On submission of proof establishing identity and creditworthiness of shareholder share application money cannot be in disputes for assessment

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH “G” DELHI)

BEFORE SHRI G.E. VEERABHADRAPPA, HON’BLE PRESIDENT

AND SHRI A.D. JAIN, JUDICIAL MEMBER

ITA NO. 3045(Del)2010

Assessment year: 2006-07

M/s. Smart Projects (P)Ltd.                                          Income Tax Officer,

6, Kala Niketan, Kewal Park, Azadpur,    v.      Ward 9(1), New Delhi. New Delhi-110033.

(Appellant)                                                           (Respondent)

Appellant by: Dr. Rakesh Gupta, Advocate

Respondent by: Shri Niranjan Kauli, CIT/DR

ORDER

PER A.D. JAIN, J.M.

This is assessee’s appeal for the assessment year 2006-07 against the order dated 30.3.2010 passed by the learned Commissioner of Income Tax(Appeals) XII, New Delhi, taking the following grounds:-

“1. That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in confirming the action of the ld.AO in making addition of ` 15,00,000/- being share application money received during the year holding the same as unexplained cash credit u/s 68 of the Act.

2.  That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in confirming the action of the ld. AO in making addition of ` 15,000/- (i.e. 1% of 15,00,000/-) on account of alleged commission paid.

3.  That in any case and in any view of the matter, the action of the ld. CIT(A) in confirming the action of the ld. AO in making the aggregate addition of ` 15,15,000/- and in framing the impugned assessment is illegal, void ab initio, contrary to law and facts, beyond jurisdiction and deserves to be quashed.

4.  That having regard to the facts and circumstances of the case, the  ld. CIT(A) has erred in law and on facts in confirming the action of  the ld. AO in framing the assessment in violation of principles of  natural justice inasmuch as passing the impugned order without  confronting the entire adverse material used against the assessee and by recording the incorrect facts and findings and without providing  adequate    opportunity  of  hearing  and  without  providing  the  opportunity of cross examination of the persons whose statements wee  used against the assessee.

5.  That in any case and in any view of the matter action of the ld. CIT(A) in confirming the action of the ld. AO in making the impugned addition and framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds. 

6.  That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in not reversing the action of ld. AO in  charging interest u/s 234A, 234B, 234C & 234D.

7.  That the appellant craves to leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

2.         Ground No.7 is general.

3.         Ground Nos. 1 to 5 are against the action of the learned CIT(A) in

confirming the addition of 15,00,000/- being share application money received during the year and that of 15,000/-, being 1% of 15,00,000/-, on account of alleged commission paid.

4.         The facts are that the assessee company, engaged in the business of real estate, stated to have received the following as share application money during the year:

5.         The AO observed that as a result of investigation carried out by the Investigation Wing, Delhi, it was found that these companies/persons were giving only accommodation entries and were not doing any general  business  or investment; that the group of companies was being used by one Shri  Pradeep Jindal who had been examined by the Investigation Wing of the  Department; that the assessee was intimated, through notice that the above  companies were not reliable/genuine; and that they were not in a position to advance the deposits.   The copies of sworn statement of the entry operator  was also provided to the assessee, intimating that the said persons had affirmed  in  their  statements  that  they  were  not  doing  any  genuine business/investment, but were only giving accommodation entries after taking cash from the parties, which was routed through the accounts maintained by them for giving cheques in the shape of share application, share capital, loans, gifts, etc.    The assessee was also informed that as such there was no genuine business transaction, the identity of the persons as investor did not stand established; and that the banking channel is not a bona fide banking transaction but a manipulated device.   The assessee was told that in case the assessee was not able to substantiate its claim, the amount received as share application money would be treated as the undisclosed income of the assessee, being unexplained cash credits u/s 68 of the I.T. Act. The assessee was required to present the Directors/Principal Officers of these companies for cross examination and to prove their credit worthiness and genuineness of the transactions.   The assessee, however, remained unable to produce these persons before the AO.

