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TMI Blog2018 (11) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case as discussed above, no addition was warranted u/s 68. CIT(A)’s findings under challenge deleting the impugned sec. 68 addition of unexplained share capital / premium. - Decided against revenue. - ITA No.1770/Kol/2016 - - - Dated:- 16-11-2018 - Shri S.S.Godara, Judicial Member And Dr. A.L. Saini, Accountant Member For the Appellant : Shri C.J. Singh, SR-DR For the Respondent : Shri Somnath Ghosh, Advocate ORDER PER S.S.Godara, Judicial Member :- This Revenue s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-4, Kolkata s order dated 08.07.2016, passed in case No.376/CIT(A)-4/Cir.10(2)/Kol/15-16, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the sides. Case file perused. 2. The Revenue s sole substantive ground challenges correctness of the CIT(A) s findings reversing Assessing Officer s action treating the taxpayer s share application / premium amount of ₹140,00,000/- vide following detailed discussion:- 5. I have considered the issue in the assessment order framed by the AO in light of the arguments made by the appellant. The short issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The first segment was as to whether the additions made in violation of the principles of natural justice should be set aside as void ab initio. The second segment was as to whether the addition should be deleted or should the case be restored to the ITO with a direction for re-doing. The rules of natural justice operate as implied mandatory requirement, non-observance of which amounts to arbitrariness and discrimination. The principles of natural justice have been elevated to the status of fundamental rights guaranteed in the Constitution as is evident from the decision of the Full Bench of the Supreme Court in the case of Union of India v. Tulsiram Patel AIR 1985 SC 1416 at p. 1460 holding that the principles of natural justice have thus come to be recognised as being a part of the guarantee contained in article 14 of the Constitution because of the new and dynamic interpretation given by the Supreme Court to the concept of equality which is the subjectmatter of that article and that violation of principles of natural justice by a State action is a violation of article 14. In fact, the principles of natural justice. in the realm of life and liberty. would ipso facto e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness of the shareholders were bogus in nature as if they did not exist and the transactions were an eyewash only for converting its black money into white without paying any tax to the revenue. In the instant case, the appellant had raised share capital in the aggregate sum of ₹1. 40,00,000/- by issuing 70,000 equity shares of the face value of ₹10 each at a premium of ₹190 per share. It is observed that the impugned addition was made with the predetermined mindset that share application monies received by the appellant is not genuine as identity and creditworthiness of the shareholders were bogus in nature as they did not exist and the transactions were an eyewash only for bringing its black money into circulation without paying any tax to the revenue. It is found that all the six share applicants are body corporates who had subscribed to the aforesaid share capital raised by the appellant and all the payments were made by each of them through a/c payee cheques drawn on their respective bankers. Each of the six share subscribers are regularly assessed to income tax and most importantly, except M/s Mangalraj Merchants P. Ltd., all the five share applicants .are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant were categorically fulfilled. These facts, in my opinion, clearly prove the genuineness of the transactions. Thus, the evidence adduced on record by the appellant in respect of the share applicants, in my humble opinion, clearly prove their source of funds, and their capacity for making such payments and accordingly, the criteria of their creditworthiness is proved. The AO has not found any defect and/or deficiency in the evidence adduced on record by the appellant. 5.3 It is also observed that the appellant had provided the copies of the acknowledgments evidencing filing of income tax returns by each of them, copies of their audited accounts including Balance Sheet wherein such investments made by each of them in the subscription of shares issued by the appellant are duly reflected as also copies of their bank statements for the relevant period from which such subscription monies were paid by them respectively and copies of the allotment advise received by them from the appellant in respect of shares allotted to them in respect of every share applicant. The annual return for the assessment year 2012-13 incorporating the allotments was filed by the appellant wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such funds are beyond reproach. 5.4. The AO had before him a plethora of evidence adduced on record by the appellant and it is well recognized that if he wished to act in a manner contrary to such proof, he had to disprove them first. At the same time, it is also a well established principle of law that in any matter, the burden is not a static one. The initial burden upon the appellant was duly discharged by it by providing the identity of share applicants by furnishing the copies of their returns along with audited report and financial statements, copies of bank accounts and proving the genuineness of the transactions by showing that money in the banks was debited by account payee cheques, and thereafter, the onus to disprove them shifted to the AO who grievously failed to discharge the same. It is observed that the AO had not issued summons u/s 131 of the Act or notices u/s 133(6) of the Act or made enquiries through Inspectors. It was the bounden duty of the AO to make enquiry about a particular receipt before drawing adverse conclusions to castigate the appellant. However. in the instant case, on receipt of such evidence, the AO did not pursue the issue further. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t details of shareholding and other bank transactions relating to those payments were placed before the Assessing Officer. It appears that the Tribunal below has recorded specifically that the Assessing Officer totally failed to consider those documentary evidence produced by the assessee in arriving at such conclusion. We, therefore, find no reason to interfere with the decision passed by the Commissioner of Income-tax (Appeals) and the Tribunal below and answer the questions formulated by the Division Bench in the affirmative and against the Revenue The appeal is, thus, dismissed, 6.1 Further. the Hon'ble jurisdictional High Court in the case of CIT vs, Gayatr. Portfolio Fund (P) Ltd [ITA No, 664 of 2004 dated 26,08,2014], it was observed as We find that the learned Tribunal has confirmed the order passed by the CIT who had overturned the order of the Assessing Officer by making the following observation: We find that the identity of the 5 parties investing in the share capital is not in doubt. They are body corporates and their complete addressees are or record This is the very first assessment in the life of the assessee company, The amounts were deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that all the share applicant/companies were assessed to the tax and their PAN and acknowledgement of I.T. returns along with their audited balance sheets, bank statements showing transactions etc. were made available to the Assessing Officer. It was pointed out that there was no legal bar of more than one company being registered at the same address and thus according to the Commissioner of Income-tax (Appeals), the doubt raised by the Assessing Officer about all those companies at the same address did not hold good. Being dissatisfied, the Revenue preferred an appeal before the Tribunal below and by the order impugned herein, the said Tribunal has affirmed the order passed by the Commissioner of Income-tax (Appeals). After hearing Mr. Nizamuddin, learned advocate appearing on behalf of the appellant and after going through the aforesaid materials, we agree with the Tribunal below that the Assessing Officer failed to establish that the share 'applicants did not have the means to make investment and that such investment actually emanated from the coffers of the assessee company. The receipt of share capital money had been duly recorded in the books of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable in the present context. 7. In this respect, the AIR relied on the decision of CIT vs. Divine Leasing Finance Ltd. (2008) 299 ITR 268 (Del) wherein it was held as under : A distillation of the precedents yields the following propositions of law in the context of section 68. The assessee has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) if relevant details of the address or PAN Identity of the creditor/subscriber are furnished to the department along with copies of the shareholders register, share application forms, share transfer register, etc.. it would constitute acceptable proof or acceptable explanation by the assessee. Further, (1) the department would not be justified in drawing an adverse inference only because the creditor/subscriber: fails or neglects to respond to its notices; (2) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted money. The assessee appears to be correct on this aspect. Something more which was necessary and required to be done by the Assessing Officer was not done. The Assessing Officer failed to carry his suspicion to logical conclusion by further investigation. After the registered letters sent to the investing companies had been received back undelivered, the Assessing Officer presumed that these companies did not exist at the given address. No doubt. if the companies are not existing, i. e. they have only paper existence, one can draw the conclusion that the assessee had not been able to disclose the source of amount received and presumption under section 68 for the purpose of addition of amount at the hands of the assessee. But, it has to be conclusively established that the company is non-existence. 7.2. Further, in the case of CIT vs. Oasis Hospitalities P. Ltd. (2011) 333 ITR 119 (Del), the facts of which are identical to the one under consideration, it was held as under : In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AN/GIR number and had also given the cheque number. name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement not traceable . The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal 7.5 The instant case is supported by the decision of Hon'ble Madras High Court in the case of CIT vs. Pranav Foundations Ltd. (2015) 229 Taxman 58 (Mad), wherein their Lordship has held as under: In view of the fact that all the four parties who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment. Thus, the assessee has categorically established the nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in deleting impugned addition made in respect of said amount. 