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TMI Blog2019 (11) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... produced the directors. Now when the party subscribing the shares and paying the money has confirmed the transaction and has proved the source from where it has got the funds directly before the AO by giving all the evidences as discussed above, then mere non-appearance will not make the transaction doubtful or colourable. It is only when there are inconsistencies in the explanation and the evidences filed then the Assessing Officer may ask the assessee to produce. One has to see in such cases, firstly, whether primary onus of proving the nature and source of credit has been discharged, that is, identity, creditworthiness and genuineness of the transaction; and secondly, post such onus, Assessing Officer has made any inquiry or has some material to rebut the explanation and the evidences filed by the assessee. If there are any inconsistencies, then AO may ask the assessee to produce the person and if assessee is unable to do so for certain reasons, then AO has the power to issue summons u/s 131 to ensure the presence. Otherwise AO cannot simply doubt the entire the entire credit which is share application money and shares have been allotted. DR are not applicable on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kar Marketing company from following parties:- ₹ 2,68,00,000/- Raju Investment (P) Ltd. ₹ 50,00,000/- M/s Superb Developers (P) Ltd. ₹ 3,18,00,000/- Total 2.1 That without prejudice, the assessee fully discharged his onus to prove the ingredients of sec.68 for ₹ 3,18,00.000 and the Ld. A.O. exceeded his jurisdiction and scope of examination by extending his inquiries for source of the source of the source, which is not permissible U/s.68 of the I.T. Act. 2.2 That without prejudice, under the facts and circumstances and in view of the documents information s and explanation furnished, even the source of the source stands fully proved. 2. The facts in brief are that assessee-company is engaged in the business of manufacturing various kinds of PU foam. The return of income was filed on 24.09.2015 declaring income of ₹ 4,30,61,880/-. The assessee s case was selected for limited scrutiny under CASS for the reasons Large Share Premium received . During the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement (filed subsequently during the course of assessment proceedings), audited financial accounts and their income tax returns. Later, on 08.12.2017, a reply was received to the Assessing Officer from M/s. Aviskar Marketing Pvt. Ltd. on e-mail, therein they had stated as under: In this regard, it appears that these 05 names and the amount have been taken from the audited balance sheet of Aviskar as on 31.03.2015. In fact, the source of ₹ 6,68,00,000/- given to Prime in this year is only from following 03 companies namely. Raju Investments (P) Ltd. 2,68,00,000/- Superb Developers (P) Ltd. 50,00,000/- Mahesh Wood Products P Ltd. 50,00,000/- Total 3,68,00,000/- 4. AO further observed that these parties had not submitted any bank statement, ledger account etc., therefore, identity, genuineness and creditworthiness of the above parties remain questionable and no one was produced by the assessee. The assessee s detailed submission wherein var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR of Mahesh of A. Y. 15-16 It was thus contended that the above documents goes to show that these loans have been given by these three parties to Aviskar. The assessee had also filed the confirmed ledger a/c of assessee in books of Aviskar, bank a/c of Aviskar. From all above documents, it was submitted that direct nexus is apparent, that is, these three companies have given loan to Aviskar which is coming in the bank a/c of Aviskar and from the bank a/c of Aviskar same amounts has been given to assessee. In the bank a/c of Aviskar, the name of the assessee is appearing showing that Aviskar has given these amounts to assessee. Thus even the source of the source stands explained by the assessee. 6. Ld. Assessing Officer without adverting to the documents filed went to observe that assessee did not produce any of the Directors of M/s. Aviskar Marketing Pvt. Ltd., M/s. Raju Investments Pvt. Ltd. and Superb Developers Pvt. Ltd., despite that assessee-company is the holding company of M/s. Aviskar Marketing Pvt. Ltd. He has also analyzed the bank statement of M/s. Aviskar Marketing Pvt. Ltd. and found that there were immediate credits in the bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium, not only Section 56(2)(viib) but also u/s.68. Otherwise also, the purpose of selection limited scrutiny was to flag doubtful transaction to further scrutiny by the Assessing Officer to get fruitful and focused result and Assessing Officer is duly empowered under the Act to call for any information which is relevant to adjudicate the ground for scrutiny from all angles. 10. After considering the aforesaid submission qua the validity of additions being beyond the scope of limited scrutiny proceedings, as noted above, the case was selected for limited scrutiny to examine the Large share premium received during the year (verify applicability of Section 56(2)(viib)) . Once, the Assessing Officer has the mandate to examine the large share premium received during the year, then he has to examine the transaction as a whole and it does not restrict him only to see the applicability of Section 56(2)(viib), which has bracketed to verify its applicability. AO has to examine the transaction of share premium received holistically, whether, same is genuine or not and its taxability from all the angles under the Act including in terms of Section 56(2)(viib). If the selection f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . is neither under investigation nor has been identified by the Department as an entry provider nor there is any material or adverse report against M/s. Aviskar Marketing Pvt. Ltd. During the course of assessment proceedings, the assessee had furnished following documents before the Assessing Officer in support of receipt of share application money: Confirmed copy of a/c of assessee in books of Avishkar; ITR ack. of Avishkar - A. Y. 15-16; Audited financial statement of Avishkar - A.Y.15-16 (this amt. / addition in investment is appearing in bal. sheet); Form PAS-3 (filed to ROC for allotment of shares by assessee); Board resolution of assessee for allotment of shares to Avishkar; Relevant bank statement of Avishkar; Notice u/s. 133 (6) Dtd.23.11.17 sent by A.O. to Avishkar ; Reply to notice u/s. 133 (6) by Avishkar (confirming the investment of 3.68 Cr in shares of assessee). 