6.         The AO observed from the information furnished by the Investigation Wing of the Department, that the assessee had taken  bogus entries in the  form of share application from the persons engaged in this trade; that in his statement  dated 15.4.04  recorded  by  the  Investigation  Wing  of  the Department, Shri Pradeep Jindal had admitted that he was Director in various companies including M/s. Gaurav Holding (P)Ltd., M/s. Reena Oil Industry (P)Ltd. and M/s. Reena Plastic Pipes (P)Ltd.; that he admitted that the cash deposited in various bank accounts operated by him for the entire business was received from various parties and it was shown as sale of shares routed through various accounts and cheques/pay orders/DDs were subsequently issued to the parties as well as  necessary documents were signed and delivered; that there was no actual sale/purchase and transfer of shares; that he was earning commission 0.25% to 0.15% from the above dealings; that he was getting his commission for handling the cash and routing the said transactions; that various persons like Arun Lata Verma, Gian Chand, Madhu Bhatnagar, Rachna Bansal, Ram Kishore Bansal, etc. were working for him and the transactions were also routed through the individual accounts on his instructions and he used to give them incentive of  0.05% to 1.10% for the transactions.   The  AO observed that since the assessee    had    not    produced    the    concerned    persons/Principal Officers/Directors of M/s. Reena Oil Industry (P)Ltd, M/s. Gaurav Holding  (P)Ltd., and M/s. Reena Plastic Pipes (P)Ltd., it had failed to discharge its onus in respect of the amount credited in its accounts in the guise of share capital; that the confirmations filed by the assessee were not sufficient or acceptable in the light of the sworn statement of Shri Pradeep Jindal.   The transactions were found to be completely unexplained and bogus.  It was held that the assessee had failed to prove the credit worthiness of the depositors/investors and the genuineness of the transactions; and that the transactions had been found to be merely a colourable device to defraud the revenue by introducing the assessee’s own unexplained money in the guise of share application money. The total amount of ` 15,00,000/- was,  therefore, treated as unexplained cash credit in the hands of the assessee u/s  68 of the I.T. Act and added to the income of The assessee company. Further, in view of the statement of Shri Pradeep Jindal, an amount of` 15,000/- @ 1%  of the total entries of ` 15,00,000/- taken by the assessee, was also added as expenditure incurred on account of commission and extra charge paid by the assessee on the services of the entry operators.

7. By virtue of the impugned order, the ld. CIT(A) confirmed these additions.   This brings the assessee in further appeal before us.

8. Before us, challenging the impugned order, the learned counsel for the assessee has submitted that the ld. CIT(A)has erred in confirming the additions wrongly made; that the ld. CIT(A) has failed to appreciate that the assessee was not confronted with the entire adverse material used against the assessee; and that the additions were made by recording  incorrect facts and findings without providing adequate opportunity of hearing and also without providing opportunity of cross examination of the persons whose statement was used against the assessee.  It has been submitted that in response to the AO’s query, the assessee had duly submitted all the requisite details and evidence along with the books of account and vouchers to corroborate and substantiate  the  transactions.    It  has  been  pointed  out    that  detailed submissions (copy at pages 138 to 169 of the Assessee’s Paper Book, “APB” for short), were filed before the ld. CIT(A); that the assessee filed reply dated 7.2.08 (APB 10) before the AO, submitting various details; that vide letter dated 24.2.08 (APB 11), confirmations, bank statement and ITRs of the creditors were filed.   Attention has been drawn to the copies of acknowledgement of return of income for the assessment year 2006-07 (APB 13), computation of income for assessment year 2006-07 (APB 14), letter dated 17.3.08 (APB 15) filed before the AO and, balance sheets of the companies from whom the share capital was received.  It has been submitted that the assessee had specifically requested the AO to grant an opportunity to cross examine Shri Pradeep Jindal, whose statement had been relied on by the  AO to make the additions; that the following evidences were submitted  with regard to M/s. Reena Oil Industry Pvt. Ltd.:-

The evidences regarding M/s. Reena Oil Industry Pvt. Ltd.

