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TMI Blog2019 (10) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of section 68 of the Act. Accordingly, the Revenue fails on this issue. Considering the huge reserves and surpluses available with the said AVPL, the creditworthiness of the AVPL also cannot be doubted. AO has not brought except stating that the company has meagre income as shown in the returns. The Assessing Officer has not brought any incriminating material to show that the creditor has not creditworthiness. As stated this company has 10 crores as reserves and surplus at the end of the March, 2010 at the relevant point of time. Regarding the genuineness of the transactions, we find that the Assessing Officer objection is that the AVPL being Kolkata Based company and its transaction with the assessee has to be suspected. In our view, such objection is unsustainable for the reason that the company with adequate reserves is assessed to tax regularly and the same is active company in the records of the Ministry of Commerce. No addition is made by the Assessing Officer for the amount of ₹ 2.5 crores in the assessment year 2009-10. Therefore, this kind of transaction with the creditor can be partly suspectable or partly unsuspectable and partly existing or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the A.O. in his Remand Report about the credibility, genuineness and identity of the share application money received. iii) On the facts in the circumstances of the case, the order of the Ld. CIT(A), Aurangabad be quashed and that the Order of the A.O. be restored. iv) The appellant prays leave to adduce such further evidence to substantiate its case as the occasion may demand. 3. Briefly stated the relevant facts include that the assessee was formerly known as M/s. Ashwa Multi Trade Pvt. Ltd. and is a group concern of M/s. Laxmi Cotspin Limited. Before the Assessing Officer 4. During the proceedings u/s 143(3) of the Act, the Assessing Officer noticed from the Balance Sheet that the facts relating to the details of share application money pending for allotment amounting to ₹ 6.55 crores. The breakup of the same includes the following :- Sr.No. Name of the Party F.Y. 2008-09 F.Y. 2009-10 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies as well as the transactions. The assessee furnished the PAN details, CIN details, Income Tax Returns of these three companies and ROC returns of the companies etc to the Assessing Officer. Further, the assessee relied heavily on the related documentation and on the accounting entries in the books of account of the assessee as well as the said three companies. Considering the above submissions, the Assessing Officer further asked for the supplementary report from ITO (Inv.), Kolkata. In reply to the report of the ITO (Inv.), Kolkata, the assessee on 28.02.2013 submitted further information stating that the assessee/companies submitted the details through the Central Receiving Section (CPS) and not directly to the ITO (Inv.), Kolkata. Thus, while commenting on the alleged non-existence nature of the said three companies, the ITO acknowledged the facts relating to the submission/compliance by the assessee and submission of the submitted the details in the Central Receiving Section. Assessing Officer received the same later after the first negative report of the ITI was sent by the ITO (Inv.), Kolkata. Shri Nemichand Jain, which is director of the one of the three companies (par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Public Issue had to be cancelled and, therefore, the IPO did not materialize. In the process, the payments received from (i) M/s. Pushpanjali Trading Pvt. Ltd. and (ii) M/s. Radico Services Pvt. Ltd. (₹ 12 lakh) were refunded. Against the share application money received from M/s. Anand Vyapar Pvt. Ltd., out of own shares of M/s. Laxmi Cotspin Limited, the assessee allotted the said shares to M/s. Anand Vyapar Pvt. Ltd. in lieu of the share application money. Explaining all the said issues and relying on various decisions, the Assessing Officer, as per discussion given in para 5 and 5.1 of his order, proceeded to invoke the provisions of section 68 of the Act in respect of only sum of ₹ 3.55 crore. For the sake of completeness, the said para 5 and 5.1 are extracted hereunder :- 5. In respect of share application money of ₹ 3,55,00,000/- received from Anand Vyapar Pvt. Ltd., the contention of the AR of the assessee is not acceptable on the following grounds : i) On verification of return of income filed by the Anand Vyapar Pvt. Ltd., for the A.Y. 2010-11, it is noticed that company has shown a loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason that the Anand