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TMI Blog2016 (4) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... 973 (10) TMI 55 - SUPREME COURT] - Decided in favour of assessee - ITA No. 1229/Kol/2012 - - - Dated:- 13-4-2016 - Shri M. Balaganesh, Accountant Member And Shri S.S. Vishwanethra Ravi Judicial Member For the Appellant/assessee: Shri S.M Surana, Advocate, ld. AR For the Respondent/department: Md. Ghyas Uddin, JCIT, ld.Sr. DR ORDER Shri M. Balaganesh, AM This appeal of the assessee arises out of the order of the Learned CIT(A), VIII, Kolkata in Appeal No. 148/CIT(A)-VIII/Kol/11-12 dated 27-07-2012 against the order of assessment framed by the Learned AO for the Asst Year 2009-10 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The only issue to be decided in this appeal is as to whether the share application money received by the assessee company from seven share applicants in the sum of ₹ 1,25,49,980/- could be brought to tax in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a public limited company engaged in the business of manufacture and trading of Industrial Couplings, Spares, Telecommunication and Transmission Line Towers and Parts. The Learned AO observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why other company would make the payment of share application money on behalf of such a share applicant having almost no net worth and having no business activity or having no business connection with the payer company. He observed that the assessee had not furnished the copy of share applications or share applicant s bank account details. Based on the above observations, he concluded that the seven share applicants do not have sufficient creditworthiness to make investment in shares of assessee company . He observed that none of them had carried on any significant business activity and none of them have any business connection with the payer of the money on their behalf. Accordingly, he concluded that preponderance of probability would suggest that all these share applicants are mere paper companies used by the assessee as conduits to bring its own undisclosed money in the form of share capital. Accordingly, he brought the entire share capital received from seven corporates to the tune of ₹ 1,25,49,980/- as unexplained cash credit u/s 68 of the Act. 4. On first appeal, the assessee reiterated the submissions made before the Learned AO and produced the same documents and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on their behalf, to Wellman Wacoma Limited towards purchase of shares. d) Relevant page of Bank Statements of M/s Premium Agro Exports Ltd and M/s Agarpala Jute Mills Ltd. e) Confirmation from M/s Premium Agro Exports Ltd and M/s Agarpala Jute Mills Ltd explaining the fact that they had advanced monies to Wellman Wacoma Limited (assessee herein) towards purchase of shares on behalf of the seven share applicant companies, as the case may be. Apart from this, pursuant to the details called for by the Bench during the course of previous hearings, he had furnished a supplementary paper book and also stated that the same has been duly certified as such and referred to the relevant pages of the paper book. He argued that the assessee had proved the source of source of source in the instant case. He argued that sources of money cannot be termed as assessee s own money introduced in the garb of share application because all such issuer of cheques are manufacturing companies having high volume of business and turnover and there is no iota of evidence or lead that would suggest that assessee s undisclosed income came through banking account of such issuer of cheques. He arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seven share applicants ; that no break up of other advances under liabilities side of the balance sheet of seven share applicants is given by the assessee ; that no business activity at all is carried on in these seven share applicants during the asst year under appeal ; that no prudent businessman would invest in these type of companies. He further argued that the supplementary paper book containing various details of source of source of funds and the details of common directors etc were not filed by the assessee before the lower authorities and it has been filed only before this tribunal for the first time and hence the same cannot be taken into account by this tribunal. He further placed reliance on the following decisions in support of his contentions :- (a) Decision of the co-ordinate bench of this tribunal in the case of Subhlakshmi Vanijya (P) Ltd vs CIT reported in (2015) 60 taxmann.com 60 (Kolkata Trib.) dated 30.7.2015. (b) Decision of the co-ordinate bench of this tribunal in the case of Bisakha Sales (P) Ltd vs CIT reported in (2015) 52 taxmann.com 305 (Kolkata Trib.) dated 19.9.2014. (c) Decision of the Hon ble Delhi High Court in the case of Riddhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Statement of Premium Agro at pg 33 and certificate regarding payment by Premium Agro at page 34 of paper book) ₹ 27,00,000 e) Arunoday Dealcom P Ltd. [PAN AAFCA0607F] By Cheque No. 033176 dated 