1. MOA and Certificate of incorporation           PB 16-27

2. Balance Sheet and Profit and Loss Account  PB 28-32

3. Annual Return filed with ROC           PB 33-47

4. Share Application Form        PB 48

5. Confirmation PB 49

6. Acknowledgement of ITR for A.Y. 2004-05 PB 50

7. Bank Statement        PB 52

8. Allotment Advice      PB 53                         

9. Share Certificate       PB 54

9.         It has been pointed out that the Schedule showing the details of investments of the company is at APB 31; that this Schedule proves the genuineness of the transaction; that the Annual Return (APB 35 to 36) shows that Shri Pradeep Jindal was not the Director of the aforesaid company during the year; that further, the statement of Shri Pradeep Jindal was recorded at the back of the AO and the assessee was deprived of rebutting the same.

10.       The learned counsel has submitted that apropos M/s. Reena Plastic Pipes (P)Ltd., the amount was received from this party in assessment year 2005-06  and  not  in  assessment  year 2006-07,  i.e.,  the  year  under  consideration; that APB 36 is the bank account which shows this amount to have been received on 15.3.2005, falling in assessment year            2004-05,relevant to assessment year 2005-06; that this submission was duly taken before the ld. CIT(A), as available from APB 150; and that the following evidences were produced with regard to this party:-

1. Certificate of incorporation    PB 55

2. Memorandum of Association            PB 56-65

3. Balance Sheet & profit and Loss account      PB 66-70

4. Share Application Form showing cheque dt.11.3.05    PB 71

5. Confirmation showing cheque dated 11.03.05           PB 72

6. Acknowledgement of ITR for A.Y.2004-05  PB 73

7. Bank Statement        PB 74

8. Allotment Advice      PB 75

9. Share Certificate       PB 76

10.Form No. 32           PB 77

It has been submitted that APB 70 is the Schedule showing the details of investments of the company, reflecting the investment in the assessee company also; that  form No. 32 (APB 77) shows that Shri Pradeep Jindal was inducted as the Director of the assessee on 8.12.05, establishing that he was not the Director of the company either at the time of transaction, or on the date of the recording of his statement.

10 A.   With regard to M/s. Gaurav Holding Pvt. Ltd., the following evidence has been stated to have been filed:-The evidences regarding M/s. Gaurav Holding Pvt. Ltd.

1. Certificate of incorporation    PB 78

2. Memorandum of Association            PB 79-87

3. Balance Sheet and Profit and Loss account   PB 88-94

4. Confirmation PB 95

5. Share Application Form        PB 96

6. Acknowledgement of ITR for A.Y. 2005-06 PB 97

7. Bank Statement        PB 98

8. Allotment Advice      PB 99

9. Share Certificate       PB 100                                               

It has further been submitted that APB 92, i.e., the Schedule showing the details of investment of the company duly reflects the investment in the assessee company; that APB 102 is the certificate of incorporation of the assessee company; that a copy of the Memorandum of Association and Articles of Association of the assessee company are at APB 101 to 116A; that the Tax Audit Report, Balance Sheet and Profit and Loss Account of the assessee company for the year is at APB 117 to 135; and that the Bank Statement of the assessee company showing the transactions in question is at APB 136 to 137.

