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TMI Blog2020 (1) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Shri Supriyo Pal, JCIT, SR-DR ORDER PER S.S.GODARA, JUDICIAL MEMBER:- This assessee s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-16 Kolkata s order dated 27.02.2017 passed in case No.755/CIT(A)-16/Kol/2015-16/W-7(4) involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. The assessee s sole substantive ground raised in the instant appeal reads that both the lower authorities have erred in law and on facts in treating its share capital / premium of ₹2,01,50,000/- as unexplained cash credits u/s 68 of the Act. The CIT(A) s detailed discussion to this effect reads as under:- 3 The assessee has raised 7 grounds of appeal. The issue is addition ₹ 2,01,50,000/- u/s 68 of the income tax Act as unexplained cash credit. The order is passed u/s 143(3) of the Income Tax Act. 4 The AR has filed additional grounds of appeal. Same have been admitted. The crux of the grounds of appeal is that no adverse infere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained un-complied with as per lower appellate findings under challenge. It is also emphasized that all of the assessee s investor parties are accommodation entry providers which have been rightly treated as bogus in both the lower proceedings. 4. We have given our thoughtful consideration to rival contentions. We notice that the CIT(A) s primary reason for affirming the Assessing Officer s action making the impugned addition is that sec. 131 summons issued for the purpose of proving the three parameters of identity, genuineness and creditworthiness of the impugned share application / premium sum page 172 to 176 in the paper book speak otherwise. The same contain the assessment notings from 08.08.2013 to 10.07.2015. It transpires therefrom that the Assessing Officer had issued u/s 131 process to the directors on 12.02.2015 for 19.02.2015. The case then was adjourned to 24.02.2015. We notice from page 174 of the paper book to this effect that the assessee itself as well as its investors had very well replied to the Assessing Officer s section 131 summons. The same were duly placed on record the same before him. There is no further notings asking the assessee to file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Counsel appearing for the Appellants revolves upon the stand taken by the Appellants whether the shareholders who have invested in the shares of the Respondents are fictitious or not. In this connection, the Respondents in support of their stand about the genuineness of the transaction entered into with such Companies has produced voluminous documents which, inter alia, have been noted at Para 3 of the Judgment of the CIT Appeals which reads thus : The assessment is completed without rebutting the 550 page documents which are unflinching records of the companies. The list of documents submitted on 09.03.2015 are as follows : 1. Sony Financial Services Ltd. - CIN U74899DL1995PLC068362- Date of Registration 09/05/1995 6. On going through the documents which have been produced which are basically from the public offices, which maintain the records of the Companies. The documents also include assessment Orders for last three preceding years of such Companies. 7. The Appellants have failed to explain as to how such Companies have been assessed though according to them such Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justifiable reason for issuing shares at a premium. The Hon ble Madhya Pradesh High Court did not agree with this reasoning given by the AO for making addition u/s 68, holding as under: Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. [Para 52] Once the genuineness, creditworthiness and identity of investors are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. [Para 53] There is no dispute about the receipt of fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd.(supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. (f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained. (c) In CIT Vs. Anshika Consultants Pvt Ltd (62 taxmann.com 192), the AO had added the share application monies treating it to be their unaccounted monies routed though accommodation entries since the shares were issued at a high premium. The Hon ble Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instant case. 33. Instead, we find that the decision of the Hon ble Delhi High Court in the case of CIT VsGangeshwari Metal (P) Ltd (ITA No. 597 of 2012) dated 21.01.2012 is of much relevance in the facts of the assessee s case. In this case the assessee had received share application money of ₹ 55.50 lacs during the year in question. The assessee filed the complete names, addresses of the share applicants, confirmatory letters from them, copies of bank statements of both the company as well as the share applicants and copies of share application forms. In spite of the aforesaid documentary evidences the AO held the explanation to be unacceptable and treated the share application as unexplained cash credit thereby making addition under Section 68 of the Income-tax Act, 1961. On appeal the CIT(Appeals) deleted the aforesaid addition holding that the identity of the share applicants stood established beyond doubt, all the payments were through account payee cheques and the share applicants were regular income-tax assessees. The CIT(Appeals) further held that the Revenue did not bring any evidence on record to suggest that the share application had been recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect:- ''Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of ₹ 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was ₹ 55,50,000/- 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 respect of the amount is found correct. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition under s.68 was not sustainable. 35. The SLP filed against the above decision has been dismissed by the Hon ble Supreme Court. 36. 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 of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application affidavits of the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. MahesGarg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned Ld. CIT(1) on the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ud reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. 3.4. 1. We also find that the impugned issue is also covered by the decision of Hon'ble Calcutta High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.1.2011, wherein the- questions raised before their lordships and decision rendered thereon is as under:- On the facts and in the circumstances 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 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- 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 ₹ 57,00,000/- we received during the previous year 2004-05 relevant to Asst Year 2005-06 from 20 persons and the shares were allotted to them during the asst year under appeal. He observed that the assessee had furnished details of the share applicants giving the date wise receipts, mode of payment, amount, name, address, income tax returns, PA No. of share applicants along with their balance sheet. The Learned CITA also observed that the assessee in its reply to show cause notice before the Learned AO had requested him to use his power and authority for the physical appearance of the shareholders which was not exercised by the Learned AO. Instead the Learned AO continued to insist on the assessee to produce the shareholders before him. He ultimately concluded that the assessee had duly discharged its onus of providing complete details of the shareholders and in any case, no addition could be made u/s 68 of the Act in the asst year under appeal as no share application monies were received during the asst year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned CITA on the decision of the Hon'ble Apex Court in the case of CIT vs Lovelv Exports (p) Ltd reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In view of the aforesaid findings and respectfully following the decision of the apex court (supra), Jurisdictional High Court (supra) and Delhi High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the grounds raised by the Revenue are dismissed. (c) In the case of ITO Wd.3(2) Kol, vs. M/s. Steel Emporium Ltd in ITA No.1061/Kol/2012 dated 05-02-2016, this Tribunal held as follows: 10. We have heard both the rival parties and perused the materials available on record. The Ld. DR vehemently supported the order of the AO. Before us the Ld. AR submitted that the assessee raised share application money during the year from 25 applicants. The AO was furnished with the copy of Form 2 of Allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Replies from Share applicants to the notice u/s. 133(6) issued to them by the AO seeking information and documents about the sources and to examine their identity, genuineness of the transaction and their creditworthiness. (copy enclosed). h) Copy of audited accounts. i) Copy of bank statements. j) Copy of Income tax acknowledgment of return filed for AY 2009- k) Copy of PAN Card. l) Details of sources of funds. m) Copy of covering letter for delivery of shares. n) Copy of master data as per ministry of Company Affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Jewellock Trexim 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 Shyam Trexim 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 appellant company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies were not in existence at the given address. Since the appellant company had provided sufficient documentary evidences in support of its claim of receipt of share application money, I am of the opinion that the no addition u/s.68 could be made in the hands of appellant company. On going through the various judicial pronouncements relied upon by the appellant, it is observed that the view taken as above is also supported by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal 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. Therefore, we delete the addition made by the assessing officer to the tune of ₹ 1,95,00,000/-. 5. Learned departmental representative at this stage quoted hon'ble apex court s decision in PCIT vs. NRA Iron Steel Pvt. Ltd . in Civil Appeal No. 2463 of 2019 dated 05.03.2019 restoring such unexplained cash credits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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