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ACIT, Circle-12(1), New Delhi. Vs Golden Falcon Industries Ltd., 71/3, Najafgarh Road, Rama Road, New Delhi-110015
December, 01st 2014
ITA No. 2046/Del/2012
Asstt.Year: 1998-99

              IN THE INCOME TAX APPELLATE TRIBUNAL
                   DELHI BENCHES `C' NEW DELHI

       BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
                         AND
       SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER

                        ITA NO. 2046/DEL/2012
                        ASSTT.YEAR: 1998-99

ACIT,                            vs Golden Falcon Industries Ltd.,
Circle-12(1),                        71/3, Najafgarh Road,
New Delhi.                            Rama Road, New Delhi-110015
                                      (PAN: AABCG7997E)
(Appellant)                            (Respondent)
                                  Appellant by: Shri Satpal Singh, Sr.DR
                                 Respondent by: Shri Rajeev Saxena, Adv.


                             O R D E R

PER CHANDRAMOHAN GARG, J.M.

       This appeal of the Revenue has been directed against the order of the

CIT(A)-XV, New Delhi dated 27.02.2012 in Appeal No.357/10-11/CIT(A)-XV

for AY 1998-99.


2.     The Revenue has raised only one ground in this appeal which reads as

under:-


              "1. Whether ld. CIT(A) was correct on facts and
          circumstances of the case and in law in deleting the addition of
          Rs.22,00,000/- made by the AO u/s 68 of the Act treating the
          share application money as unexplained cash credit."


                                                                             1
ITA No. 2046/Del/2012
Asstt.Year: 1998-99

3.     Briefly stated the facts giving rise to this appeal are that information was

received from the Investigation Wing that the assessee has taken

accommodation entries from certain entry operators and has introduced Rs.22

lakh in the garb of share capital from Frenzy Products (P) Ltd. and Kush

Leasing Pvt. Ltd. The AO issued notice u/s 148 of the Act for reopening of

assessment on 7.8.2009 and objections of the assessee against the said notice

were dismissed by the AO's order dated 24.12.2010. Subsequently, the AO

proceeded to frame reassessment and the AO made addition of Rs.22 lakh to the

income of the assessee, treating the share application money as unexplained

credit u/s 68 of the Income Tax Act, 1961. The aggrieved assessee preferred an

appeal before the CIT(A) which was allowed by passing the impugned order.

Now, the aggrieved revenue is before this Tribunal with the sole ground as

reproduced hereinabove.





4.     Apropos the only ground raised by the revenue, we have heard arguments

of both the sides and carefully perused the relevant material placed on record

including reassessment order, impugned order of the CIT(A), Paper Book filed

by the assessee spread over 51 pages and ratio of the decisions relied by both

the parties. Ld. DR submitted that the AO reopened the assessment by way of

issuing notice u/s 148 of the Act and objections to the reopening of the assessee

were found unsustainable.      The DR further contended that the AO rightly

observed that the entry operators have already given statement under oath to the


                                                                                 2
ITA No. 2046/Del/2012
Asstt.Year: 1998-99

income tax authorities that they are entry providers and have received cash from

the beneficiaries before issuing cheques to the respective entities, therefore, the

AO was right in making addition of Rs.22 lakh to the income of the assessee,

treating the amount received in the garb of share capital as unexplained credit

u/s 68 of the Act. The DR further contended that the CIT(A) was not justified

in deleting the impugned addition without any justified and reasonable cause.

The DR vehemently contended that the CIT(A) grossly erred in holding that the

transaction regarding share application money received by the assessee was a

genuine transaction and the same was not accommodation entry. The DR

finally prayed that the impugned order may be set aside by restoring that of the

AO.

5.     Replying to the above, ld. Counsel appearing for the assessee submitted

that when the assessee has discharged its initial onus of establishing the bona

fides of transaction by way of submitting identity of the subscribers, their

addresses, PAN Nos., assessment particulars etc. and the assessee has

discharged the initial onus to establish the bonafides of the transaction, then the

AO was not justified in ignoring various evidences submitted by the assessee.