11.       It has been, on the basis of the above evidence, submitted that it is thus clear that the assessee had duly established the identity and credit worthiness of the creditors, as also the genuineness of the transactions.  It has been contended that when the assessee was handed over the statement of Shri Pradeep Jindal, vide letter dated         17.3.08 (APB 15), the assessee, refuting the said statement, requested for cross examination of Shri Jindal ; that however, no such opportunity of cross examination was afforded to the assessee and the additions were made relying solely on the said statement of  Shri Pradeep Jindal; that before the ld. CIT(A), vide written submissions (APB 148 to 150) as well as by way of arguments, it was contended that no adverse inference could be drawn from the statement of Shri Pradeep Jindal against the assessee; that it is pertinent that whereas the statement of Shri Pradeep Jindal was recorded on 15.4.04, the share capital was received by the assessee in March and May, 2005 and so, the statement was not applicable to the transactions in question; that the ld. CIT(A) observed, inter alia, that the assessee’s contention that the AO had not afforded opportunity to the assessee to cross examine Shri Pradeep Jindal, could not be accepted since the AO had made all information available on record; and that this despite the fact that the assessee had made  specific request for cross examination, as above, whereas the AO had not accepted this request and had gone on to make the additions, even though the statement of Pradeep Jindal was recorded at the back of the assessee.   The learned counsel has placed reliance on the following decisions:-

1.         “CIT v. Ashwani Gupta”, 322 ITR 396 (DHC);

2.         “Prakash Chand Nahta v. CIT”,(HC)(MP), 218 CTR 367;

3.         “CIT v. SMC Global Share Brokers”, 288 ITR 345(Del);

4.         “CIT v. Rajesh Kumar”, ITA No. 545/2007 dt. 4.4.2008; &

5.         “ITO v. Dr. Pushpa Gupta”, ITA No. 4468(Del)2004.

12.       The learned counsel has further submitted that as held by various Courts, including the Hon’ble Supreme Court and Hon’ble jurisdictional Delhi High Court, once the identity of the shareholders had been established, no addition can be made in the hands of the recipient company.   Reliance in this regard has been placed on “CIT v. Lovely Exports Pvt. Ltd.”, 216 CTR (SC) 195.

13.       The learned counsel has then contended that the learned CIT(A) has gone wrong in observing that Shri Pradeep Jindal was the assessee’s witness and so, there was no question of giving the assessee an opportunity to cross examine him; that in “Kishin Chand Chellaram”, 125 ITR 713(SC), it has been held that where the evidence in the form of a statement of a third party is used against the assessee without confronting the assessee and without adequate opportunity  of  cross  examination, it does  not constitute  any material evidence at all; that therefore, any addition based thereon is not in accordance with law; that in “Sona Electric Co.”, 152 ITR 507(Del), it has been held that where the grounds themselves for making the addition are based on no evidence, no question of presumption arises; that in “Menaka Gandhi v. Union of India” AIR 1978 SC 597, it has been held that a judicial decision or an administrative decision rendered or an order made in violation of Rule of Audi Alterem Partem is null and void and the order made in such a case needs to be struck down on that score itself.

14.       The learned counsel has further contended that APB 33 to 47 is a copy of the Annual Return of Reena Oil Industry (P)Ltd., filed with ROC; that therefrom, it is clear that Pradeep Jindal was never a Director in the said company; that form No. 32 of Reena Plastic Pipes (P)Ltd.(APB 7) shows that Shri Pradeep Jindal was inducted as a Director w.e.f. 8.12.05; that however, the transaction was entered into on 15.3.05, making it clear that this transaction did not come about in the year under consideration; that this fact is also verifiable from the share application form (APB 71) and the bank statement of Reena Plastic Pipes (P)Ltd. (APB 74); that from these facts, it is evident that Shri Jindal was neither a Director of the company on the date of recording of his statement,  nor was he the Director of the company on the date of the transaction.

15.       It has been further submitted by the learned counsel that the AO wrongly observed that the assessee company was unwilling to produce the Principal Officers/Directors of M/s. Reena Oil Industry (P)Ltd.,M/s. Gaurav Holding (P)Ltd. and M/s. Reena Plastic Pipes (P)Ltd.; that the assessee had never stated any such unwillingness; that rather, the assessee had specifically asked for the cross examination for being allowed opportunity to cross examine the concerned persons of the companies many times, as evident from the assessee’s letter dated 17.3.08, as above, addressed to the AO.