8. In the instant case, the doubts expressed in the reasoning of the AO in the instant case is on the premise that the apparent is not real which is based on the decisions of the Apex Court in the cases of CIT vs. Durga Prasad More 82 ITR 540 and Sumati Dayal vs. CIT 214 ITR 801 wherein it was expounded that Revenue authorities are also supposed to consider the surrounding circumstances and apply the test of human probability. In the case of Sumati Dayal (Supra), the assessee has claimed to have won substantial amount in horse races in two consecutive assessment years. When the matter reached the Settlement Commission, it was held by the majority view that the appellant did not really participate in any of the races, except purchasing the winning tickets after the evens. The Chairman of the Settlement Commission expressed dissenting opinion and stated that the assessee has produced the evidence in support of the credits in the form of certificates from Racing Clubs. The Apex Court after considering the ratio of CIT vs. Durga Prasad More (Supra) upheld the majority view of the Settlement Commission and held at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny adverse inference against the appellant in relation to the provisions contained in s. 68 of the said Act since the appellant had adduced all possible evidence in support of the share capital raised by it and there was nothing more for the director of the appellant to state in that respect. Thus, the justification sought to be construed by the AO in support of his adverse action fails on merit. It is observed that the nature and source of such money received from the share applicants were duly explained by the appellant. Therefore, in my considered opinion, the appellant has discharged its primary onus of proving the identity and creditworthiness of the share applicants and genuineness of the transactions, more so when the share applicants had sufficient funds in their possession from which such investment in share subscriptions were made. Thus, the requirements of the provisions of s. 68 of the Act are duly met by the appellant and therefore, the AO was entirely in error in resorting to the impugned addition thereunder misconceiving the sweep and scope of the case of CIT vs. Sumati Dayal (supra) 8.1. Therefore, considering the totality of the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) is quoted in Assessing Officer s support that all these investors are in fact sham entities having no actual business thereby ploughing taxpayer s own money back to the system through a well as executed layering exercising. And that the assessee s meagre income does not at all justify its exorbitant premium of ₹190/- per share by way of private placement. The Revenue accordingly prays for acceptance of its instant appeal. 4. We have given our thoughtful consideration to rival contentions against and in support of the CIT(A) s findings reversing Assessing Officer s action making the impugned sec. 68 addition. There is no dispute about the assessee having claimed to have obtained share application / premium from six parties namely, Sonali Suppliers Pvt. Ltd., M/s Nihon Impex Pvt. Ltd., M/s Shivarapan Vanjiya Pvt. Ltd., M/s Saurabh Management Pvt. Ltd. M/s Jagajyoty Commodities Pvt. Ltd., M/s Mangalraj Merchants Pvt. Ltd., involving sums of ₹25 lac in case of former ₹5 and ₹15 lac regarding last entity; respectively. We find that these former five investors are in fact Non- Banking Finance Companies (NBF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibing companies, notices u/s 133(6) of the Act were issued to all the shareholders. Out of which, 6 shareholders responded to notice u/s 133(6) of the Act directly by sending the requisite details to the ld AO. The brief facts of raising of shares capital are as under:- The assessee had received share application for ₹ 1,80,00,000/- during the year under consideration. This capital was raised by way of issue of 95,000 shares of ₹ 10/- each out of which 10,000 shares were issued at a premium of ₹ 90% and balance 85,000 shares were issued at a premium of ₹ 190/- per share. These shares were issued to the following shareholders: We find that 6 out of 7 shareholders had duly confirmed the transactions with the assessee company. The evidences which were filed before the ld AO with regard to this issue are as under:- a) Income Tax Return of the shareholders b) Certificate of incorporation of the shareholder companies. c) Audited financial statements of shareholder companies. d) Details of bank balances, loans and advances. e) Share Allotment Letters f) Copy of the bank account of the shareholders g) Transactions with the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant documents for this company are available on pages 81-105 of the paper book. (c) Capricorn Abasan Private Limited: This Company invested a sum of ₹ 10,00,000 in the appellant company. The share application was made by account payee cheque. This company was incorporated on 10/01/2007 and was having company identification number U45203WB2007PTC112505. This company duly filed its return of income before ITO Ward 1 (1). Kolkata and was having PAN AADCC0536H. This company was having a paid up capital with free reserves and surplus of ₹ 2,24,71,1971- as on 31/03/2012 and ₹ 2,24,23,903/- as on 31/03/2011 respectively. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available in the paper book. All the relevant documents for this company are available on pages 106-122 of the paper book. (d) Kavya Marketing Private Limited: This Company invested a sum of ₹ 50,00,000 in the appellant company. The share application was made by account payee ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving a paid up capital with free reserves and surplus of ₹ 3,51,89,013/- as on 31/03/2012 and ₹ 1,00,958/- as on 31/03/2011 respectively. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash. The copy of the assessment order passed u/s 144/143(3) of the Act for the AY 2012-13 is also available in the paper book. The details of source of funds from which this company had made the share application are also available in the paper book. All the relevant documents for this company are available on pages 174-200 of the paper book. (g) Subhankar Mercantile Private Limited: This Company invested a sum of ₹ 20,00,000 in the appellant company. The share application was made by account payee cheque. This company was incorporated on 27105/2008 and was having company identification number U51909WB2008PTC126187. This company duly filed its return of income before ITO Ward 7(3), Kolkata and was having PAN AAMCS0780N. This company was having a paid up capital with free reserves and surplus of ₹ 4,89,71,429/- as on 31/03/2012 and Rs.,4,09,19,363/- as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany by account payee cheques out of sufficient bank balances available in their respective bank accounts. We find that the assessee had even proved the source of money deposited into the respective bank accounts of share applicants, which in turn had been used by them to subscribe to the assessee company as share application. Hence the source of source of source is also proved in the instant case though the same is not required to be done by the assessee as per law. The share applicants have confirmed the share application in response to notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. 5.4. It is not in dispute that the ld AO issued summons to the director of the assessee company who appeared in person before the ld AO on 16.2.2015 and a statement was recorded from Shri Hemand L Harkhani, director of assessee company. He explained the details that were sought for by the ld AO. Merely because he could not produce the directors of the share applicant companies, drawing an adverse inference against the assessee company to treat the receipt of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y point out that section 68 under which the addition has been made by the Assessing Officer reads as under: 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. The phraseology of Section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words shall be charged to income tax as the income of the assessee of that previous year . The Supreme Court while interpreting similar phraseology used in Section 69 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a certificate that it was a true copy of an entry contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business and that such book was in the custody of the bank, it was held admissible in evidence. Radheshyam v. Safiyabai Ibrahim AIR 1988 Bom. 361 : 1987 Mah. 725: 1987 Bank J 552. In view of the position of law as discussed above, it is always open for a borrower to contend, that even the creditworthiness of the lender stands proved to the extent of credits appearing in his Bank Account and he should be held to be successful in this contention. 5.6. In the case of Nemi Chand Kothari vs CIT reported in 264 ITR 254 (Gau), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking 5.6. In the case of Nemi Chand Kothari vs CIT reported in 264 ITR 254 (Gau), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person, the burden) of proving that fact is upon him. ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the subcreditor ********** In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the subcreditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held as follows: 15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loanconfirmation- certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements. 5.8. We find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the Commissioner of Income-tax (Appeals) on facts having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this -fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: The Income-tax Appellate Tribunal performs a judicial function under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee herein. However, it would be incumbent on the part of the ld AO of the assessee herein, to trigger the said verification process on the side of the department. It would be interesting to note in this regard that the Hon ble Jurisdictional High Court in the case of CIT Kolkata III vs M/s Dataware Private Limited in ITAT No. 263 of 2011 dated 21.9.2011 had held as under:- In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 5.11. We also find that the Hon'ble Jurisdictional High Court in the case of CIT vs Leonard Commercial (P) Ltd in ITAT No. 114 of 2011 dated 13.6.2011 had held as under:- The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of ₹ 8,52,000/-, ₹ 91,50,000/- and ₹ 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly prayed that the addition has been rightly made u/s 68 of the Act. He also placed reliance on the decision 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. In response to this, the ld AR argued that there is no mandate in law that the assessee has to prove the source of source of share applicants. He argued