2021 (9) TMI 525 - AT - Income Tax

Addition u/s 68 - bogus share application money and premium received by the assessee-company - sham transactions - Onus to prove - notices sent u/s.133(6) were not received on the given date - HELD THAT - There is no dispute that the assessee has received share application money from six companies, out of which, from three companies assessee has received premium and accepted - AO has only disputed the other three companies as discussed above, merely because the assessee company has received huge premium from such parties. In so far as the initial onus cast upon the assessee for proving the nature and source of the share capital, the assessee had filed various documents. One of the main allegation of AO that the notices sent u/s.133(6) were not received on the given date for which it has been clarified before us that within a short span, Assessing Officer has sought lot of information during the period of one week from the parties situated outside Delhi. In fact, all the notices were ultimately duly complied with by these parties who have sent all the requisite details as required by the Assessing Officer in his notices u/s.133(6). Thus, there cannot be reason of compliance of the notices have been made beyond the dates specified by him and as his observation lose its relevance. Reason assigned by the Assessing Officer does not have much credence to dislodge the evidences filed by these parties to corroborate the assessee s explanation and the documents submitted by the assessee to prove the nature and source of credit. From bare perusal of the explanation duly supported by the documents, we find that whatever so called inquiry which was conducted by him has not lead to any iota of adverse material so as to hold that the transaction is not genuine. AO required the Directors/the representatives of the three companies which were produced before him, the same were duly complied with and not only they were produced but have also confirmed the transaction and given the required documents on the subsequent dates. Once these parties have directly confirmed the transaction with all the documents and the authorized representatives have duly appeared before the Assessing Officer, then without any substantial ground he has disbelieved on a very technical and whimsical reasons. Here in this case, the investee companies are based outside Delhi and if he was not satisfied with the authorized representative sent by them, then at least he could not have issued a commission u/s.133(1)(d) to be examined by the local Income tax authority. Further, these authorized representative have adduced the document but nowhere Assessing Officer has pointed out what was lacking in such documents which was already submitted by these companies in reply to the notice u/s.133(6) and what extra he wanted to examine, has not been mentioned. Regarding one of the companies, i.e., M/s. Bridge and Building Construction Pvt. Ltd. who has made the payment on behalf of M/s. Topgrain Mercantile Pvt. Ltd., Ld. counsel explanation as incorporated above is testimony to itself that M/s. Topgrain Mercantile has furnished a certified copy of the ledger account of the said party which shows that investee company has sold its share against which M/s. Bridge and Building construction company had transferred the sale consideration thereof amounting to ₹ 57.30 crore through RTGS at the direction of M/s. Topgrain Mercantile Pvt. Ltd. Evidences to this effect of RTGS transfer and copy of bank statement of the said company was also filed before the Assessing Officer. The said bank statement reveals that there was an OD limit and there was also mention of correct address. Thus, without any cogent material to rebut such evidence, adverse inference cannot be drawn that transaction through this company is sham. Another allegation by the AO was that these companies have received funds from other companies before issuance of cheques through the assessee company and also tried to analyze fund trail to assume that assessee-company had ploughed back its own money in the books of account in the garb of share application money itself is based on erroneous assumption of facts which has been demonstrated by the ld. counsel, from the details of funds chart as reproduced above, specifically in the case of payment made by M/s. Godsons Pvt. Ltd. to the assessee - Nowhere in the so called alleged cash trail there is an element of cash or anything has been brought on record that any of the trails, assessee s undisclosed cash or income has been routed. In fact, none of these bank account requisitioning by the Assessing Officer u/s. 133(6), there was any cash deposits. Source of the fund and the creditworthiness of the parties , it is seen from the chart reproduced hereinabove that these parties had sufficient own funds to invest and the share of assessee-company duly reflected in their balance sheet as on 31.03.2011. Thus it cannot be held that the onus cast upon the assessee to prove the identity, creditworthiness of the investee parties or genuineness of the transaction has not been explained properly nor there is any adverse finding or material gathered from any inquiry that it is a bogus transaction or kind of accommodation entry. Thus, we do not find any reason to tinker and deviate from the finding of the ld. CIT (A) while deleting the addition. Accordingly, the order of the ld. CIT (A) is confirmed and the appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition made u/s 68 on account of unexplained share capital and premium for AY 2011-12.
2. Deletion of addition made u/s 68 on account of unexplained share capital and premium for AY 2012-13.

Issue-Wise Detailed Analysis:

1. Deletion of Addition Made u/s 68 on Account of Unexplained Share Capital and Premium for AY 2011-12:

The assessee, engaged in various businesses, including share trading and hotel industry, filed its return of income for AY 2011-12, declaring an income of ?53,21,14,645/-. A search operation conducted by the Income Tax Department led to the initiation of assessment proceedings u/s 153A. The Assessing Officer (AO) noticed a significant increase in the assessee's subscribed share capital and premium, totaling ?108,29,00,000/-, raised from various parties. The AO questioned the genuineness of these transactions, particularly focusing on three companies: M/s. Topgrain Mercantile Pvt. Ltd., M/s. Godsend Bio Tech Ltd., and M/s. TVH Trading Co. Pvt. Ltd.

The AO issued notices u/s 133(6) to these companies but claimed no timely response. The assessee provided extensive documentation, including share application forms, board resolutions, PAN cards, audit reports, bank statements, and income tax returns of the investing companies. Despite this, the AO held the transactions as non-genuine, citing reasons such as the lack of substantial investment increase in the investing companies, the non-existence of M/s. Bridge & Building Construction Co. Pvt. Ltd., and the complex trail of funds.

The CIT(A) considered the assessee's detailed submissions and the extensive documentation provided, concluding that the assessee had discharged its onus u/s 68. The CIT(A) noted that the AO's reliance on the investigation wing's report without confronting the assessee was against natural justice principles. The CIT(A) found that the AO's observations, including the alleged non-existence of M/s. Bridge & Building Construction Co. Pvt. Ltd., were not substantiated with concrete evidence.

The Tribunal, after reviewing the rival submissions and the material on record, upheld the CIT(A)'s decision. It was noted that the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal found that the AO had not brought any adverse material to disprove the assessee's claims. The Tribunal emphasized that the AO's technical and whimsical reasons for disbelieving the transactions were not justified. Consequently, the Tribunal confirmed the deletion of the addition made u/s 68 for AY 2011-12.

2. Deletion of Addition Made u/s 68 on Account of Unexplained Share Capital and Premium for AY 2012-13:

For AY 2012-13, the assessee received share application money of ?23 crores, with ?4.50 crores from M/s. TVH Trading Company and ?18.50 crores from Vishaka Tech Pvt. Ltd. The shares could not be allotted, and the share application money was treated as an advance against the property. The AO, relying on the findings of the previous year, questioned the genuineness of these transactions.

The assessee provided confirmations from the parties and detailed documentation similar to the previous year. The Director of M/s. TVH Trading Company Pvt. Ltd. personally appeared before the AO and confirmed the transactions for both AY 2011-12 and AY 2012-13. The CIT(A) and the Tribunal, applying the findings from AY 2011-12, concluded that the assessee had discharged its onus u/s 68. The Tribunal noted that the AO had not conducted any further investigation to disprove the assessee's claims.

The Tribunal confirmed the CIT(A)'s decision to delete the addition made u/s 68 for AY 2012-13, emphasizing that the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transactions. The appeals for both AY 2011-12 and AY 2012-13 were dismissed, upholding the deletion of the additions made by the AO.