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TMI Blog2017 (10) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... and several other Companies having their Registered Offices at the same address. This created a suspicion in the mind of the Revenue. CIT(A) therefore, rightly noted that there is no law that more than one Company cannot have its Registered Office at one address. The Companies could have change their address later on. It is also an admitted fact that source of the capital investment companies were established during their respective assessment proceedings including in the case of the present assessee-company as per the findings of the Ld. CIT(A). Ld. CIT(A) also found that no evidence was found during the course of survey to indicate introduction of unaccounted cash/funds in the form of share capital in these companies. These findings of fact recorded by the Ld. CIT(A) have not been rebutted through any evidence or material on record. No evidence has been brought on record that money so invested in assessee-company came from coffers of assessee-company. All objections of A.O. have been considered by Ld. CIT(A) and various case law referred to above support the findings of Ld. CIT(A) that addition has been correctly deleted. - Decided in favour of assessee. - ITA.No.3611/Del./ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and creditworthiness. It was therefore, submitted that there were no cause exists to make a recourse to the provisions of Section 68 of the I.T. Act, 1961. In the instant case, there is no material on record to prove or even remotely suggest that the share application money received actually emanate from the assessee-company. The share application money was received from independent legally incorporated Companies through banking channels. The initial onus upon assessee has thus been discharged. The assessee relied upon the decision of the Delhi High Court in the case of CIT vs. Steller Investment Ltd., (1991) 192 ITR 287 (Del.) in which it was held that any increased capital is not assessable in the hands of the assessee which has been confirmed by the Hon ble Supreme Court in the case of CIT vs. Steller Investment Ltd., (2001) 251 ITR 263 (SC). The assessee also relied upon the decision of the Hon ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., 216 CTR 195 in which it was held that if the share application money is received by the assessee-company from alleged bogus share holders whose names are given to the A.O, then the Department is free to proceed to reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus of establishing the identity of the share holders / applicant ire source of the money. The only reason for the revenue to cause further verification was the report relating to survey conducted at the premises of the appellant which forms part of the satisfaction recorded for reopening the assessment proceedings. From the said report it transpires that the business premises of the appellant actually belonged to M/s Bhushan Steel Ltd. and several other companies were having their registered offices in the same premises. This led to the suspicion that these companies were paper companies. During further verification of the identity of the shareholders in Mumbai, some summons were served but parties did not respond. In Guwahati, both parties were not found at the given address. In Kolkata, all 11 parties responded by post but no one appeared. 3.4. There is no law that more than one company cannot have its registered office at one address. There is no law that companies cannot change their registered office. Several companies can have the same registered office. Businesses raise capital and such capital is rotated in economy for increasing production and trade and for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013 and C.O.No.259/Del./2015 dated 18th August, 2017, in which, on identical issue, the Departmental appeal and cross-objection of the assessee have been dismissed. He has submitted that most of the parties are similar in this case as have been considered in the case of the assessee on identical facts. It is the case of sister concern of the assessee. He has submitted that all the documents were filed before A.O. which proved the identity of the share applicants, their creditworthiness and genuineness of the transaction. All companies are registered with Registrar of Companies and filed their bank statements. No cash have been deposited in the bank accounts of the share applicants. They were having sufficient funds with them to make investment in the assessee-company. He has submitted that the issue is covered in favour of the assessee by the order of the ITAT, Delhi Bench, in the case of M/s. Adamine Construction Pvt. Ltd., (supra). 7. We have considered the rival contentions and perused the material available on record. It is not in dispute that assessee company filed copies of the confirmations, income tax return acknowledgments and bank accounts of the share applicant compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Prominent Vyapaar Pvt. Ltd., 95,00,000 (C) Guwahati based companies 1. Ispat Sheets Ltd., 90,00,000 2. Novelty Traders Ltd., 90,00,000 Total Amount 17,60,00,000 8. The Learned Counsel for the Assessee relied upon the order of the ITAT, Delhi Bench in the case of ACIT, Central Circle-13, New Delhi vs. M/s. Adamine Construction Pvt. Ltd., (supra), in which the departmental appeal, on the identical question have been dismissed. The findings of the Tribunal in paras 10 to 18 of the Tribunal are reproduced as under : I.T.Appeal No. 6175/Del/2013 : 10. The Revenue has questioned first appellate order on the following grounds :- 1. The order of Ld. CIT (Appeals) is not correct in law and facts; 2. On the facts and circumstances of the case the ld. CIT (Appeals) has erred in deleting the addition of ₹ 4,65,00,000/- being unexplained share capital including share premium and ₹ 50,00,000/- being unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 15. In support of the ground, the ld. Sr. DR has basically placed reliance on the assessment order with this contention that assessee has thoroughly failed to establish creditworthiness of the investor companies as well as genuineness of the transaction. Some of the parties were not found on the given address and some of them did not respond to the notices issued by the Assessing Officer to them nor the assessee has been able to produce them for verification before the Assessing Officer. In absence of compliance of these requirements the Assessing Officer was very much justified in making the addition of ₹ 5,15,00,000/- under section 68 of the Act on account of unexplained share capital and share premium received by the assessee company from various companies. Ignoring these material aspects the ld. CIT (Appeals) has erred in deleting the addition. 