Brief of the case:
AO made addition on account of share application money u/s 68 which was confirmed by the CIT. On appeal ITAT held that assessee has proved identity, genuineness & creditworthiness of the investors. On further appeal to HC it was held that revenue failed to discover any legal infirmity out of the order of ITAT and it cannot be said that assessee failed to prove identity, genuineness and creditworthiness of the investors.
Facts of the case:
- Assessee is a company with the object of running a shopping mall. The business of the Assessee had not commenced till 31st March 2009 because the Mall was under construction.
- Search was conducted on SVP group (assesses in one of the company) and it was found that these companies received huge amount of share capital. Assessee received investments in different AYs.
- These four companies were found to have received share capital from 106 companies between AYs 2003-04 to 2009-10. The said shareholders have been categorised Table-I, II and III shareholders. Table-I shareholders, which were 20 companies, were subjected to search under Section 132 of the Act.
- It was alleged that ‘on-money’ on account of sale of flats, shops etc. was taken in cash and in turn was routed back into the Group companies in the form of share application/unsecured loans, share capital etc.
- The broad general allegation was that in the course of the investigation the SVP Group of companies did not produce the shareholders despite being served with notices for that purpose. It was alleged that the shareholders were not produced till finalization of assessment order, i.e., upto 21 months thereafter.
- As far as the Table I shareholders were concerned, the AO noted that none of the companies were found to be operating at the given addresses.
- As far as the Table III companies were concerned, many of the summons issued were returned unserved with the remarks “unknown” or “no such person”. 24 of the companies submitted replies and some filed affidavits but did not submit any other details.
- The nexus of the shareholders and the beneficiary, i.e. the SVP Group stood proved from the fact that shares were bought back by the individuals/concerns belonging to SVP Group. During the search, original share certificate worth Rs. 38 crores were found out of which some were seized.
- The Assessee had failed to prove the identity, genuineness and creditworthiness of the said shareholders. Accordingly, the aforementioned sums shown as investments in its shares for the AYs in question were added to its income for those AYs.
- Appeals filed against assessment orders before CIT (A) were dismissed.
- ITAT allowed appeals filed by assessee and how the appeal are before high court.
Contention of the revenue:
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