that in the instant case, the assessee had duly discharged its complete onus by furnishing the requisite details. In case if the ld AO has got some doubts, he should have verified the same from the AO of those share applicants. We find from the plain reading of section 68 of the Act, the duty cast on the assessee is to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share application money from five share applicants. The nature of receipt towards share application money is well established from the entries passed in the respective balance sheets of the companies as investments. Hence the nature of receipt is proved by the assessee beyond doubt. In respect of source of credit, the assessee has to prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions and genuineness of share applicants and the transactions herein. In the instant case, the assessee had indeed proved the identity of the share applicants, creditworthiness of share applicants and genuineness of transactions beyond doubt. We find that the entire addition has been made by the ld AO based upon suspicion, surmises and conjectures and not upon proper evaluation and appraisal of the evidences and documents filed before him. We place reliance on the decision of the Hon ble Apex Court in this regard in the case of Dhakeshwari Cotton Mills Ltd vs CIT reported in 26 ITR 775 (SC) wherein it has been held that no addition can be made without material and on mere suspicion. In these facts and circumstances, there is no need to treat the receipt of share application money from five share applicants as unexplained u/s 68 of the Act. Hence we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed. 5.13. We find that the co-ordinate bench of this tribunal recently in the case of ITO vs Wiz-Tech Solutions Pvt Ltd in ITA No. 1162/Kol/2015 dated 14.6.2018 had held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. 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 as it stood/ applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. 30. ***** 31. ***** 32. We would like to reproduce the Hon'ble High Court order in CIT vs. Gangeshwari Metal P.Ltd. in ITA no. 597/2012 judgement dated 21.1.2013, the Hon'ble High Court after considering the decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgement in the case of CIT vs. Lovely Exports 319 ITR (St) 5(SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided 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 33. The case on hand clearly falls in the category where there is lack of enquiry on the part of the A. O. as in the case of Ganjeshwari Metals (supra). b) In the case of Finlease Pvt Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8/ it was held as follows. 6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application affidavits of the directors, form 2 filed with the ROC by su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to uphold the order of the Ld. Commissioner of Income Tax (Appeals) 35. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad deposed before the ld AO while recording his statement in the course of assessment proceedings that the assessee company had huge prospects in future in real estate business and accordingly the receipt of share capital with premium was justified. The ld DR had filed written submissions before us reiterating the findings of the ld AO. We find that the reply of the director of the assessee company for justification of premium has been summarily rejected by stating that the said explanation appears to be incorrect. We would like to add that receipt of share capital for a company is not a prohibited transaction, as that is one of the main source of raising funds for a company to run its intended activities. The ld CITA had categorically given a finding that the ld AO did not bring on record sufficient tangible and cogent material to support his conclusion that the amount credited in the assessee s books in the form of share capital and share premium actually represented assessee s undisclosed income. This factual finding remain uncontroverted by the revenue before us. Once the replies to notices issued u/s 133(6) of the Act were received from the share subscribing companies, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute that 6 out of 7 share subscribing companies had duly complied with the notices issued u/s 133(6) of the Act which was done behind the back of the assessee and all those parties had duly confirmed the transactions with the assessee by furnishing the requisite details called for by the ld AO. The ld AO actually had taken adverse view in respect of all the share subscribing companies in similar fashion, without bringing any cogent material on record against the assessee, which in our considered opinion, is not tenable as per law. We find that the reliance placed by the ld DR on the decision of Hon ble Calcutta High Court in the case of Rajmandir Estates supra was distinguishable on facts as the said decision was rendered in the context of validity of revisionary jurisdiction u/s 263 of the Act by the Learned Administrative Commissioner. This fact has already been addressed by this tribunal in the case of VSP Steel P Ltd supra. No decision whatsoever was rendered by the Hon ble Jurisdictional High Court in the case of Raj mandir Estates P ltd on merits of the addition and hence does not come to the rescue of the revenue in the facts of the instant case. 5.16. We also find that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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