9911796707
TMI Blog2019 (10) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has failed to prove the identity, creditworthiness and genuineness of the transaction. 3. Brief facts qua the issue are that the assessee company filed its return of income for the A.Y 2012-13, on 25-09-2012, declaring total income at Rs. Nil. The assessee's return of income was selected for scrutiny u/s. 143(2) of the Act. During the scrutiny proceedings, the Assessing Officer noticed that the assessee company had raised a fresh share capital including security premium of Rs. 2,97,75,000/- by issuing 11,91,000 number of shares at a face value of Rs. 10/- each with a premium of Rs. 15/-, per share. In order to look into the three limbs of basic parameters i.e., identity and creditworthiness of the share applicants as well as genuineness of the transactions, summon u/s 131 of the Act was issued to the Director of the assessee company on 16/02/2015, requesting for personal appearance on 23/02/2015. At the same time, it was also requested to produce all the Directors of the subscribers companies. But there was no response on the part of the assessee company. Neither the Director of the assessee company appeared nor any Director of any share subscriber company was produced. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed addition made by the Assessing Officer. Aggrieved by the order of the ld CIT(A), the Assessee is in appeal before us. 5. The ld. Counsel for the assessee has reiterated the submissions made before the authorities below. On the other hand, Ld. DR for the Revenue submitted before us that assessee company, is a zero asset base company which has raised share capital by issuing its shares to primarily different private limited companies against a high premium of Rs. 190/-, which is nothing but to introduce the unaccounted money without paying taxes. In this instant case, the assessee company failed to discharge its onus, about the identity, creditworthiness and genuineness of the subscriber companies. Apart from this, ld DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. 6. We have heard both the parties and perused the material available on record, we note that according to section 68 of the Income Tax Act, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly Form No. 2 and Form No. 5 were filed with the ROC. (Copy of Form 2 and Form 5 is enclosed at page 15-23 of Paper book). The list of allottees to whom 11,91,000 Equity Shares of a Face Value of Rs. 10/- per share at a premium of Rs. 15/- per share were allotted are as under: Sl. No. Name of Allottee No. of Shares Allotted Share Capital @ Rs. 10 per Share Share Premium @ Rs. 15 per Share Total 1. Startrade Vyapaar Ltd 55000 5,50,000/- 8,25,000/- 13,75,000 2. Kamayani Commotrade Pvt. Ltd. 376000 37,60,000/- 56,40,000/- 94,00,000 3. Baba Basuki Distributors Pvt. Ltd 560000 56,00,000/- 84,00,000/- 1,40,00,000/- 4. Regard Fin Cap Pvt. Ltd 200000 20,00,000/- 30,00,000/- 50,00,000/- Total 1191000 1,19,10,000/- 1,78,65,000/- 2,97,75,000/- The above sum of Rs. 2,97,75,000/- was added to the total income of the assessee considering it as unexplained cash credit u/s 68 of the Act by the Ld. AO and the same was sustained by the Ld. CIT (A). We note that in the instant case the details of amount received during the assessment year under consideration and earlier asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account ending on March 31, 1992, for the financial year 1991-92 relevant to the assessment year 1992-93 cannot be an unexplained cash credit or investment in the books of account maintained for the financial year 1992-93, the accounting period of which ends on March 31, 1993, so as to warrant its consideration as unexplained investment or cash credit for its relevant assessment year 1993-94. 5. It does not require any elaborate argument that a carried forward amount of the previous year does not become an investment or cash credit generated during the relevant year 1993-94. This alone is sufficient to sustain the order of the Tribunal in deleting the amount of Rs. 1,55,316 from the assessment for the assessment year 1993-94. Since the appeal succeeds on the merits of the assessee's case in respect of the additions made in the income computed on reassessment the validity of notice dated June 17, 1997, need not be gone into." Further the Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Usha Stud Agricultural Farms Ltd., [(2008) 301 ITR 384 (Delhi)] held as under: "8. Here, the CIT(A) has deleted the addition of Rs. 15 lacs mainly on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. M/s Startrade Vvapaar Ltd is also an associate concern of M/s. Simplex Infrastructure Ltd, a listed company with BSE. The same is also mentioned in the 'Related Party Disclosure' of the company. Almost the entire source of funds for investment in the assessee company was from revenue generated from Simplex Infrastructure Limited as would be clearly evident from the detailed chart showing the date wise inflow of funds and the subsequent investment in the assessee company enclosed at page 25 of the paper book. A copy of the chart of source of funds, ITR acknowledgment, Annual Accounts for the FY 2010-11 and the relevant Bank Statement are attached at Page 25-79 of the Paper Book. On a perusal of the Balance Sheet, it can be seen that the own funds of the company is Rs. 5,24,41,578/-. This very clearly shows the high creditworthiness of the company to make investment in the assessee company. Further, the entire inflow and outflow of funds was made through regular banking channels as supported by Bank Statements of both the companies. In addition to above, it is submitted that the company had fixed assets of Rs. 3,30,62,162/- which comprises of land and buildings, plant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company. Further, the