Vyapar Pvt. Ltd. (AVPL) is an existence only on paper and did not indulge in business activity. There was a reference to the (i) Hon ble Supreme Court judgement in the case of CIT vs. Durga Prasad More, 82 ITR 540, (ii) Hon ble Delhi High Court judgement in the case of Indus Valley Promoters (P) Ltd. vs. CIT, 305 ITR 202 (relating to Assessing Officer s satisfaction), (iii) Hon ble Supreme Court judgement in the case of CIT vs. P. Mohanakala, 291 ITR 278 (SC) (relating to entries in the bank transaction is not sacrosanct) before taking a decision against the assessee and in favour of making addition of ₹ 3.55 crore. Before the CIT(A) 8. The CIT(A) discussed the above facts and the development before the Assessing Officer and deleted such addition of ₹ 3.55 crore. The discussion given in para 5.10 of his order is relevant. While giving relief, CIT(A) followed and relied on various judicial precedents as referred to in para 5.10 (supra). For the sake of completeness, the said para 5.10 of the order of the CIT(A) is extracted hereunder :- 5.10 As regards addition of ₹ 3.55 crores mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the earlier investments of the said company. Absence of any adverse material to discredit the book entries was also discussed. The CIT(A) held that the transactions entered by the assessee and the AVPL are genuine. He dismissed the Assessing Officer s findings on the suspicion nature of the transactions in its entirety. 10. Aggrieved with the above finding of the CIT(A), the Revenue is in appeals before us. Proceedings before the Tribunal 11. The ld. DR s arguments : The ld. DR for the Revenue, at the outset, relied heavily on the order of the Assessing Officer, report of the ITO (Inv.), Kolkata, etc. The ld. DR is critical of the findings given in the order of the CIT(A). Mentioning of the above facts, ld. DR submitted that this is a case where out of ₹ 6.55 crores, the total investments made by this concern AVPL one of three Kolkata based companies, i.e. ₹ 3.55 crore, was only added by the Assessing Officer as bogus share application money invoking the provisions of section 68 of the Act. Further, ld. DR submitted that wherever the share application money was refunded to the two other compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 3.55 crore of the current assessment year 2010-11. In the process, Assessing Officer accepted ₹ 2.5 crores received in the assessment year 2009-10 from same AVPL. For this year only, the Assessing Officer treated the AVPL as nonexistent, bogus etc and invoked provisions of section 68 of the Act and not to the entire amount of ₹ 6.55 crore. Explaining the same, ld. AR submitted that the assessee received a sum of ₹ 2.5 crore from the AVPL in the assessment year 2009-10 and the same stands undisturbed by the Assessing Officer. Reiterating the argument, ld. AR for the assessee argued stating that for the purpose of ₹ 2.5 crore AVPL cannot be an existing taxpayers and for balance amount of ₹ 3.55 crore AVPL cannot be non-existent taxpayers. On finding fault with the Assessing Officer s manner of making addition or invoking the provisions of section 68 of the Act, ld. AR submitted that the Assessing Officer blind obligation followed to the facts of the present case and the same cannot be free to suspect or doubt the genuineness of the transactions. 13. Further, explaining the judgemental laws in this regard, ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of payment to the assessee, onus etc were shortlisted and the ld. AR was directed to address to the said issues. In response, the ld. AR for the assessee filed a written submission and the relevant parts of the same are extracted hereunder :- Ref:- Appeal No. ITA 1602 and 1603 /PN/2015 for AY 2010-11 and AY 2011-12, Appeal No. ITA 2568/PN/2016 for AY 2012-13 M/s. Ashva Multi Trade Pvt. Ltd., PAN:AAECM3414F 1. Issue related to identity of Anand Vyapar Pvt Ltd M/s Anand Vyapar Pvt Ltd was subjected to scrutiny assessment for A.Yr 2007-08 on 18.06.2009. By that time the funds available with M/s AVPL on account of share capital and reserves were ₹ 4.31cr, which have partly funded the investment in M/s Ashva Multitrade Pvt Ltd. These funds were received by AVPL in the year 2006-07 i.e. A.Yr. 2007-08, and had been subjected to verification. AVPL had furnished Bank account details/ balance sheet /PL account at time of assessment and it's creditors were verified under section 133(6). Nothing adverse was found by the assessing officer of AVPL. Further, Nemichand Jain one of the directors of AVPL visited the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom M/s Ashwa Multitrade which owned 37.64% stake in M/s Laxmi Cotspin amounting to 6,29,00,000 shares. M/s Laxmi Cotspin Ltd was a company promoted by the Ashwa Group of which the respondent is a part. M/s Laxmi Cotspin is a listed company, and the shares were sold to AVPL at ₹ 17.80 per share, based on FMV as per Rule 11UA of Income Tax Rules. Subsequently, the shares were offered to the public at ₹ 20 per share during the course of public issue. Moreover, AVPL and other investors have been regularly receiving dividend from M/s Laxmi Cotspin, regularly for the last 5 years. 