Ld. Counsel further contended that the AO kept aside all relevant evidence

details and explanation of the assessee and simply relied on the statement of the

so-called entry providers recorded by the Investigation Wing of the Department

on the back of the assessee and the assessee was not provided due opportunity


                                                                                 3
ITA No. 2046/Del/2012
Asstt.Year: 1998-99

of cross-examining these so-called entry providers. Ld. Counsel vehemently

contended that the AO took a hyper technical approach in rejecting the evidence

and explanation of the assessee at the threshold without any examination and

verification and the AO was also not justified in making the addition simply

relying on the statement of the so-called entry providers recorded by the

Investigation Wing on the back of the assessee.


6.     On careful consideration of above submission and factual matrix of the

case, we observe that the CIT(A) has granted relief to the assessee by following

the decision of Hon'ble Supreme Court in the case of CIT vs Divine Leasing

& Finance Ltd. (CC375/2008 dated 21.1.08). The relevant operative part of

the impugned order reads as under:-


               "6.17. 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. 22 Lacs 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 and not in the hands of the appellant
        company. The appellant has relied upon the decision of
        Hon'ble Supreme Court in CIT Vs Divine Leasing and Finance
        Ltd. (CC 375/2008) dated 21/01/2008 wherein it was held -
        "We find no merit in this Special Leave Petition for the simple
        reason that if the share application money is received by the

                                                                               4
ITA No. 2046/Del/2012
Asstt.Year: 1998-99

        assessee-Company from alleged bogus shareholders, whose
        names are given to the AO, then the Department, is free to
        proceed to re-open their individual assessments in accordance
        with law."
        6.18. Reliance in this regard is also placed on the decision of
        Hon'ble Delhi High Court in the case of CIT vs. Pondy Metal
        and Rolling Mill Pvt Ltd (Delhi) (ITA No. 788/2006) dated
        19.02.2007, wherein the Hon'ble Court concurred with the
        findings of the Appellate Tribunal, Delhi Bench 'F' that once
        the identity of the investor has been manifest and is proved, the
        investment cannot be said to be the undisclosed income of the
        assessee. At best, the amount could be added in the hands of
        the investor but it certainly could not be treated as undisclosed
        income of the assessee. The appeal filed against the said
        decision, was dismissed by the Hon'ble Supreme Court in c.c.
        12860/2007 dated 08/01/2008.
        6.19. In the light of the above discussion, I am inclined to
        agree with the arguments and evidences provided by the
        appellant to substantiate that the transaction regarding Share
        Application Money received by it was genuine transactions
        and the same was not accommodation entry. I also do not find
        any evidence collected by the AO which could prove
        otherwise. Accordingly, the AO was not justified in treating the
        amount of share application money received by the appellant
        as its undisclosed income.
        In view of our aforesaid discussion, I delete the addition of 22
        Lacs, made by the AO under Section 68 of the Income Tax Act,
        1961."
7. In view of above, we are inclined to hold that the AO was not justified in rejecting the evidence and details submitted by the assessee without any further verification and examination of the same. We also observe that the AO made addition by accepting the statement of the alleged entry providers recorded by the Investigation Wing accepting the same as gospel truth without affording opportunity of cross-examination to the assessee. At this juncture, we 5 ITA No. 2046/Del/2012 Asstt.Year: 1998-99 respectfully take guidance from the decision of Hon'ble Apex Court in the case of CIT vs Divine Leasing and Finance Ltd. (supra) wherein dismissing the special writ petition of the department, their lordships held that if 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 assessment in accordance with law. Under the facts and circumstances of the present case, we are in agreement with the conclusion of the CIT(A) that once the identity of the investor has been manifested and proved by the assessee by submitting their names, addresses, PAN Nos. and other relevant details, then the capital receipt of share application money cannot be said to be the undisclosed income of the assessee and addition u/s 68 of the Act is not sustainable. However, the AO is free to proceed to reopen the individual assessments of the respective persons who provided share capital money. 8. Accordingly, we hold that there is no ambiguity, perversity or any other valid reason to interfere with the impugned order and we uphold the same. 9. In the result, sole ground of the revenue being devoid of merits is dismissed and resultantly, the appeal of the revenue is also dismissed. 6 ITA No. 2046/Del/2012 Asstt.Year: 1998-99 Order pronounced in the open court on 28.11.2014. Sd/- Sd/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 28th NOVEMBER, 2014 `GS' Copy forwarded to:- 1. Appellant 2. Respondent 3. C.I.T.(A) 4. C.I.T. 5. DR By Order Asstt.Registrar 7
 
 
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