16.       Further, it has been averred that the AO wrongly observed that the bank’s accounts of the creditor companies were maintained by Shri Pradeep Jindal; that ample material belying this observation was placed before the AO; that in the  statement of Shri Pradeep Jindal, the bank account through which the concerned transaction had taken place, is nowhere mentioned; that the concerned transaction was through Vijay Bank; that Shri Pradeep Jindal never made mention of this bank in his statement; that the genuineness of the transaction is also available clearly from the bank statement of M/s. Veena Oil Industry (P)Ltd. (APB 52), the bank statement of M/s. Gaurav Holding (P)Ltd.(APB 98) and the bank statement of  M/s. Reena Plastic Pipes (P)Ltd.(APB 74).

17.       Lastly, it has been contended that the addition of15,000/- as commission amount is also, consequential, without basis, deserving to be deleted along with the main addition of ` 15,00,000/-.

18.       The ld. DR, on the other hand, has staunchly supported the impugned order.  It has been submitted that it was clear from the investigation carried on by the Investigation Wing of the  Department that the three companies involved were giving only accommodation entries rather than doing any genuine business or making any investment; that these companies were used by Shri Pradeep Jindal; that in his statement before the Investigation Wing of the Department, Shri Jindal had made an inculpatory statement; that the sworn statements of the entry operators were duly supplied to the assessee; that in these statements, the entry operators had categorically admitted that they were not doing any genuine business or investment but were only giving accommodation entries on taking cash from the parties which was routed through the accounts maintained for giving cheques in the shape of share application, share capital, loans, gifts, etc.; that the assessee  was specifically  asked  to  produce  the  Directors/Principal  Officers  of  these companies for cross examination and to prove their credit worthiness and the genuineness of the transactions; that however, the counsel for the assessee  had expressed  the unwillingness of the assessee company to produce the Principal Officers/Directors of these companies; that it was in the backdrop of these facts that the AO correctly made the additions; that the matter was further clarified by the AO before the ld. CIT(A) on remand; that in the remand report dated 27.7.07, the AO had categorically stated that enquiries were made from Vijay Bank, Azadpur, New Delhi, in which, it was found that Shri Pradeep Jindal , the proprietor of M/s.Raja Agencies, Azadpur, New Delhi, had deposited cash given by the assessee in the proprietorship account and had transferred this cash to the company accounts maintained by him, from where, the entries were given to him by the assessee company; and that the address of  Laxman Singh Satyapal, proprietor of M/s. Rani Enterprises, and Pradeep Jindal, proprietor of M/s. Raja Agencies, were also the same in Azadpur, Delhi.  The ld. DR has further contended that in the facts and circumstances of the case, the ld. CIT(A) has correctly observed that the AO had made all the information on record available to the assessee; that the assessee’s contention that it was not given an opportunity to cross examine Shri Pradeep Jindal could not be accepted; that  actually, it was the assessee’s onus to establish the genuineness of the transactions and the identity and capacity to pay off the creditor companies; that the assessee company  had  received  the  money  in  its  books  of  account  and  the Department had not collected information from any outside party; that the assessee could not wash its hands off  by merely taking specious plea that it was not concerned about the source of the source, i.e., the source of the cash deposit in the account wherefrom the share application money was received by the assessee; that in the statement of Shri Pradeep Jindal, he had stated that all the companies that he was dealing were dealing in providing accommodation entries on commission basis;   that in these facts, there is no error whatsoever in the order of the ld. CIT(A) and it cannot be, in any

manner be said that the additions have been wrongly confirmed; and that therefore, there being no merit therein, the appeal filed by the assessee be dismissed.