25.8.2008 drawn on IDBI Bank, Park Street Branch (Audited B/S at pg 35-40; Copy of ITR Ack pg 41, Certificate reg share investment at pg 42, Bank Statement of Premium Agro at pg 43 and certificate regarding payment by Premium Agro at page 44 of paper book) ₹ 27,00,000 f) Nalanda Vanijya P Ltd. [PAN AACCN3532F] By Cheque No. 809487 dated 25.8.2008. drawn on Oriental Bank of Commerce, Gariahat Branch (Audited B/S at pg 77-82; Copy of ITR Ack pg 83, Certificate reg share investment at pg 84, Bank Statement of Premium Agro at pg 85 and certificate regarding payment by Premium Agro at page 86 of paper book) ₹ 27,00,000 g) Safal Vyapar P Ltd. [PAN AAKCS1261N] By Cheque No. 809496 dated 27.8.2008. drawn on Oriental Bank of Commerce, Gariahat Branch (Audited B/S at pg 87-92; Copy of ITR Ack pg 93, Certificate reg share investment at pg 94, Bank Statement of Premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the 3 cheques issued by it on behalf of Deva Merchants P Ltd. for ₹ 9,37,480 (copy at page 54); Ankur Tie up P Ltd. ₹ 7,00,000/- (copy at page 66); and Rosevalley Merchants P Ltd. ₹ 1,12,500 (copy at page 76). These confirmations were furnished in course of assessment proceedings. 7.4.5. The amount given by the said company Agarpara Jute Mills Ltd. on behalf of the said 3 share applicants is duly shown by Agarpara Jute Mills Ltd. in list of Loans Advances. Copy at page 138-139 of paper book. 7.4.6. The copy of Bank Statement of the said company with Syndicate Bank, Camac Street Branch was also furnished in course of assessment proceedings. The copy of the bank statement is appearing at page 53 of the paper book. The immediate source was by clearing of cheques received by the company in its normal business namely realization from trade debtors. The said company is running a Jute Mill and has sale turnover of finished goods of ₹ 64.51 crore and having sundry debtors of ₹ 14.15 crore for the year ended 31.3.2009. 7.4.7. The amounts which were paid by Agarpara Jute Mills Ltd. on behalf of 3 share applicant companies is duly included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished in course of assessment proceedings. The copy of the bank statement with IDBI Bank, Park Street Branch is appearing at page 33 ( showing payments made on behalf of the said Triton and Arunodaya) and copy of the bank statement with Oriental Bank of Commerce, Gariahat Branch at page 85 (showing payments made on behalf of said Nalanda and Safal Vyapar) of the paper book. The immediate source was by clearing of cheques received by the company in its normal business namely realization from trade debtors. The said company is running a Jute Mill and has sale turnover of ₹ 42.91 crores and having sundry debtors of ₹ 8.92 crores for the year ended 31.3.2009. 7.5.7. The Profit Loss account and Balance Sheet etc. together with PAN / copy of acknowledge of filing IT Returns of the share applicant company were also furnished in course of assessment proceedings. The copy of the same are appearing in paper book: Triton Vinimay P Ltd. (at page 26 to 30, ack of IT Return at page 31); Arunoday Dealcom P Ltd. (at page 36 to 40, ack of IT Return at page 41); Nalanda Vanijya P Ltd. ((at page 78 to 82, ack of IT Return at page 83); and Safal Vyapar P Ltd. (at page 88 to 92, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of Premium Agro Exports Ltd for advancing the amount to the share applicant companies. (pages 286 to 289 of paper book dated 29.4.15). Relevant bank statements with Oriental Bank of Commerce was already filed in paper book 2. 5. Detailed source of utilization of funds by the assessee company vide pages 290 to 348 of paper book dated 29.4.15. We find that this paper book is duly certified by stating that the same has been filed as requisitioned in the course of hearing. The same is taken on record for the purpose of adjudication of the impugned issue. 7.8. It would be relevant to reproduce the provisions of section 68 at this juncture:- Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditworthiness of the share applicants is also proved beyond doubt. Third ingredient is genuineness of the transactions. We find that the two jute companies had paid the monies directly to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. We also find from the paper book that the assessee has even proved the source of those two jute companies represented by way of sale proceeds getting deposited into their bank accounts which in turn has been used by them to advance monies to assessee company on behalf of share applicants. Hence the source of source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law. We find that the share applicants have not denied the fact of making investment in share capital in assessee company. The two lending jute companies M/s Agarpara Jute Mills Ltd and M/s Premium Agro Export Ltd have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. Shares have been issued to the seven share applicant compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in Nova Promoters (supra), the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the AO and the AO fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands 0 r the Assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law. 5. In the facts and circumstances of the present appeals, the Court is satisfied that no substantial question of law arises. The appeals are dismissed. (ii) Decision of co-ordinate bench of this tribunal in the case of ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 dated 2.3.2016. 