entire inflow and outflow of funds was made through regular banking channels as supported by Bank Statements of both the companies. In addition to above, it is also submitted that the company had total revenue of Rs. 47,11,528/-. During the F.Y. 2011-12, it earned profit before taxes of Rs. 9,54,007/. The revenue comprises of interest income, dividend income and sale of shares which are the main source of income. The company had paid tax of Rs. 1,83,203/- during the year. Further, as already discussed the company being engaged in the business of lending and investing activities, the company made investment in the assessee accompany as well as several other companies out of the refund of loan amount given in earlier years. The Loan given by the company in earlier years was not questioned and therefore the source of fund i.e. refund of loan could not be doubted. Refund of loan implies that the existing funds of the assessee were utilized for investment and no new or outside funds has come in to make such investment. Further, it is also obvious that the company had own fund of Rs. 9,83,20,364/- which has been utilized by the company in lending and inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment company will make investment in one company and will either earn income from such investment or if the investment are refunded then the same will be utilised in investing in any other company. Hence, this cannot be said to be mere rotation of money as the main business of such company is lending and investing activities. The copies of source of funds, ITR acknowledgment, Annual Accounts and the relevant Bank Statement to prove the identity of the shareholder and genuineness and creditworthiness of the company to make investment are enclosed at page 109-142 of the paper book. (iv) Regard Fin-Cap Pvt Ltd: During the year 2,00,000 equity shares were allotted to M/s Regard Fin-Cap Pvt Ltd. M/s Regard Fin-Cap Pvt Ltd is an associate company of the assessee having common shareholders. Lalit Kr Kothari is a common Director in both these companies. M/s Regard Fin-Cap Pvt Ltd is also an associate concern or Simplex Infrastructure Limited, a listed company with BSE. The source of funds for investment in the assessee company was refund of Share Application Money as would be clearly evident from the detailed chart showing the date-wise inflow of funds and the subsequent investment in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and genuineness of the investor company and the transaction made during the year. 9. The Ld. DR submitted that the assessee had not justified the reasons for issuing shares at a high premium. Therefore, according to the Ld. DR, the genuineness of the transaction remained un-proved. He therefore, vehemently argued that the order of the Ld. CIT(A) should be upheld. On the other hand, the Ld Counsel first drew our attention to the several grounds raised by the assessee in respect of addition made u/s 68 of the Act. Thereafter on the merits of the case, our attention was drawn by the Ld Counsel to relevant page of paper book where we note that shareholders had submitted the following relevant details as called for and had confirmed the transaction with the assessee company. The evidences which were filed before the AO, included the following details. (a) Income Tax Return of the share holders (b)Copy of the bank account of the share holders (c) Transaction with the assessee was duly highlighted in the bank statement (d) Explanation along with evidence of source of source of the funds of the applicant (e) Audited Accounts of the share holders (f) Board Resolution pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not and need not automatically result in deeming the amount credited in the books as the income of the assessee as also held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 11. The main plank on which the AO made the addition was because the directors of the share subscribers did not turn up before him. From the notices issued u/s 131, it is noted that each of the share subscribing company was required to furnish the following details for examination: - Details of shares of assessee applied for including number of shares, nominal price, premium and amount - Correspondence made for application of shares - Copy of Balance Sheet, Profit & Loss A/c, IT Ack for FY 2011-12 - Copy of Bank Statements evidencing transaction with assessee - Source of Funds for making investments in the assessee company - ROC details and relevant statement. - Copy of Resolution passed by the Board authorizing investment in shares of assessee - Reasons for making payment of premium. It is noted that all the above requisitioned documents were furnished before the AO which substantiated the transaction between the assessee company and the share applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 12. Undisputedly the Share Applicants in this case are the bank account holder in their respective banks in their own name and are sole owner of the credits appearing in their bank account from where they issued cheques to the assessee company. For the proposition that a Bank Account holder himself is the 'owner' of 'credits' appearing in his account (with the result that he himself is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under:- "4. Mode of proof of entries in bankers' books Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." 13. Following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- "While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub- creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and subcreditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee. " ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case" 17. 