16. The ld. AR, on the other hand, placed reliance on the first appellate order and reiterated following submissions made before the ld. CIT (Appeals) :- (1) By way of a brief introduction, it is submitted that the Appellant Company had raised money amounting to ₹ 5,15,00,000/- through share capital/app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough which payment has been received and the Income-Tax particulars which go on to establish the identity and creditworthiness of the respective share applicants authoritatively and conclusively. ( 2) On the basis of the documents/details submitted, the Learned Assessing Officer, has summarized as follows :- S.No. Name of the Share Holder Returned Income Assessment Year 1 Vanguard Jewels Ltd ₹ 3,42,600/- 2008-09 2. Ganga Builders Ltd (Rs. 2,910/-) 2008-09 3. Shivlaxmi Exports Ltd Nil 2008-09 4. Lexus Infotech Ltd 15,64,590/- 2008-09 5. Hema Trading Co Pvt Ltd 17,16,207/- 2008-09 ( 4) In order to further verify the genuineness of all the parties commissions u/s 131 were sent by the Learned Assessing Officer to the respective Investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me for A.Y. 2008-09 2. Shivlaxmi Exports Ltd Assessee made a submission through dak and submitted that the company has applied for 90000 equity share of ₹ 10/- of M/s Adamine Construction Pvt Ltd each at a premium of ₹ 90/- and allotted the same. The assessee has not given the reason for paying such a high premium. The assessee has enclosed bank statement showing payment was made by cheque no. 611654 dated 08.02.2008 for ₹ 50,00,000/- and cheque no. 611515 dated 08.02.2008 for ₹ 40,00,000/- drawn on Deutsche Bank. The assessee has not enclosed the bank statement showing the source of fund for share application money. The company has shown Nil income for A.Y. 2008-09. (5) On the basis of the said exercise, the Learned Assessing Officer has observed and concluded as follows:- * The identity and the creditworthiness of the investors are not established as all the investors are showing a nominal income. Neither the investor company and nor the assessee company has produced any proof to substantiate the credit worthiness of the investors (for example balance sheet of the investor compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be used to form any conclusion, adverse of otherwise in respect of the Appellant Company. As such the said addition is neither warranted nor justified or sustainable on the facts of the case. (9) The above factual statements and arguments can be further buttressed and reinforced by an analysis of the relevant legal provisions and legal pronouncements on the issue. Before proceeding further with the matter it would be worthwhile to reproduce the provisions of S.68 of the Income tax Act, 1961 which reads as follows:- S 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 officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. ( 10) The above Section enjoins upon an Appellant Company, the duty to adequately, satisfactorily and substantively explain the source of any cash credit in his books of accounts and no further. To put it differently an Appellant Company s burden of proof would stand discharged if he is able to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the record of the Income Tax Department. Moreover all the share applicants are companies duly incorporated after following the procedure laid out in the Companies Act, 1956. Thus, no doubt exists or even arises with respect to the identity of the creditors. ( ii) With respect to the capacity/credit worthiness of the share applicants to advance money and the genuineness of the transactions it needs to be understood, reiterated and re-emphasized that the entire transaction was consummated through account payee cheques through regular banking channels which fact has not been disputed or denied in any manner. As such given the entire factual situation of the case no doubt arises and remains as to the capacity and credit worthiness of the parties and genuineness of the transactions. ( 15) In this connection Your Honour s attention is also invited to the decision of the Hon ble Delhi High Court in the case of Commissioner of Income-Tax vs. Steller Investments Limited [(1991) 192 ITR 287 (Delhi)] wherein it has been clearly held that any increased capital is not assessable in the hands of the company. The relevant observations of the Learned Judges are as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take such repudiation at face value and construe it, without more, against the assessee; and (7) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribes. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company . ( 18) Further Your Honor s kind attention is also invited to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings by any of the subscribers to the share capital of their having invested money by way of share application money in the Appellant Company. Moreover there is no shred of evidence, direct, indirect or even peripheral of the share application money having emanated from the coffers of the Appellant Company. In fact, the investor companies, in their replies filed before the Department (in response to summons u/s 131 of the Act), have duly confirmed, the factum of their having made the investment and have further buttressed the same with the following documents :- ( a) Confirmations; ( b) Acknowledgement for filing of Income Tax Returns; ( c) Bank statements reflecting the transactions with the Appellant Company; ( d) Copies of Annual Accounts. ( 22) In view of the above, no doubt remains as to the identity of the investors, their credit worthiness and the genuineness of the transactions and correspondingly no adverse inference is called for. ( 23) In fact, in the instant case, reliance is placed on the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel Alloys Limited and Others [(2012)206 Taxman 254(Delhi)] wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved that it has created evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Sections 68 and 69 of the Act. ( 24) It would also