9911796707
TMI Blog2019 (3) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... cknowledgments 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 conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed. - I.T.A. No. 2278/Kol/2016 - - - Dated:- 27-2-2019 - Shri A. T. Varkey, JM And Dr. A. L. Saini, AM For the Appellant : Shri P.K. Srihari, CIT(DR) For the Respondent : Shri A.K. Tulsiyan, FCA ORDER PER SHRI A.T.VARKEY, JM This is an appeal preferred by the Revenue against the order of the CIT(A) 4, Kolkata dated 04.10.2016 for Assessment Year 2012-13. The main grievance of the Revenue is against the action of the Ld. CIT(A) in deleting the addition made by the AO on share capital and share premium issued by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom pages 25 to 36 of Paper Book. It was brought to our notice the details pertaining to share subscriber filed before the AO during the course of assessment proceedings however the AO in the assessment order says assessee did not comply with the direction of AO. It was brought to our notice that the share capital were raised incompliance with the provisions of the Companies Act, 1956. From the details filed before us it transpires that the share subscribing entities were incorporated as per Companies Act, 1956 and were regular income tax assessees and their income is assessed to tax at Calcutta. We note that the share application money was received through account payee and the relevant bank statement highlighting share application money received by the assessee-company has been filed in the Paper Book. It was brought to our notice that only because the director of the assesseecompany could not appear before the AO pursuant to the 131 notice issued by him, the AO drew adverse inference against the assessee. According to the assessee, the director of the company was out of town for official tour and therefore, he could not appear before the AO. It was brought to our notice that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them are duly and fully reflected in their audited accounts as well as their income tax return filed in the paper book. The appellant had duly filed its return of total income u/s 139(1) of the Act in respect of the assessment year 2012-13. In the course of the assessment proceedings, the, appellant in response to the requisitions made by the AO, from time to time produced its audited books of accounts, filed copies of its audited annual accounts including various details and other documents as desired by the AO. The details and documents so produced and filed with the AO included, inter alia, full details of each of the share applicants, who had subscribed to the aggregate share capital as well as share premium money raised by the appellant during the assessment year under appeal. The AO, on receipt of the aforesaid details from the appellant, did not conduct any enquiry. 4.4 It is further observed that the corporate share subscribers are registered under the Companies Act, 1956 and are on the records of Registrar of Companies functioning under Ministry of Corporate Affairs, Government of India and the individuals are having Permanent Account Numbers. In fact, the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any doubt or dispute that the share applicants are actually found to have subscribed to the share capital issued by the appellant, in the impugned previous year relevant to the assessment year under appeal. However, the AO had not brought these indisputable facts on record but acted on his whims and fancies. It is observed that the burden which lay on the appellant, in relation to s. 68 of the Act, has been duly discharged by it and nothing further remains to be proved by it on the issue. There is no evidence on record to show that the identities of the share applicants are not proved and/or that the introduction of share capital by them was not genuine and/or the source of investment was not fully explained to the satisfaction of the AO. Since the conditions precedent for discharging of burden under the provisions of s. 68 of the Act are met with adequate evidence, the addition made under such pretext deserves to be deleted. 4.6 A close perusal of observations and findings recorded in the assessment order does not show that documents filed by the appellant to establish identity and creditworthiness of share subscribers as well as genuineness of transactions have neither bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards their subscription to the share capital is proved by submission of their return, audited annual accounts, their bank statement filed by the appellant. The net worth of such subscribers is in excess of the amount invested by each of them as explained hereinabove. The addition made by AO is based on extraneous parameters not germane for deciding the issue. The AO had not dealt with the issue judiciously and consistently with the evidence adduced during the course of the assessment proceedings by the appellant and the replies of the share applicants in respect of the share capital do not warrant the inference that such share application monies received is unaccounted cash credit. Hence, I am inclined to accept the arguments tendered by the AR Of the appellant in this respect. In view of the above, I have no hesitation to hold that the impugned addition made by invoking the provisions of s. 68 by the AO is not justified in the circumstances. Accordingly, I direct deletion of addition of ₹ 12,01,00,000/- made on account of share premium u/s 68 of the Act. Thus, these grounds are allowed. 5. The Ld. CIT, DR assailing the decision of the Ld. CIT(A) drew our attentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T dismissed the appeals of the assessee on similar facts and circumstances. xii) Nakoda Fashions Pvt. Ltd ITA No 1716/Ahd/2012, revenue appeals are allowed. xiii) Hindusthan Tea Trading Co. Ltd. Vs. CIT 263 ITR 289 (Kol) xiv) CIT Vs. Nipun Builders and Developers Pvt. Ltd. (2013) 350 ITR 407 (Del.), xv) CIT Vs. N. R. Portfolio Pvt. Ltd. (2014) 2 ITR 68 (Del) xvi) CIT Vs. Gold Leaf Capital Corporation Ltd. (2013) 353 ITR 164 (Del). xvii) CIT Vs. Navodaya Castles Pvt. Ltd. (2014) 367 ITR 306 (Del.) xviii) Onassis Axles P. Ltd. Vs. CIF (2014) 364 ITR 53 (Del). xix) CIT Vs. Jan Sampark Advertisement Marketing Pvt. Ltd. 2015 TIOL 6000 (Del) And he summed up the arguments by stating the following material points: Mere production of incorporation details, PAN or the fact that third persons or company had filed Income Tax details may not be sufficient when surrounding and attending facts predicate a cover up. Paper work like details of PAN, Income Tax Return, details of cheque and bank accounts indicate and reflect proper paper work or documentation but genuineness, creditworthiness and identity are deeper an obtrusive. Companies no doubt are art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No. Name Income tax assessee ITR filed PAN Bank statement filed or not Amount of share subscription including share premium (Rs.) 1 Brijbhumi Tradevin Pvt. Ltd. Yes Yes AAECB6243M Yes 50,00,000 2. Brijbhumi Merchants Pvt. Ltd. Yes Yes AAECB6242L Yes 50,00,000 3. Recon Agencies Pvt. Ltd. Yes Yes AAFCR4184A Yes 1,00,00,000 4. Paridhi Dealer Pvt. Ltd. Yes Yes AAGCP1423K Yes 1,00,00,000 5. Moondhara Mercantile Pvt. Ltd. Yes Yes AAGCM5216R Yes 1,00,00,000 6. Futteresoft Suppliers Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share subscribers have filed their declaration of source of fund towards payment of share application money to assessee company. Thus, the identity cannot be disbelieved. The share subscribers have filed their relevant page of bank statements evidencing the share application money paid through cheque and the bank statement have also been filed which we find placed in pages 42, 80,122, 164, 208, 252 and 299 of the paper book which tallies with the copy of application for equity shares wherein the cheque numbers and amounts have also been stated. Therefore, the genuineness cannot be disbelieved unless the papers filed before the AO/Ld. CIT(A) or before us is found to be false or fabricated. 9. Coming to the creditworthiness, we note that from the aforesaid figures which emanate from the Balance Sheet placed along with the paper book of each subscriber shown that the share subscribers had enough money to subscribe in the share capital. We note that all of them have filed their income tax acknowledgement which shows that they are income tax assessees and had their PAN also disclosed in that. In any case, if the AO of the assessee company had any doubt about the creditworthin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Return of the share holders (b) Audited Accounts of the share holders (c) Share Application Forms (d) Share Allotment Letters (e) Copy of the bank account of the share holders (f) Transaction with the appellant was duly highlighted in the bank statement (g) Copy of assessment orders of the shareholders (h) Evidences of source of source of the share holders 11. Taking note of the aforesaid documents, the Ld. CIT(A) was of the opinion that assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share subscribers and deleted the addition made u/s. 68 of the act. Before we adjudicate as to whether the Ld. CIT(A) s action is right or erroneous, let us look at section 68 of the Act and the judicial precedents on the issue at hand. 12. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 14. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as 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 sub-creditor ********** 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 sub-creditor, that the transaction between the two were not genuine and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sub-creditors to prove their creditworthiness. 15. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- 4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order. 16. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: 15. It is now a settled law that while considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income-tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Income-tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 18. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought ₹ 4, 00, 000/- and ₹ 20,00,000/- towards share capital and share premium respectively amounting to ₹ 24,00, 000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of ₹ 24,00,000/-. On appeal the Learned CIT (A) by following th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see Company received the applications through bankers to the issue, who had been appointed under the guidelines of the Stock Exchange and the Assessee Company had been allotted shares on the basis of allotment approved by the Stock Exchange. The Assessee Company had duly filed the return of allotment with the Registrar of Companies, giving complete particulars of the allottees. The Commissioner of Income Tax (Appeals) found that inquires had confirmed the existence of most of the shareholders at the addresses intimated to the Assessing Officer, but the Assessing Officer took the view that their investment in the Assessee Company was not genuine, on the basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed the particulars of the shareholders. The factual findings cannot be interfered with, in appeal. We are of the view that once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds. 22. Further, our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner of Income Tax vs M/s. Leonard Commercial (P) Ltd on 13 June, 2011 in ITAT NO 114 of 2011 wherein the Court held as follows: 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 through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant is given at page numbers 1-42 of the Paper Book. We note that this company invested a sum of ₹ 50,50,000/- in the appellant company. The investments were made in two parts. Firstly, 50,000 shares were purchased at the time of incorporation of the assessee company i.e. the applicant is the promoter of the assessee. Subsequently 50,00,000 shares were also acquired by the applicant through allotment at ₹ 1/ share. It was also brought to our notice that the present shareholder is holding 47.91% shares out of the total shares. The same are also present share holders of the assessee company holding the same number of shares. Thus, the applicant is an associate of the assessee company holding major number of shares. The share application was made by account payee cheque. This company was incorporated on 19.07.2011 and was having company identification number U51909WB2011PTC165056. This company duly filed its return of income before ITO Ward 8(1), Kolkata and was having PAN AAECB6243M. This company was having a paid up capital with free reserves and surplus of ₹ 51,82,293/- as on 31.03.2012. The copy of the bank statement of the Company is duly available in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sited the website of ministry of Corporate Affairs and from a perusal of the master data, we note that this company is active as on 7th February, 2019. We also note that M/s. Brijbhumi Merchants Pvt. Ltd. is holding 47.91% as on 31.03.2018. 25. In respect of M/s. Recon Agencies Ltd., our attention was drawn by the Ld. AR to pages 81-122 of the paper book wherein we note that this company invested a sum of ₹ 2,00,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 11.08.2011 and was having company identification number U51909WB2011PLC166320. This company duly filed its return of income before ITO Ward 12(l), Kolkata and was having PAN AAFCR4184A. This company was having a paid up capital with free reserves and surplus of ₹ 51,01,02,258/- as on 31.03.2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note 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 from a perusal of the bank statement and other documents filed in the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was having PAN AABCF7789D. This company was having a paid up capital with free reserves and surplus of ₹ 38,87,09,882/- as on 31.03.2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note 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 from a perusal of the bank statement and other documents filed in the paper book. 29. In respect of M/s. Fairlink Mercantile Pvt. Ltd., Ld. AR drew our attention to pages 253-299 of the paper book wherein we note that this Company invested a sum of ₹ 4,00,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 01.08.2011 and was having company identification number U51909WB2011PTC165688. This company duly filed its return of income before ITO Circle 2(1), Kolkata and was having PAN AABCF7790E. This company was having a paid up capital with free reserves and surplus of ₹ 49,99,21,78U- as on 31/03/20L2. The copy of the bank statement of the Company is duly available in the paper book. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers as held by Hon ble jurisdictional High Court in CIT vs DATAWARE (supra) which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company 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. 32. We also note that recently the ITAT Kolkata in several cases has deleted the addition on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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. 3.4.2. In view of the aforesaid findings and respectfully following the decision of the apex court (supra) and Jurisdictional High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the ground no.2 raised by the Revenue is dismissed. 4. The last ground to be decided in this appeal of the Revenue is as to whether the Learned CIT(A) is justified in deleting the addition u/s 68 of the Act made in respect of allotment of shares to 20 individuals for an amount of ₹ 57,00,000/- in the facts and circumstances of the case. 4. 1. The brief fact of this issue is that the assessee had received share application monies from 20 individuals in the earlier year which were kept in share application money account. During the asst year under appeal, the assessee allotted shares to these 20 individuals out of transferring the monies from share application money account to share capital account. The details of 20 individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the additional ground raised before us and vehemently supported the order of the Learned AO. In response to this, the Learned AR fairly conceded to admission of this additional ground and vehemently supported the order of the Learned CIT(A). 4.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the additional ground raised by the assessee separately before us vide its covering letter dated 9. 12.2011 is admitted as it appears to be a genuine and bonafide error of omission on the part of the Revenue from not raising this ground in the original grounds of appeal filed along with the memorandum of appeal. Moreover, it does not require any fresh examination of facts. Hence the same is admitted herein for the sake of adjudication. 4.4. 1. We find from the details available on record that the share application monies from 20 individuals in the sum of ₹ 57,00,000/- has been received by the assessee during the financial year 2004-05 relevant to Asst Year 2005-06 and only the shares were allotted to them during the asst year under appeal. Admittedly no monies were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction. Held After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovely Exports Pvt Ltd, 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. 6.2. We find that the issue is also covered by the decision of Hon'ble Delhi High Court in the case of CIT vs Value Capital Services P Ltd reported in (2008) 307 ITR 334 (Del) , wherein it was held that: In respect of amounts shown as received by the assessee towards share application money from 33 persons, the Assessing Officer required the assessee to produce all these persons. While accepting the explanation and ITA No. 632/KoI12011--C-AM M/s. R.B Horticulture 6 Animal Proj. Co. Ltd the statements given by three persons the Assessing Officer found that the response from the others was either not available or was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a show a cause notice dated 09.12.2011 asking for the explanation from the assessee as to how the notices u/s. 133(6) could be served to these nine companies who had different address as per ROC records. The AO was explained vide letter dated 20.12.2011 of the assessee that those companies had changed their addresses since filing of Form 2 with the Registrar. Further, it was none of the business of the assessee to question the addresses of the applicants as long as they affirm the address. The applicants were duly incorporated bodies under the Companies Act. 1956 since long. They have been regularly filing their returns of income under the Income Tax Act and are being assessed by the Revenue since long. Some of them are even registered as Non-Banking Financial Companies with Reserve bank of India. They have been filing returns regularly with Registrar of Companies and RBI since long. The letters might have been received at their old addresses because in case of change in the address, people instruct the incumbents at old addresses not to refuse the receipt of letters and receive the same. Just because, a letter was received at the old address instead of present address, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings of the Ld. CIT(A). In view of above we find no reason to interfere in the order of the Id. CIT(A). Accordingly the ground raised by Revenue is dismissed. (d) The Ld ITAT Kolkata in ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 dated 2.3.2016. In this the decision the Ld. Tribunal held as follows: 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 I am of the opinion that the AO was not justified in making, the addition aggregating to ₹ 54,00,000/- u/s.68 of the Act being the amount of share application money by holding that the appellant company has failed to prove the identity, and creditworthiness of The creditors as well as the genuineness of transactions. It is observed that all the three share applicant companies i.e. M/s. Shree Shyam Trexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kata bench in the case of ITO vs Devinder Singh Shant in IT A No.20BIKo112009 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 shareholder. In this regard it is seen that for A Y.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 A Y.2005- 06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodation entry providers . The Assessing Officer in the latter case was able to prove with enough material that the share subscription was a pre-meditated plan to route unaccounted monies. In the present case however the Department was unable to bring any material whatsoever shows that share application was in the nature of accommodation entries. The Court observed that the appellant had filed sufficient documentary evidences to establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. The AO however chose to sit back with folded hands till the assessee exhausted all the evidence in his possession and then merely reject the same without conducting any inquiry or verification whatsoever. The Court thus held that the decision of CIT Vs Novo Promoters Finlease (P) Ltd (342 ITR 169) was not applicable to the facts of the case. Instead it was held that the issue in hands was on the lines of the decision of the Supreme Court in the case of CIT Vs Lovely Exports Pvt Ltd (319 ITR 5). Accordingly the addition made under Section 68 on account of share application was deleted. 34. We would like to reproduce the Hon'ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 35. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much 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) 37. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