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) confirmat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations 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. 20. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case, Ld. 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 Rs. 4, 00, 000/- and Rs. 20,00,000/- towards share capital and share premium respectively amounting to Rs. 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 Rs. 24,00,000/-. On appeal the Learned CIT (A) by followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations 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 shares of the Assessee Company rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual 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." 24. 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 in ITAT No. 114 of 2011 dated 13thJune, 2011 wherein the Court held as follows: "The only question raised in this appeal is whether the Commissioner of Incometax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs. 8,52,000/-, Rs. 91,50,000/- and Rs. 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 assessee 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 the assessee also disclosed the complete list of shareholders wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (A). Comments from the AO were sought. Detailed reasons have been given by the CIT (A) to come to the conclusion that the Assessee had discharged its onus of establishing the identity, genuineness and creditworthiness of both the investors as well as the lenders. This has been concurred with by the ITAT in the impugned order which is again an extremely detailed one. 5. The concurrent factual findings of both the CIT (A) and ITAT have not been shown to be perverse by the Assessee. This is virtually the fourth stage of the litigation. 6. Question (1) is accordingly answered in the negative, i.e., in favour of the Assessee." It is noted that the SLP filed by the Revenue against this judgment has been dismissed by the Hon'ble Supreme Court. 26. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee 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 capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. They are not bogus and fictitious. Therefore, the impugned order is set aside. The appeal is allowed accordingly. No order as to costs. 28. In the instant case before us, we also note that the share subscribing companies are duly assessed to income tax. The Ld AR had placed on record the copies of the assessment orders framed in the cases of several of the share subscribing companies, as noted above. It therefore cannot be disputed that the share subscribing companies are not in existence. From the assessment orders, it is noted that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record. We also find that the Ld. CIT(A) had categorically stated that the scrutiny assessments were framed on the share subscribing companies for the Asst Year 2012-13 which shows their existence is genuine and transactions carried out by them were the subject matter of examination by the income tax department in scrutiny proceedings. This fact has not been controverted by the Revenue before us. 29. We may gainfully refer to the judgment in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law, this Court in an Appeal under Section 260A of the Income Tax Act cannot re-appreciate the evidence to come to any contrary evidence. Considering that the authorities have rendered the findings of facts based on documents which have not been disputed, we find that there are no substantial question of law which arises in the present Appeal for consideration. 30. We also find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96 taxmann.com 469 (SC) wherein the SLP of the Revenue has been dismissed by the Hon'ble Apex Court. The brief facts of that case were that the addition u/s 68 of the Act was made by the Assessing Officer in respect of capital contributed by the partner of the firm. The Hon'ble Gujarat High Court noted that when the concerned partner had confirmed before the Assessing Officer about his fact of making capital contribution in the firm and that the said investment is also reflected in his individual books of accounts, then no addition could be made u/s 68 of the Act. The decision of Hon'ble Gujarat High Court is reported in (2018) 89 taxmann.com 80 (Guj HC) . The SLP of the revenue against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h premium raised suspicion on the genuineness of the transactions. While dismissing this plea raised by the Revenue, the Hon'ble Bombay High Court held as under: (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars were available with the Assessing Officer in the form of balance sheets income-tax returns, PAN details etc. While arriving at the conclusion that he did, the Assessing Officer did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the Commissioner (Appeals) and the Tribunal, these conclusions were clearly baseless and false. This Court is constrained to observe that the Assessing Officer utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents." 32. We also 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viders". 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 assessee 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. The relevant extracts of the judgment is as follows:- "As can be seen from the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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" 34. Further, in the decision of the Hon'ble Delhi High Court in the case of CIT v. Kamdhenu Steel & Alloys Ltd. [2012] 19 taxmann.com 26/206 Taxman 254/[2014] 361 ITR 220 is also relevant, wherein it was held as under : "Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; A.O. failed to carry his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k was shown to be present in the case of Nova Promoters &Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under Section the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material." 