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TMI Blog2015 (10) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... creditworthiness of creditor have been proved. Therefore, we are of the view that since the assessee has discharged its primary onus of proving the genuineness of transaction, identity and creditworthiness of shareholders, the addition u/s 68 of the Act is not called for. The addition cannot be sustained only for the simple reason that these shareholder companies have not responded in first round of commission. The ADIT(Inv.) has initially reported that the parties are not available at given address but in second round of commission the parties have come forward and submitted their requisite reply in order to justify the financial credibilities. In the light of all these facts, we are of the view that the CIT(A) has rightly adjudicated the issue in favour of the assessee. - ITA No. 243/LKW/2015 - - - Dated:- 22-9-2015 - Suni Kumar Yadav, JM And A K Garodia, AM For the Petitioner : Dr A K Singh, CIT-DR For the Respondent : Shri K R Rastogi ORDER Per Sunil Kumar Yadav, JM. This appeal is preferred by the Revenue against the order of Ld. CIT(A)-I, Lucknow deleting the addition of ₹ 1,60,00,000/- on account of share application money without appreciatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, West Bengal-711101 10,000 Rs.1,00,000/- Rs.9,00,000/- 7. M/s Motorex Finance (P) Ltd., 9/12, Ul. Bazar Street, Block-E, 2 a Floor, Kolkata, 'West Bengal-700001 20,000 Rs.2,00,000/- Rs.18,00,000/- 8. M/s Ranisati Stockist (P) - Ltd., 1A, Grant lane, Kolkata-700012 Kolkata, West Bengal-Wb-700012 10,000 Rs.1,00,000/- Rs.9,00,000/- 9. M/s Topline Finvest (P) Ltd.. 107C, Todi Chamber, 2, Laibazar Street, Kolkata, West Bengal-Wb- 70000 35,000 Rs.3,50,000/- Rs.31,50,000/- 10. M/s Vibgyor Vimmay (P) Ltd., 9/12, Lal Bazar Slieei.Room No. -3 Black-E, 4 ' Floor, Kolkata, West Benga!-Wb-700001 15,000 Rs.1,50,000/- Rs.13,50,000/- Rs.16,00,000/- Rs.1,44,00,000/- 3. From the details, it was also observed by the AO that the registered of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l authorities. The AO therefore, confronted these facts to the assessee and asked him to prove the identity, creditworthiness and genuineness of transaction. After confrontation of this fact to the AR of the assessee, replies from Kolkata started coming from the same places from where letters were returned unserved by postal department. The AO further examined the details furnished before him and noted that the alleged share holders companies have not done any business activities. Most of the transfer entries of high value are colourful device to channelize monies through banking channels. The amounts as it comes in the bank account are routed the next day from the bank accounts through RTGS/cheques so as to give impression of legal character to the transaction. The modus operandi of share holders companies to act as a conduit for the persons to channelize the illegal money into a legal capital. Keeping in view of these facts, the AO issued a commission u/s 131(1)(d) of the Act to Addl. DIT (Inv.) Kolkata for making inquiries about the alleged shareholding companies based in Kolkata. The report, stating therein that notices issued u/s 131 of the Act to all these parties were not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be proved by the assessee company during the course of assessment proceedings. From report of DIT(Inv.), Kolkata, it is also apparent that these companies are non-existent companies and the assessee company has routed its money through such companies by making accommodation entries at Kolkata and then subscribed its own shares so as to give it a look of genuine transaction. The identity of these companies, their creditworthiness and genuineness of the transaction could not be proved by the assessee company, the assessee. The assessee company at-later stage of assessment proceedings, filed copies of share application forms, PAN details, copies of bank accounts, return etc., to substantiate the identity and genuineness of these alleged companies. On examination of the details filed by the assessee, It is seen that the names of these companies, have been utilized .by the assessee company in routing its own money through banking channels. Infact, the copies of returns and bank statements of these companies do show that the alleged shareholders are companies on paper and merely filing of income-tax return and transaction through bank accounts .do not establish, the identity, cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholding companies at ₹ 1,60,00,000/-are treated as unexplained credit u/s 68 of the I.T. Act and accordingly added towards the income of the assessee. Penalty proceedings under u/s 271(l)(c) is being initiated on this issue. 6. The assessee has preferred an appeal before the CIT(A) with a plea that proper opportunity was not afforded to the assessee. He has furnished the written submission before the CIT(A). The CIT(A) recorded the same in para no.3 of its order. Before the CIT(A), it was contended that the summon issued u/s 131 of the Act while executing the commission by the DDIT (Inv.) were received subsequent to the date fixed for the compliance. In support of these facts, the copy of postal envelope were produced before the CIT(A) vide letter dated 11.09.2014. The CIT(A) called the remand report from the AO directing him to conduct proper enquiry on the basis of written submission filed by the assessee and furnished the remand report with his comments after affording proper opportunities to the appellant. During the remand report, the Assessing Officer has again issued commission u/s 131(1)(d) of the Act to the Addl. DIT(Inv.) for making further enquiries in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untants, Kolkata. k. Balance Sheet and Profit and Loss Account and Annexures/Schedules for the year ending 31.03.2010 .l. Memorandum and Articles of Association . m. Certificate of Registration with Reserve Bank of India No. B.05.05854 dated 14.10.2003 n. Reply to notice u/s 131 from DDFT (Inv.), Kolkata including explanation for the source of investment dated 25,03.2013 Similar details have been filed in respect of other 14 shareholder companies. 