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TMI Blog2018 (10) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... final accounts were filed giving sources of funds for making the investment, the Assessing Officer has not given any reason as to why he is not able to accept the same. If at all the creditworthiness of the directors is not proved, then an addition can be made only in their hands and not in the hands of the company as held by the Hon’ble A.P. High Court in the case of Lanco Industries Ltd. (1999 (12) TMI 45 - ANDHRA PRADESH HIGH COURT). No contrary evidence to controvert the evidence produced by the assessee, is brought on record. Simply because the directors/shareholders did not present themselves before the Assessing Officer, an addition u/s 68 cannot be made. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company had only filed the requisite documents which are seen and placed on file. It is seen that the director thwarted the process of furthering the investigation as neither the director of assessee company nor the subscriber company director appeared and also no proper reason has been explained for their non-appearance. In the absence of personal appearance of the director of the assessee company as well as the director of the subscriber company, the genuineness and creditworthiness remained unexplained. The onus that falls with the assessee to prove the genuineness, creditworthiness and the identity of the investors remains unexplained." 2.1. The Assessing Officer on the ground that the identity, creditworthiness, of the subscriber companies and genuineness of the transactions is not proved, the entire share capital and share premium amount credited in the books of accounts, during the year under reference were added back u/s 68 of the Act. A disallowance u/s 14A of the Act, was also made of ₹ 1,87,566/- by applying Rule 8D. Aggrieved, the assessee carried the matter in appeal. The ld. First Appellate Authority, deleted the addition u/s 68 of the Act. On the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., the total assets are ₹ 2,32,26,565/- and the investment in the assessee company is around ₹ 46.20 Lakhs/-. As brought out by the ld. CIT(A), all these companies have given replies to the statutory notice u/s 133(6) of the Act. They have furnished copies of the income tax acknowledgements evidencing filing of the return of income by each one of them. Copy of the audited books of accounts including balance sheet, wherein such investments are reflected etc. have been filed as evidence After taking all these facts into account, the ld. CIT(A) at para 4.12. as concluded as follows:- "4.12. Considering the totality of the facts and circumstances of the case. I find substance in the arguments of the AR that the appellant has made its case that the identity of the share applicants are established beyond doubt and on enquiries made by the AO there was no adverse finding on this aspect. Admittedly, all the share applicants are existing assessees under the Act and that some of them were subject to scrutiny assessment during the same period establishes he fact that the identity and authenticity of the share applicants were not in doubt. About the genuineness of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complied with. Similar are the decision of this Bench of the Tribunal in the case of Income Tax Officer vs. Wiz-Tech Solutions Pvt. Ltd., ITA No.1162/Kol/2015 and Hon'ble Jurisdictional High Court in the case of Pr. CIT-1 vs. M/s. Steel Emporium Ltd., GA No. 3275 of 2016 in ITAT 354 of 2016. This Bench of the Tribunal under identical circumstances, discussed the issue at length, in the case of Five Star Vanijya Pvt. Ltd v. Deputy Commissioner of Income Tax, Circle-8, Kolkata in ITA No. 1120/Kol/2015, Assessment Year: 2010-11, order dt. July 31st, 2018, and by relying upon a number of judgement of various Courts of law, held as follows:- "5. After hearing rival contention, perusing the papers on record, orders of the authorities below as well as case-law cited, we hold as follows:- The assessee in this case is not a paper company and is engaged in international and inland trading of iron ores and minerals. It has a turnover of about ₹ 15 Crores during the year 31/03/2010. It has profits and taxation of about ₹ 33.84 Lakhs. The share holders in this company are also not paper companies or Jamakharchi companies. They are individuals who are also the directors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise." 6.3. Recently, the Hon'ble Jurisdictional High Court in the case of ld. Pr. CIT-1, Kolkata vs. M/s. Steel Emporium Ltd. in GA NO.3275 OF 2016 WITH ITAT NO.354 OF 2016, 14th May, 2018, held as follows:- "The third ground is on account of share application money. The assessing officer found that several of the applicants for issuance of further shares in the assessee shared the same 12, Waterloo Street address as the assessee and that one individual had accepted notices under Section 133(6) of the Act, though different rubber stamps were used along with the signature. The Tribunal was satisfied that the identities of the applicants for shares in the assessee had been established. No legal question arises as a result of such finding." 6.4. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd. (2012) 248 ITR 33, held that once the assessee has prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as has been arrived by the Investigation wing of the department. As such entries of ₹ 55,50,000 received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under Section 271(1)(c ) are being initiated separately. " The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under Section 68 of the Income Tax Act, 1961. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. " 6.6. In the case of CIT vs. Fair Finvest Ltd., (2013) 357 ITR 146 (Del.) at para 6 held as follows. "6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Andhra Pradesh High Court in the case CIT vs. Lanco Industries Ltd. [2000] 242 ITR 357 (Andhra Pradesh), held as follows:- "Moreover, we fail to see how merely by reason of unsatisfactory explanation relating to the source of investment by the shareholders, the money invested on shares should be treated as income of the assessee. If the ostensible shareholders failed to explain the means of investment, that should have been treated as unexplained income in their hands. In order to add it to the income of the assessee there must be a further finding that in fact the shareholders were mere namelenders and the money allegedly invested by them really belonged to the directors of the assessee-company. In the absence of a finding that the persons to whom the share certificates were issued on receipt of consideration as per the book entries were in fact dummies or stooges of the directors of the assessee-company, the same cannot be treated as unaccounted income of the assessee. There was no such finding by the assessing authority. In this view of the matter, the ultimate conclusion of the Tribunal cannot be faulted in any case. We, therefore, see no ground to admit this app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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