ADDITION OF UNEXPLAINED CASH CREDITS OF RS.5,10,2007- IS HELD T O HE NOT JUSTIFIED AND THE SAME IS DELETED. 8. BEFORE US, THE ABOVE FINDING OF THE LD. CIT(A) R EMAINED UNCONTROVERTED BY THE REVENUE BY BRINGING ANYTHING ON RECORD TO THE CONTRARY. THEREFORE, THE ORDER OF LD. CIT(A) IS HE REBY UPHELD. THIS GROUND OF THE REVENUE STANDS DISMISSED. 9. GROUND NO.4 READS AS UNDER: 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FA CTS OF THE CASE IN ADMITTING THE ADDITIONAL CLAIM IN RESPECT OF DEP RECIATION OF RS.15,17,4937- AND IN DIRECTING THE A.O TO ALLOW TH E CLAIM OF DEPRECIATION OF THE ASSESSEE. 10. THE BRIEF FACTS OF THE CASE RELATING TO THIS GR OUND ARE THAT THE ASSESSEE FILED AN ADDITIONAL GROUND OF APPEAL BEFOR E LD. CIT(A) STATING THAT THE CLAIM OF DEPRECIATION OF RS.15,17,493/- HA S BEEN REJECTED BY THE A.O. WITHOUT GIVING ANY REASON. A CHART SHOWING DE PRECIATION WAS FURNISHED ALONG WITH THE RETURN OF INCOME AND ALL T HE DETAILS WERE FILED IN THE AUDIT REPORT AND IN THE COMPUTATION OF TOTAL INCOME ON THE BASIS OF WHICH THE ASSESSEE COMPANY HAD CLAIMED DEPRECIATION IN THE RETURN OF INCOME. AS THIS GROUND WAS ARISING OUT OF THE ASSE SSMENT ORDER AND DID NOT REQUIRED FRESH INVESTIGATION OF FACTS, THE SAME WAS ADMITTED BY THE LD. CIT(A). HE FURTHER FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN SALES OF RS.1.76 CRORES AND HAD CONSUMED RAW MATERIAL OF RS.75.81 LACS. THE, LD. CIT(A) WAS OF THE VIEW THAT MANUFACTURING ACTIVITY WAS CARRIED ON DURING THE YE AR UNDER CONSIDERATIONS AND THE PLANT & MACHINERY WAS ALSO U SED AND THEREFORE, THE ASSESSEE WAS ELIGIBLE FOR DEPRECIATION AND HENC E HE DIRECTED THE A.O. TO CONSIDER AND ALLOW THE CLAIM OF DEPRECIATIO N TO THE ASSESSEE. I.T.A.NO. 2004/AHD/2008 11 WE FIND NO INFIRMITY IN THESE DIRECTIONS OF LD. CIT (A) AS THE FACTS WHICH WERE CONSIDERED BY LD. CIT(A) WHILE GIVING TH IS DECISION, WERE NOT DISPUTED BY THE REVENUE AT THE TIME OF HEARING BEFORE US AND, THEREFORE, THE ORDER PASSED BY LD. CIT(A) ON THIS I SSUE IS ALSO UPHELD. THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE 2011. SD./- SD./- (G. D. AGARWAL) (D.K.TYAGI) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED :17 TH JUNE, 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE 1. DATE OF DICTATION 13/6/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14/6/11 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 15/6/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 17/6/11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 17/6/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17/6/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .. I.T.A.NO2004/AHD/2008 12