37. We also note that recently the ITAT Kolkata in several cases has deleted the addition on account of share application in similar circumstances. The relevant portion of the decisions, are as follows: (a) In the case of DCIT Vs Global MercantilesPvt.Ltd in ITA No. 1669/Kol/2009 dated 13-01-2016, this Tribunal held as follows: "3.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed are not reiterated herein for the sake of brevity. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 individuals are reflected in page 6 & 7 of the Learned CIT(A) order. The Learned AO asked the assessee to produce the shareholders before him. He found that the assessee did not do so but furnished copies of pay orders used for payments to the assessee company and also furnished income tax particulars and balance sheets of all the shareholders. The Learned AO on analyzing all the balance sheets observed that the shareholders have paltry income and small savings and none of them have any bank account and huge cash balances were shown in their hands out of which Pay orders were obtained. Based on this, the Learned AO concluded that these shareholders do not have creditworthiness to invest in the assessee company and brought the entire sum of Rs. 57,00,000/- to tax as unexplained cash credit u/s 68 of the Act. 4.2. On first appeal, the Learned CIT(A) observed that entire share application monies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Rs. 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 received during the asst year under appeal and hence there is no scope for invoking the provisions of section 68 of the Act. Hence we hold that the order passed by the Learned CITA in this regard does not require any interference. Accordingly the ground no. 3 raised by the Revenue is dismissed. "6. We have heard the Learned DR and when the case was called on for hearing , none was present on behalf of the assessee. However, we find from the file that the assessee had filed a detailed paper book and written submissions. Hence the case is disposed off based on the arguments of the Learned DR and written submissions and paper book already available on record. The facts stated in the Learned CIT(A) were not controverted by the Learned DR before us. We find that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inadequate and added an amount of Rs. 46 lakhs pertaining to 30 persons to the income of the assessee. The Commissioner (Appeals) upheld the decision of the Assessing Officer. On appeal, the Tribunal set aside the order of the Commissioner (Appeals) and deleted the additions. On further appeal: Held, dismissing the appeal, that the additional burden was on the department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. " 6.3. We find that the argument of the Learned DR to set aside this issue to the file of the Learned AO for verification of share subscribers would not serve any purpose as the ratio decided in the above cases is that in any case, no addition could be made in the hands of the recipient assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumbents 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 be said that the identity of the applicant has not been verified. All of these companies had duly replied to notice u/s. 133(6) and confirmed the transaction with all the evidences. The AO has not raised any objection on any of the information furnished before him. The AO has not asked the respective Company applicants also to explain the alleged discrepancy in the address. The AO has not brought any material on account of record to disbelief the evidences furnished with him and treat the transaction as not genuine. The assessee submitted the following material at the time of assessment. a) Copy of share applications from the share applicants (copies enclosed) b) Copy of Form 2 filed with Registrar of Companies, West Bengal (copy enclosed) c) Copy of Form 18 about the Registered Office of the applicants for change of address subsequent to the date of allotment, i.e. 31.03.2009 (copies enclosed) d) Members register e) Share application & Allotment Register f) Copy of board resolution. g) Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. M/s. Shree ShyamTrexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. JewellockTrexim Pvt. Ltd. had filed their confirmations wherein each of them confirmed that they had applied for shares of the assessee -company. All the three companies provided- the cheque number, copy of bank statements and their PAN. It is observed that these companies also filed, copies of their return of income and financial statements for as well as copy of their assessment order u/s. 143(3) of the I. T Act for AY 2005-06. In the case of M/s. JewellockTrexim Pvt. Ltd. the assessment for AY 2005-06 was completed by the ITO Ward 9(3), Kolkata and the assessments in the case of M/s. Navalco Commodities Pvt. Ltd. and M/s. Shree ShyamTrexim Pvt. Ltd. for A. Y.2005-06 and AY.2004-05 respectively were completed by the I TO, Ward 9(4), Kolkata. Under the circumstances, I am of the opinion that the AO was not justified in holding that the share applicant companies were not in existence. The assessment orders were completed on the address as provided by the assessee company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. " 38. To conclude, 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. 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. We delete the amount of Rs. 31,75,000/-, as it p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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