4. Assessing officers decision in assessing only ₹ 3.55 crores out of ₹ 6.05 crores received from AVPL. The respondent company received ₹ 6.05 crores from AVPL, out of which ₹ 2.50 crores was in A.Yr 2009-10, and ₹ 3.55 crores in A.Yr 2010-11. No assessment was carried out for the year 2009-10. At the time of completion of assessment for the year 2010-11, ample time was available with the assessing officer to invoke jurisdiction u/s 148. However, the assessing officer chose not to do so. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkatta. This has been explained earlier in para 1. 7. Discharge of primary onus by the assessee. The respondent company has discharged, the initial onus of proof that the law casts upon it. It is for the assessing officer, to then investigate and show, how the evidence is inadequate, or that the contentions of the assessee are incorrect or not backed by enough proof. Only then does the onus shift back to the appellant. The assessing officer, has proceeded to claim that the identity of the investors, their genuineness, and their credit worthiness has not been established. The contention of the assessing officer is not correct. As discussed above, the respondent has provided all details asked for and discharged the onus cast upon it. The assessing officer, did not either confront the respondent with his doubts, if any, nor conduct any further enquiries. In principle, there cannot be a dispute with the proposition that the onus was on the appellant to adequately explain the amount credited on account of the said advance received. In this case, the respondent has supported the money received on the basis of valuation of the shares of Laxmi Cotsp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils to be submitted with regards to this case we are ready to submit the same at the ITAT Bench. Decision of Tribunal 14. We heard both the parties on this issue of addition of ₹ 3.55 crore u/s 68 of the Act involving AVPL, the creditor, for the assessment year 2010-11. The transaction with this creditor examined by the Assessing Officer along with two other creditors and accepted the transaction with involving two other creditors. The Assessing Officer invoked the provisions of section 68 of the Act involving the AVPL only. There is no dispute on the fact about PAN numbers, TIN numbers, payment of share application money through banking channels etc in view of the full proof documentation available and filed by the creditor before the Investigation Wing, Kolkata as well as the Assessing Authority in Pune. While accepting the said details in case of other two creditors, the Assessing Officer differently handle this creditor only for the reason that the share application money given by the creditor to the assessee was not refunded when there is a failure of said IPO by the M/s. Laxmi Cotspin Limited, the group concern of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue fails on this issue. 16. Considering the huge reserves and surpluses available with the said AVPL, the creditworthiness of the AVPL also cannot be doubted. The Assessing Officer has not brought except stating that the company has meagre income as shown in the returns. The Assessing Officer has not brought any incriminating material to show that the creditor has not creditworthiness. As stated this company has 10 crores as reserves and surplus at the end of the March, 2010 at the relevant point of time. 17. Regarding the genuineness of the transactions, we find that the Assessing Officer objection is that the AVPL being Kolkata Based company and its transaction with the assessee has to be suspected. In our view, such objection is unsustainable for the reason that the company with adequate reserves is assessed to tax regularly and the same is active company in the records of the Ministry of Commerce. The Assessing Officer has not made out a case whatsoever to demonstrate that the transaction of payment of loan by AVPL to the assessee bogus or sham. The transactions are through banking channels and the assessee allotted the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vider. Considering the same, we proceed to extract the finding of the CIT(A) as given in para 9 and 