19.       We have heard the parties and have perused the material on record. The assessee had received 5,00,000/- each from Reena Oil Industry (P)Ltd.,  Reena  Plastic  Pipes (P)Ltd.  and  Gaurav  Holdings (P)Ltd.,respectively, as share application money, during the year.   Before the AO, the assessee filed replies dated 7.2.08 (APB 10) and 24.2.08 (APB 11), giving the required details. Besides, certificate of incorporation of the assessee company (APB 102), Memorandum of Association and Articles of Association of the assessee company (APB 101 to 116 A), Tax Audit Report, Balance Sheet and Profit and Loss Account of the assessee for the year under consideration (APB 117 to 135) and Bank Statement (APB 136 and 137) of the assessee company for the concerned period, showing the related   transactions   with   all   the   creditor   parties   were   also   filed. Acknowledgement of return of income for the year under consideration is at 13, whereas computation of income for the year is at APB 14.   Vide letter dated 17.3.08 (APB 15) the assessee submitted the balance sheets of the creditor companies and asked for cross examination of Pradeep Jindal, on whose statement, the AO had sought to rely.

20.       Apropos M/s. Reena Oil Industry (P)Ltd., the assessee filed before the AO an MOU and Certificate of Incorporation, Balance Sheet and Profit and Loss Account, Annual Return filed with the  ROC, Share Application Form, Confirmation, Acknowledgement of Income Tax Return for assessment year 2004-05, Bank Statement, Allotment Advices and Share Certificate were filed.  Copies thereof have been placed before us, as noted hereinabove.   A Schedule (APB 30 and 31) showing the details of investment of M/s. Reena Oil Industry (P)Ltd. was also filed.   This Schedule depicts investment of ` 5,00,000/- in the assessee company.  This Schedule is an annexure forming part of Schedule III of the Balance Sheet of Reena Oil Industry (P) Ltd., as on 31.3.06.

21.       So far as regards Reena Plastic Pipes (P)Ltd., it has been submitted that the amount of ` 5,00,000/- was received by the assessee from this creditor in F.Y. 2004-05, relevant to assessment year 2005-06 and not in the year under consideration, i.e. assessment year 2006-07.   A copy of bank statement in this regard is at APB 136 to 137. It shows credit of ` 5,00,000/-on 14.3.05, by depositing of cheque No. 606894, by clearing.   The assessee  states this to be the amount pertaining to Reena Plastic Pipes (P)Ltd. and this  fact has not been disputed.   Therefore, since the amount was received in

assessment year 2005-06, no addition could be made u/s 68 in the year under  consideration, i.e., assessment year 2006-07.   This is so because as per the provisions of section 68 of the Act, where any sum is found credited in the books of an assessee maintained for any previous year, the sum so credited may be charged to Income Tax as the income of the assessee of that previous year, if the requirements of section 68 are not fulfilled.

22.       Further, the identity of Reena Plastic Pipes (P)Ltd. Stands established along with the credit worthiness of this party and the genuineness of the transaction, from the voluminous documents filed by the assessee before the Authorities   below,   including   the   Certificate   of   Incorporation,   the Memorandum of Association, Balance Sheet and Profit & Loss Account, the Share  Application  Form  showing  cheque  dated 11.3.05,  confirmation showing cheque dated 11.3.05, Acknowledgment of ITR for assessment year 2004-05, Bank Statement, Allotment Advice and Share Certificate and Form No. 32.   In the Balance Sheet and Profit and Loss Account for assessment year 2006-07 (APB 67 - 70), there is a Schedule (APB 70) showing the details of investments of the company, including the investment of ` 5 lakhs in the assessee company.   The name of the assessee company stands duly reflected.