6. On appeal by the assessee the CIT(A) deleted the addition made by the AO observing as follows 6) I have considered the submission of the appellant and perused the assessment order. I have also gone through the details and documents filed by the appellant company in the course of assessment: proceedings vide letter dt.3-10-2007. On careful consideration of the facts and in law 1 am of the opinion that the AO was not justified in making, the addition aggrega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT vs Raj Kumar Agarwal vide ITA No.179/2008 dated 17.11.2009 wherein the Hon'ble Allahabad High Court took a view that non production of the director of a Public Limited company which is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs Devinder Singh Shant in ITA No.208/Kol/2009 vide order dated 17.04.2009. 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the revenue that the revenue disputed only the proof of identity of the share holder. In this regard it is seen that for AY.2004-05 Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward-9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for AY.2005-06 by ITO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax forAY.2005-06 by the very same ITO- War ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Commissioner was based on irrelevant consideration and was he supposed to point out specifically where the Assessing Officer went wrong in not properly examining the issue of share capital ? (vii) If the Assessing Officer has taken a possible view, can still the revision be ordered ? (viii) Issue of non-service of show cause notice under section 263. (ix) Whether order under section 263 is barred by limitation ? (x) Effect of order passed under section 263 in the case of amalgamating company after amalgamation (xi) Whether order under section 263 becomes invalid for being passed on a closed day ? (xii) Whether the order under section 263 can be declared as a nullity for the notice having not been signed by the Commissioner ? Hence from the above, it could be seen that this tribunal never had an occasion to look into the merits of the addition proposed to be made towards share capital in the facts and circumstances of that case and no decision was rendered thereon on merits of the issue. Various case laws were analysed by this tribunal only in the context of validity of revisionary jurisdiction u/s 263 of the Act to consider whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. 7.12. With regard to the case relied upon by the Learned DR on the decision of the Hon ble Apex Court in the case of Navodaya Castle (P) Ltd vs CIT reported in (2015) 56 taxmann.com 18 (SC) is concerned, we find that the issue before the Hon ble Apex Court was whether an addition towards cash credit u/s 68 of the Act could be made in the event of assessee filing certificate of incorporation , PAN for the purpose of identification of subscriber company especially when there was material to show that subscriber was a paper company and not a genuine investor. In these circumstances, the special leave petition filed by the assessee was dismissed by the Hon ble Apex Court. Whereas, in the instant case, there is no material that is brought on record to prove that the seven share applicants were paper companies except merely making a wild allegation based on surmise and conjecture. Hence the facts of that case are distinguishable from the facts of the instant case before us. In these facts and circumstances and respectfully following the judicial precedents relied upon hereinabove in favour of the assessee, there is no need to treat the receipt of share capital from seven shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be so and this burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of benami or establish circumstances unerringly and reasonably raising an inference of that fact. The essence of benami is the intention of the parties and not unoften, such intention is shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of the serious onus that rests on him nor justify the acceptance of mere conjectures or surmises as a substitute for proof. (b) It was also held by the Hon ble Supreme Court in the case of Jaydayal Poddar (Deceased) through L.R.s and Another vs Mst.Bibi Hazra and Others in Civil Appeal No. 1759 of 1967 dated 19.10.1973 reported in (1974) 1 SCC 3 that :- 6. It is well settled that the burden of showing that a particular transaction is benami and the owner is not the real owner always rests on the person asserting it to be so and this burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of benami or establish circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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