4.1 It is also noted that the shareholding companies have submitted the following documents before the ADIT (Inv.), Kolkata as evidence of having invested in share capital of the appellant company: a. Copy of the share application and allotment advice as evidence of transaction; b. Copy of bank statement highlighting the relevant portion of transaction; c. Copy of audited balance sheet, profit and loss account and annexure thereto; d.. Income tax return acknowledgement for the relevant assessment year; e. Copy of resolution of the Board meeting of the company to invest in shares; f. Source of funds of investment made by such company; g. Details of the directors including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le money received from Prime Commodeal Pvt. Ltd. of Rs.6,00,000/- vide cheque no.139459 dated 21.05.2009, share sale money received fromSpandan Vanijya Pvt. Ltd. of Rs.3,00,000/- vide cheque no.255938 dated 21.05.2009, share sale money received from Vibgyor Vinimay Pvt. Ltd. of Rs.1,00,000/- vide cheque no.258660 dated 21.05.2009 and loan refund from Crown Infrastructures Pvt. Ltd. of Rs.10,00,000/- vide cheque no.281303 dated 29.05.2009. 8. M/s Ranisati Stockist (P) -Ltd., 10000 10,00,000 The source of fund was out of share sale money received from Pearl Dealer Pvt. Ltd. of Rs.20,00,000/- vide cheque no.172063 dated 21.01.2010, Ranisati Stockist Pvt. Ltd. has amalgamated with M/s Motorex Finance pvt. Ltd. as per the order passed by the Hon'ble Calcutta High Court 9. M/s Topline Finvest (P) Ltd.. 35000 5,00,000 The amount of such share investment was as under: Cheque no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies are existing companies with established identity, have capacity and creditworthiness to make the investment and the investment made by them are genuine 4.3 In the assessment order, the AO has stated that the shareholding companies are non-existent paper or briefcase companies the identities of which could not be established by the appellant company. The observations of the AO are not justified in view of the following facts: a. The share applicants are duly incorporated companies under the provisions of the Companies Act, 1956. b. They are regular income tax assessees and are holding PANs issued by the Income Tax Department They are filing their income tax returns are being assessed c. They are holding valid .bank accounts. d. The notices issued to these companies by the AO u/s 133(6) have been duly complied with. e. The summons issued u/s 131 by the ADIT(Inv.), Kolkata have duly been served on the share applicant companies at their registered offices and complied with. In view of above the AO is not justified in observing that the identity of the company is not established. The shareholding companies filed their balance sheets, bank st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be proved - Tribunal upheld order of Commissioner (Appeals) - Whether instant case was squarely covered by decision of Supreme.Court in case ofSteller Investment Ltd. (supra) - Held, yes [Para 3] d. CIT v, Som tobacco India Ltd. [2014] 42 taxmann.com 310 (All.) Section 68 of. the Income-tax Act, 1961 - Cash credits [Share application money] -Assessment year 2005-06 - In course of assessment, Assessing Officer made addition to assesses^ income in respect of share application money received from various persons -Tribunal finding that names, addresses and PAN of depositors were provided to Assessing Officer,. which were sufficient to prove their identity and creditworthiness, set aside impugned addition -Whether, on facts, impugned order passed by Tribunal did not require any interference - Held, yes [Para 9] e. CIT v. Vacmet Packaging India Private Limited [2014] 367 ITR 217 (All.) The Assessing Officer, in the course of an order of assessment under section 153A of the Income Tax Act, 1961, made an addition under section 68 an amount ofRs.8.50 crores which was received by the assessee as share application money from a company. The Commissioner (Appeal) deleted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is merits in the submission of the Ld. A.R. that since all the share holders have been identified on record by the assessee company, no addition on account of unexplained snare capital can be made in the hands of the assessee company g. CIT v. Miq Steels (P.) Ltd. [2013] 36 taxmann.com 422 (All.) h. CIT v. Al Anam Agro Foods (P.) Ltd. [2013) 38 taxmann.com 375 (All,) i. GIT (Central) v. L.D.K. Shares arid Securities P. Ltd. and Ors, 71 DTK 371 (All.) In view of the above discussions it is held that addition of ₹ 1,60,00,000/- made by the AO under section 68 of the Act is not justified and the same is deleted. Ground nos. 2, 3 and 4 are decided in favour of the appellant, Ground nos. 1, 5, 8 and 9 are general in nature. Ground no. 6 relates to charging of interest u/s 234A, 234B, 234C and 234D of the Act. Charging of interest is mandatory but the AO is directed to allow consequential relief. Ground no. 7 relates to initiation of penalty proceedings u/s 271(l)(c) of the Act. The same, being premature is dismissed. 6. In the result, the appeal is partly allowed as discussed above. 7. Aggrieved the Revenue has placed reliance upon the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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