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TMI Blog2018 (12) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... n upholding the action of AO in making an addition of Rs. 5,00,00,000/- by treating the share application money received during the assessment year under consideration as unexplained cash credit u/s 68 of the Income Tax Act. 3. That the CIT (A) was not justified in upholding the action of AO in making impugned addition and erred in not adjudicating the following specific grounds raised by the appellant 3.1 proper and reasonable opportunity was not provided during the course of assessment proceedings. 3.2 copies of confirmation, ITR, Balance Sheet of all the companies who invested in share capital in the assessee company were duly filed during the assessment proceedings to prove the identity, genuinity and credit-worthiness whereas the same have been overlooked by AO. 3.3 AO lost sight of the fact that the shares allotted to investing companies were not bought back till date and are still existing in the name of investing companies. 3.4 at the fag-end of assessment proceedings i.e. only on 23.03.2015 the assessee company was required to produce Directors of investing companies and as such proper and reasonable opportunity was not provided by the AO. 3.5 as sufficient com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the order of The Commissioner Of Income Tax Appeals - 29, New Delhi dated 12/12/2017 wherein the addition under section 68 made by the Learned Assessing Officer of INR 50,000,000/- was confirmed. This is the solitary issue in the appeal of the assessee. 4. The brief fact shows that assessee is a company who filed the return of income on 29/9/2012 declaring a loss of INR 154985/-. The case was selected for scrutiny. Search on SRM group of cases and certain survey operation were carried out on 15/10/2013 and after that the case of the assessee was also centralized with that group. Pursuant to search action and post-search enquiries, SRM group was alleged to have introduced in the books of accounts of the main companies of the group used in unaccounted money in the form of share capital with very high premium, during financial year 2010 - 11 and 2011 - 12 through a larger number of Delhi and Calcutta-based unknown and non- descript companies. Based on this allegation, case of the assessee was examined. 5. The learned assessing officer found that assessee has issued shares to 13 companies who are based in Delhi and Kolkata. The assessee was asked to prove the identity and credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application form or any other documentary proof evidencing the genuineness of the investment made by the different companies and its group companies. Further, as Mr. Praveen Gupta in case of search on another company M/s Goel Exim India private limited offered a sum of INR 4 0 - 4 5 crore as voluntary disclosure of share capital and share premium for FY 2010 - 11 and 2011 - 12. The learned assessing officer also stated that summons were issued by the investigation wing under section 131 (1A) of the income tax act to the directors of the several companies. However, none of the principal officer and directors of the investing companies based in Delhi made compliance of the summons. Many of the summons returned unserved with postal remarks that „no such person on such address‟. He further referred to some enquiries made by the investigation wing of income tax Department at Calcutta. Later on he looked into the balance sheet of the various companies and stated that from the financial of the investor companies, it was clear that the gross receipt in turnover of these companies are extremely low and profit before tax is either negative and in most of the cases is at a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued as share capital to 13 companies and to discharge the initial onus of the assessee, it submitted the copies of the confirmation, income tax return, balance sheet and profit and loss account, bank statement of the shareholders in respect of the share capital and share premium before the assessing officer. He submitted that the assessing officer has not made any enquiry but has completely relied upon the enquiry conducted by the investigation wing with respect to 133 companies. He further stated that the companies are assessed to income tax and are regularly filing the return of income. The bank statements are also available with the assessing officer, which did not show that they have deposited any cash in the bank accounts those companies. He submitted that the learned assessing officer did not conduct any enquiry but has relied upon the enquiries conducted by the investigation wing. He further stated that the learned assessing officer should have issued summons to the companies or asked the assessee to produce the directors et cetera but the learned assessing officer has not done so. He also relied on the statement recorded by the investigation wing of the directors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd submitted that the addition has been rightly made by the learned assessing officer and confirmed by the learned Commissioner of income tax appeals. He further relied upon the decision of CIT vs. MAF capital private limited 361 ITR 258, CIT vs Navodaya castles private limited 367 ITR 306, Konark structural engineering private limited vs DCIT 90 taxmann.com 56, Prem casting private limited vs CIT, 88 taxmann.com 189, along with the decision of the honourable Delhi High Court in case of CIT vs. Nova promoters and Finlease private limited 342 ITR 169. In the end he referred to the decision of the honourable Delhi High Court in case of principal Commissioner of income tax vs. Bikram Singh. 9. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly the assessee has issued share capital to 13 companies in the range of INR 4,000,000 to INR 2,500,000. To prove the creditworthiness of these companies assessee submitted with respect to all 13 companies i. Confirmation of accounts ii. copy of share application money forms where the complete details of the name and address , bank account number, PAN, details of the directors coupled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given to the assessee. On the issue of the financial parameters of the investing companies, learned assessing officer has merely looked at the returned income of that assessee, where the complete balance sheet is available to him audited by the chartered accountant and also produced before the income tax authorities along with the return of income. The learned assessing officer should have enquired about the source of funds of these companies by issuing summons to the directors of those companies which the learned assessing officer has failed to do so. He could have also examined the fact that when these companies are having low income wherefrom they are getting money to invest in the assessee company. As the fund have been undeniable shown in the annual accounts, there are definitely sources of those funds which are routed through the balance sheet only if not through the profit and loss account. Furthermore, even the banking enquiries were conducted by the investigation wing only with respect to 133 companies, learned assessing officer has not even done the enquiries with the banks with respect to these 13 companies to examine who are the directors of those companies, who are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case:- "The Assessing Officer in this case had - based upon the search conducted in the premises of a third party, issued reassessment and proceeded to add Rs. 9,30,00,000/- as unexplained investment under Section 68 of the Income-tax Act, 1961 (hereafter referred to as "the Act"). The amounts received were from 7 entities and the AO sought report from the Commissioner at Mumbai and Kolkata. The CIT (A) and the ITAT concurrently deleted the amounts brought to tax under Section 68 of the Act, holding that the relevant enquiry based upon the materials furnished by the assessee had not been made. 2. We notice that the search in the premises of the Bhushan Steel Group, had led to survey in the premises of various other assesses including M/s Adamine Construction Pvt. Ltd., and in the end the additions made in that case too were deleted. The deletion - again concurrently by the lower appellate authorities was upheld by this Court recently in respect of the same assessee for an earlier assessment. Here too, the Court has considered the materials. What is evident is that the AO went by only the report received and did not make the necessary further enquiries - such as int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec. 68 and the remedy open to the revenue is to go after the share applicants in accordance with law. Ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec. 68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. 13. The glaring feature of the assessment proceedings conducted by the learned as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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