12. No such discrepancies or short coming has been pointed out in the above documents by the Assessing Officer. Not only that, here the assessee has even proven the source of the source, i.e., the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e source stood explained by the assessee but onus cast upon the assessee stood fully discharged. Here, in this case, the identity is proved by ROC records, bank a/c, ITRs and reply u/s. 133(6). Apart from that, source of fund to the extent of ₹ 50,00,000/-, received from Mahesh Wood Products (P) Ltd. given to Aviskar Marketing Pvt. Ltd, who in turn has utilized the same for paying for share capital and share premium stands accepted by the A.O. Further, the genuineness of the transaction stands proved by confirmation letters from the parties, their bank statements and the entire transaction is appearing in the audited balance sheet of Avishkar Marketing Pvt. Ltd, who is assessed to income tax including the reply u/s. 133(6) directly given to the Assessing Officer by Avishkar. Lastly, the creditworthiness also stands explained because, the source of funds in the hands of Avishkar, was duly explained and not only that, the source of the source also was explained with evidence. It is not a case where the share application money has been given out of income but it has been given out of the loans taken from other parties out of which major amount has come from Raju Investments, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity, genuineness and creditworthiness of the parties subscribing to the shares and paying share capital share premium to the assessee company, like, confirmed copy of account, ITRs, audited financial statements where the amount invested has been duly disclosed in the balance sheet, documents filed in the ROC for allotment of share by the assessee to the subscribing company, board resolution for allotment of shares, relevant bank statement and most importantly, in response to notice u/s.133(6) sent by the Assessing Officer to M/s. Aviskar Marketing Pvt. Ltd., same has been duly responded to wherein all the details have been filed directly before the Assessing Officer. From the perusal of the balance sheet, it is seen that M/s. Aviskar Marketing Pvt. Ltd has long term borrowings of ₹ 4,15,50,000/- and reserves and surpluses to the tune of ₹ 3,76,05,866/-. This company before the Assessing Officer had stated that the source of share application money was given out of unsecured loan received from three companies, namely, M/s. Raju Investment ₹ 2,68,00,000/-, Super Developers Pvt. Ltd. ₹ 50,00,000/- and Mahesh Wood Products Pvt. Ltd. ₹ 50,00,000/-, out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation or report or inquiry that either M/s. Aviskar Marketing Pvt. Ltd. or two other companies who had given loan to M/s. Aviskar Marketing Pvt. Ltd. were involved in any bogus accommodation entry or were in collusion. One of the reason given by the Assessing Officer is that revenue from operations of M/s. Aviskar Marketing Pvt. Ltd. was Nil/ meager. However, in the balance sheet itself incorporated by him in the assessment order it is clearly borne out that there is huge availability of fund in the form of long term borrowings of more than ₹ 4.15 crores and reserves and surpluses of ₹ 3.76 crores. If the said company has stated that it has subscribed to the share application money out of borrowing and has also proved the genuineness and creditworthiness of the loan taken from the 3 parties directly before the Assessing Officer, then primary onus cast upon the assessee stands fully discharged. It is not the case here that any adverse material has been unearthed or has been found that all these transactions are make believe arrangements or all the evidences are mere paper trail. 19. One of key reasons harped upon by the Assessing Officer is that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is only when there are inconsistencies in the explanation and the evidences filed then the Assessing Officer may ask the assessee to produce. One has to see in such cases, firstly, whether primary onus of proving the nature and source of credit has been discharged, that is, identity, creditworthiness and genuineness of the transaction; and secondly, post such onus, Assessing Officer has made any inquiry or has some material to rebut the explanation and the evidences filed by the assessee. If there are any inconsistencies, then Assessing Officer may ask the assessee to produce the person and if assessee is unable to do so for certain reasons, then Assessing Officer has the power to issue summons u/s 131 to ensure the presence. Otherwise Assessing Officer cannot simply doubt the entire the entire credit which is share application money and shares have been allotted. 21. Lastly, the judgments relied upon by the Ld. DR are not applicable on the facts of the case as discussed above, as the entire share application money and premium received by the assessee company stands proved by the assessee company and also by the subscribing company, which has even proved the source of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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