In case of share capital identity, genuineness and creditworthiness of the cash creditor is to be proved by assessee

Brief of the case:

In the case of DCIT Vs. M/s. Soni Hospital Pvt. Ltd. Jaipur bench of ITAT have held that that in case of share capital, the creditworthiness along with genuineness of transaction, identity of person is also required to be proved by the assessee. ITAT considered the decision of Hon’ble SC in the case of M/s Lovely Exports and found that assessee was required to prove the identity, genuineness and creditworthiness.

Facts of the case:

• Assessee is running a hospital and files its return of loss of Rs. 2,82,73,070/- on 31.10.2005.
• There was a search on M/s. B.C. Purohit & Co. on 12.04.2005 and detailed investigation was made by the Department on the basis of evidence collected.
• On the basis of this search, the assessee was also covered under section 133A of the IT Act in survey proceedings on 03.05.2005 to confront these evidences.
• The AO observed that during the course of investigation being conducted by the Investigation Wing it was noticed that some entries from the bogus entities being run by these racketeers had gone to Soni Hospital Ltd., Jaipur.
• In order to verify these entries and confront this party about the non-genuineness of these entries a limited purpose survey was conducted u/s 133A at the office premises of hospital with the authorization issued by the Addl. DIT, Jaipur.
• The AO further observed that during the course of survey operation it was found that share application money was shown as received by this company from certain entities being operated by M/s. B.C. Purohit & Co. Group.
• The MD of the assessee company was confronted with the findings of non-genuineness of these parties from whom loans were shown in the books of accounts of his company.
• However, MD did not accept that the transactions relating to receipt of share application money are not genuine.
• As a result of the evidences gathered during the search operation and the investigations conducted subsequently it was found that in the guise of tax consultation the owners and employees of his group were running a big racket of providing accommodation entries of gifts, loans, share application money, share investment and long term capital gains in shares.
• The AO observed that the assessee had taken entries during the financial year 2004-05 relevant to the assessment year 2005-06 mostly from the bogus companies operated by the impugned entry operators.
• AO found entries of Rs. 79,00,000/- are in the form of share application money which have been received from M/s. B.C. Purohit Group.
• Assessee was asked to produce the relevant parties for examination.
• AO concluded that it has been clearly established that the companies and individuals in whose names the assessee had shown share application money of Rs. 79,00,000/- were engaged in providing accommodation entries.
• The assessee had also obtained accommodation entries and had not received any genuine share application money and had thus introduced its own undisclosed income in the account books, which was added to the income of the assessee.
• AO further found that assessee had raised share application money of Rs. 20,00,000/- from various parties.
• The assessee was failed to satisfy the AO to prove the genuineness of the transaction of share application money of Rs. 20,00,000/- so AO treated this money to have been invested out of undisclosed income of the assessee itself as accommodation entries.
• The assessee submitted copy of financial statements, copies of balance sheets, PAN, and P&L A/c of the companies as additional evidences before the CIT (A).
• Remand report was sought by CIT (A) but AO didn’t submit remand report.

Contention of the assessee: