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TMI Blog2019 (6) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate action or proceeding against these shareholders. It is a case where the assessee has been able to meet the requirements to justify its case. If the notices issued by the A.O. to the share subscribers were not complied with or came back unserved, this could not be held against the assessee, which had discharged the initial onus which lay upon it by proving the identity of the share applicants and the genuineness of the transactions - Decided in favour of assessee Addition u/s. 14A u/s 8D - no dissatisfaction has been recorded by assessee - HELD THAT:- Before invoking the provisions of Section 14A, AO has first of all to record his or her dissatisfaction with the claim of the assessee as regards the expenditure shown (or not shown at all) by the assessee in relation to income which does not form part of the total income. However, in the assessment order, no such dissatisfaction has been recorded and the AO has mechanically applied Section 14A/Rule 8D to make the disallowance, which is not sustainable in the eyes of law. Therefore, addition in dispute is not warranted - CIT(A) has rightly directed the AO to delete the addition - Decided in favour of assessee. - ITA NO. 53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditworthiness of the subscribers of company s share. The assessee vide letter dated 29.12.2014 submitted that during the year under consideration the assessee had raised its paid up capital by ₹ 60.00 lacs and submitted the return filed with ROC copy of share application by subscriber, Board Resolution of said Company and copy of confirmation of transaction from subscriber company. AO observed that the assessee company had issued shares to two CO. s namely Manav Realities Pvt. Ltd. and Gaji Sales Pvt. Ltd. Accordingly, notices u/s. 133(6) of the Act has been issued to the following two companies from whom share capital and share premium had been received vide notice dated 3.2.2015. However, no reply was received from the subscribers. Again notice u/s. 133(6) of the Act was issued on 16.2.2015 to furnish some details by 25.2.2015 and AR was also informed to produce the parties vide hearing dated 18.2.2015. The notices u/s. 133(6) of the Act to the aforesaid companies returned unserved. Further summons dated 21.1.2015 u/s. 131 of the Act issued to the Directors of the assessee company for personal deposition on 30.1.2015 also remained uncomplied with. The AO ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) order on this issue and allow the ground raised by the Revenue. He further submitted that during the assessment proceedings, it was observed that during the year, the assessee company has shown investment in equity instruments of ₹ 5,26,81,405/- and vide order sheet entry dated 29.12.2014, the AR of the assessee company was asked to justify applicability of Section 14A r.w.r. 8D and in response to the same assessee company vide letter dated 13.1.2014 has submitted that the assessee company made investment in shares amounting to ₹ 5.27 crores and the company had not earned any dividend income during the year, hence, the provisions of section 14A are not applicable on the Co. He stated that AO by placing various case laws and the CBDT Instructions, has rightly held that the expenses related to exempt income are to be disallowed u/s. 14A in accordance with Rule 8D of the I.T. Rules and hence, rightly made the addition of ₹ 1,76,513/- u/s. 14A of the Act. In view of above, he requested to cancel the order of the Ld. CIT(A) on the issues in dispute and ground raised by the Revenue may be allowed. 4. On the other hand, Ld. Counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to summons u/s 131 of the Act, the shareholder companies had not appeared for personal deposition. The AO observed that one of the Directors of the assessee company, Shri Satish Kumar Gupta, who appeared was not completely aware of the details of transactions with these companies. Further, the other Director Shri Naval Kishor Gupta did not appear in response to summons u/s 131 of the Act. According to the AO, the assessee was not cooperative and has not been able to establish the genuineness of the share capital. The AO has also made reference to decisions of the Hon'ble Delhi High Court in the cases at NR Portfolio Pvt Nora Promoters and Finlease Ltd. and Nipun Builders and Developers Pvt Ltd. in support of the addition u/s 68 made by him. It is noted that in when the case of the assessee was selected for scrutiny, the AO called upon the assessee to furnish necessary details and evidences to establish the genuineness of share capital. The main grievance of the AO was on account of the fact that the shareholders had not complied with notices u/s 133(6) of the Act. However, the assessee placed on record copies of replies to notices u/s 133(6) of the Act (certified by the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- and not ₹ 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in of the parties mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at ₹ 55,50,000/-. The assessee has further tried to explain the source of this amount of ₹ 55,50,000/- by furnishing copies of share application money, balance sheets etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee 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) are being initiated se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the genuineness of transaction could be copies of the shareholders register, share application forms share transfer renter, etc. As far as creditworthiness or the financial strength of the creditor or subscriber is s concerned, that can be proved by producing bank statement of the creditor / subscribers showing that it had sufficient balance its account to enable it to subscribe to the share capital. Once these documents are produced the assessee would have satisfactorily discharged the onus placed upon him. Thereafter it is for the Assessing Officer to scrutinize the same and in case he has any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the cannot go into the realm of suspicion. After analyzing the above facts, the Court referred to the judgment of the Hon ble High Court in the case of CIT vs. Creative World Telefilms Ltd. (2011) 15 taxmann.com 183 (Bom.) and held that once the documents like PAN or bank account details were given by the assessee, the onus shifts upon the assessing officer and it is upto him to reach the shareholders and the assessing officer canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, this could not be held against the assessee, which had discharged the initial onus which lay upon it by proving the identity of the share applicants and the genuineness of the transactions. This principle has been laid down in the case of C.I.T. vs. Orissa Corporation Pvt. Ltd., [1986] 159ITR 78 (SC), wherein it was held as follows:- In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 13.1.2014 has submitted that the assessee company made investment in shares amounting to ₹ 5.27 crores and the company had not earned any dividend income during the year, hence, the provisions of section 14A are not applicable on the Co. However, AO by placing various case laws and the CBDT Instructions, has held that the expenses related to exempt income are to be disallowed u/s. 14A in accordance with Rule 8D of the I.T. Rules and made the addition of ₹ 1,76,513/- u/s. 14A of the Act. For the sake of convenience, we are reproducing relevant portion of Section 14A as under:- Section 14A (1) For the purpose of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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