23.       Apropos M/s. Gaurav Holdings (P)Ltd., again, the assessee furnished Certificate of Incorporation (APB 78), Memorandum of Association (APB 79 to 87), Balance Sheet  and Profit and Loss Account (APB 88 to 94), Confirmation            (APB   95),Share Application   Form    (APB   96),Acknowledgement of ITR for assessment year 2005-06 (APB 97), Bank  Statement (APB 98), Allotment Advice (APB 99), and Share Certificate (APB 100).  In the Schedule showing the details of investments of the said company (APB 92), the investment of ` 5,00,000/- in the assessee company had duly reflected.   Therefore, here also, all the three ingredients of Section 68 of the I.T. Act are duly met.   The identity and credit worthiness of the creditor stands established as thus the genuineness of the transaction.

24.       Moreover, we find that it has been rightly contended on behalf of the assessee, that Shri Pradeep Jindal’s statement could not have been made the basis for the addition in question.   This is so, because whereas the statement of Shri Pradeep Jindal was recorded on 15.4.04, the share capital in question was received by the assessee only in March, 2005 and May, 2005.   That being so, at the outset, the said statement of Shri Pradeep Jindal could not have been  about the transactions not hitherto-fore entered into at the time of recording of the said statement and it related only to transactions prior to 15.4.04.  On this score itself, the statement of Shri Pradeep Jindal was wrongly made the basis of the additions in question.

25.       And not only this, despite the assessee having requested for providing an opportunity to cross examine Shri Pradeep Jindal, this request was not acceded to, to the detriment of the assessee, in utter violation of principles of natural justice, such statement having been recorded at the back of the assessee.

26.       Further-more, it has rightly been contended that on the date of recording of the statement of Shri Pradeep Jindal, he was not the Director in the creditor companies. The Annual Return filed by M/s. Reena Oil Industry (P)Ltd. with the ROC is at APB 34 to 47.   Therefrom, it is evident that Shri Pradeep Jindal was never a Director in the said company.   In Form No. 32 (APB 77) of  Reena Plastic Pipes (P)Ltd., Shri Pradeep Jindal  has been shown to have been inducted as a Director of the company w.e.f. 8.12.05, whereas the transaction with Reena Plastic Pipes (P)Ltd. was on 15.3.05, as evident from the Share Application Form (APB 71), of Reena Plastic Pipes (P)Ltd. and the Bank Statement (APB 74) of the said company.

27.       On this score also, the addition cannot sustain.Despite these undisputed facts, Shri Jindal had deposed  in his statement that he was a Director in these companies.

28.       Still further, from the bank statements of the three creditor companies, copies whereof are at APB pages 52, 74 and 98, respectively, it is available that the transactions were entered through Vijay Bank.  In his statement, Shri Pradeep Jindal did not mention this bank.   The details of the bank account through which the concerned transactions had taken place were also not mentioned.   Therefore also, weighing the documentary evidence against the oral one, the transactions entered into by the assessee company are clearly stated in the bank statements to be through Vijay Bank, thereby establishing the genuineness of these transactions, whereas the oral statement of Shri Pradeep Jindal is de-void of any details of the transactions and  is not worthy of credence in the face of the said documentary evidence.

29.       In the aforesaid facts and circumstances, we hold that the assessee company has duly submitted all  requisite documentary evidences before the Authorities below  so as to discharge its onus of establishing the identity and credit worthiness of the shareholders and the genuineness of the transactions. That being so, looked at  from any angle, the addition has wrongly been made in the hands of the assessee company, though the same ought to have been made, if at all, in the hands of the shareholders, as held in “Lovely Exports” (supra).

30.       In view of the above, the grievance of the assessee is accepted and the addition of  15,00,000/- being share application money received during the year and that of 15,000/- on account of the alleged commission paid, are hereby deleted, accepting ground Nos. 1 to 5.

31.       Ground No.6 is consequential.

32.       Ground No. 7 is general.

33.       In the result, the appeal of the assessee is allowed. Order pronounced in the open court on  07.12.2011.

Sd/-                                                     Sd/-

(G.E. Veerabhadrappa)                              (A.D. Jain)

       President                                         Judicial Member

Dated:  07.12.2011.

Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR

True copy

By order

Deputy Registrar