be pertinent, topical and relevant to mention here that the Special Leave Petition field before the Hon ble Supreme Court by the Revenue against the above decision of the Hon ble Delhi High Court has been subsequently dismissed by Their Lordship of the Supreme Courts and as such the decision of the Delhi High Court in the case of CIT vs Kamdhenu Steel Alloys Limited and Others (supra) has attained conclusive judicial finality. ( 25) To conclude it may be said that on the basis of the facts discussed supra and the ratio of the above judgements makes it clear that if the share applicants are identified and it is established that they have deposited money in the Company, no recourse can be made to the provisions of S 68. The Appellant Company had provided all the requisite particulars to establish the identity of the share applicants in the confirmations, ITRs and bank statements already filed before the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Pr. CIT Vs. Softline Creations P. Ltd. (supra), the assessee in support of receipt of share application money had furnished PANs, bank details of share applicants and affidavits of Directors of those share applicant companies. The Hon ble High Court of Delhi has been pleased to hold that share application money cannot be considered as unexplained cash credits in the hands of the assessee. In the case of CIT Vs. Value Capital Services P. Ltd. (supra) the Hon ble jurisdictional High Court of Delhi while dismissing the appeal of the Revenue has been pleased to hold that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the case of CIT Vs. Orbital Communication P. Ltd. (supra) the Hon ble jurisdictional High Court of Delhi in the case of the claimed share application money has been pleased to hold that where substantial evidence has been produced by the assessee to prove creditworthiness of the creditors and genuineness of share applications, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, had doubted the genuineness of the claimed receipt on the basis that some of the investor companies could not be found at the given address and that some of the investor companies responded to the summons by post, but had not caused appearance before him. The Assessing Officer also held that income of many of the investor companies was too low or meager to enable them to make such large investments in the share capital of the assessee company. The Assessing Officer also observed that there appeared no justification for large components of share premium paid to the assessee along with the share capital. The Assessing Officer also remained suspicious about the claimed investor companies on the basis of reasons recorded for initiation of reopening of assessment proceedings based on the report relating to survey conducted at the premises of the assessee that the business premises of the assessee actually belong to Bhushan Steel Ltd. and several other companies were having their Registered offices in the same premises. The submission of the assessee in this regard remained that there is no law that more than one company cannot have its Registered office at one address and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleting the addition of ₹ 5,15,00,000./- made under section 68 of the Act on account of unexplained share capital and share premium. Since the first appellate order is based upon the ratio laid down in the above cited decisions of the Hon ble jurisdictional High Court of Delhi, we do not find reason to interfere therewith. The same is upheld. The ground is accordingly rejected. 9. It may be noted here that in this case five parties from Mumbai and Kolkata are same as have been considered in the present Departmental appeal. Even if Mumbai based companies have not responded to the letter issued by the A.O, however, three of them have already been found existing and genuine Companies and two of the Companies from Kolkata based are also found existing and genuine in the case of ACIT, Central Circle-13, New Delhi vs. M/s. Adamine Construction Pvt. Ltd., (supra). All Kolkata parties confirmed genuineness of transactions in their reply before A.O. Therefore, the issue is covered in favour of the assessee by the above said judgments. The Hon ble Rajasthan High Court in the case of CIT vs. ARL Infratech Ltd., 394 ITR 383 considered the identical issue of share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 14. The Hon ble Supreme Court in the case of M/s. Earthmetal Electrical Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP. No.21073/99 in which Hon ble Apex Court held we have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside. In this case, the Hon ble Bombay High Court and the ITAT, Mumbai Bench, which was the subject matter in SLP before Hon ble Supreme Court observed that assessee failed to produce any evidence regarding confirmation of the amount supposed to have been received as share capital from third party. The case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source . The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of ₹ 71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of ₹ 35,50,000/- with the aid of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Department and are genuine parties. No efforts are made by A.O. for production of investors at assessment stage. Therefore, the assessee has been able to prove identity of the share applicants, their creditworthiness and genuineness of the transactions in the matter. The Ld. CIT(A), on examination of the material on record, further found that the only reason for the Revenue to goes for further verification was the report relating to survey conducted at the premises of the assesseecompany which forms part of satisfaction recorded for reopening of the assessment proceedings. From the said report, Ld. CIT(A) found that the business premises of the assessee actually belong to M/s. Bhushan Steel Ltd., and several other Companies having their Registered Offices at the same address. This created a suspicion in the mind of the Revenue. The Ld. CIT(A) therefore, rightly noted that there is no law that more than one Company cannot have its Registered Office at one address. The Companies could have change their address later on. It is also an admitted fact that source of the capital investment companies were established during their respective assessment proceedings including in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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