10 of his order and the same are as under :- 5.9 The appellant company has filed the various documents such as application for investment in shares, confirmation for investment in shares, Board Resolution for investment in shares, copy of acknowledgment of return, copy of the balance sheet, details of PAN, copy of the bank account, copy of documents filed with ROC and copy of the assessment order for AY 2010-11. All the documents and information have clearly proved the identity of the applicant company and the genuineness of the transaction. The onus of the assessee in case of receipt of share application money was to establish the identity and creditworthiness of the shareholder. In the present case, the appellant has filed all the evidences to prove the identity and creditworthiness of the subscriber company. There is nothing on record to suggest that transactions were not genuine. Hence, no addition in the hands of the appellant company was called for. In the case of CIT Vs. First Point Finance Ltd. (286 ITR 477), the assessee having been aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was justified. In the following cases, the Hon ble High Courts have also held that once the identity of the share holder is proved, the share application money can t be treated as bogus. CIT Vs Arunananda Textiles Private Limited (333 ITR 119) (Delhi) CIT Vs K.C.Fiber Limited (333 ITR 116) (Karnataka) CIT Vs Victor Electrodes Limited (332 ITR 481) (Delhi) CIT Vs Ujala Dying and Printing Private Limited (328 ITR 437) (Gujarat) 5.10 As regards addition of ₹ 3.55 crores made an account of share application money received from M/s Anand Vyapar Pvt. Ltd., the appellant had filed the necessary evidences. Since the director of investor company was residing at Kolkata and its registered office was also at Kolkata, the appellant could not have compelled the director to appear before the A.O at Aurangabad. According to the financial statement of the applicant company for the year ended 31.03.2010, the said company had enough creditworthiness to make investment in the share capital of the appellant company. Nothing adverse has been noticed in the documents and bank statement filed by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company, the attempt to take shelter behind legal pronouncement is woefully inadequate. The fact that the assessee has given certain information is insufficient to hold that the assessee has proved the creditworthiness of the share applicant, which I have noticed is conduits for passing through of monies to the assessee company. The assessee has been unable to prove the genuineness of transaction as well by being unable to substantiate creditworthiness of share applicant beyond doubt from whom share application money has been received. Under these circumstances after considering the doubtful nature of the transaction and the manner in which the sums were credited in the books of account maintained by the assessee, the undersigned hold that the amounts received as share advance is unexplained cash credit liable to be taxed as income of the assessee under section 68 of the income tax Act. 22. For the A.Y. 2012-13 : Similar addition was added by the Assessing Officer as per the discussion given in para 4.8 and 4.9 of his order and the same are extracted hereunder :- 4.8 It is already established in the instant case that due to the close connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were cheques received from Gold Securities Private Limited, M/s Gopal Steels, M/s Acute Designfab and RIMS Fastners and out of credit balance, it gave RTGS to the appellant company. This explained the sources of investment of M/s Mangalmayee Stock Management Pvt. Ltd. The AO had raised doubts that M/s Mangalmayee Stock Management Pvt. Ltd. had itself received share premium and this amount was given to the appellant company without any apparent motive of conducting any actual business. On the contrary, I find that M/s Mangalmayee Stock Management Pvt. Ltd. had received dividend of ₹ 9,25,025/- on shares of Laxmi Cotspin Ltd. and this amount was also credited in its bank account with HDFC bank. Therefore it can t be said that no actual business was conducted. The fact that director of M/s Mangalmayee Stock Management Pvt. Ltd. visited Kolkata only once in two years will not make it a dummy/bogus entity. The AO had claimed that M/s Mangalmayee Stock Management Pvt. Ltd. did not have any employee whereas Shri Piyush Shivratan Mundada had replied in answer to question no. 5 that Shri Santosh Pandey was working as an employee and he was paid salary of ₹ 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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