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TMI Blog2020 (3) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... e that in the case of public limited company, the share capital is issued in close-circuit. When companies incorporated under the Companies Act raise their capital through shares, various persons would apply for shares and then give share application money. This amount received from such share holder would naturally be credited in the books of accounts of the assessee. Once the alleged share capital is credited to the accounts of the assessee, then role of section 68 would come. PAN details were submitted in order to demonstrate that this assessee is assessable to tax, and it proves its identity. That concern, responded to the notice received u/s 133(6) - AO, thereafter did not conduct any inquiry. We deem it appropriate to mention that investigation wing of the department is able to unearth details of various accommodation entry providers mainly Kolkatta based companies, but the AO nowhere observed that these concerns were ever engaged in providing accommodation entries, and this fact came to notice of the Department through its investigation wing. Thus, if he has any doubt, he should have called for further information from the share applicants. He should have asked the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed an application for additional evidence, which was allowed by the ld.CIT(A). In paragraph-2.3 on page no.13 of the impugned order, the ld.CIT(A) has observed that the assessee was prevented by sufficient reasons, and therefore, in the interest of justice, additional evidence was admitted. He sent those evidences to the file of the AO for verification and necessary inquiry related to the assessee. The ld.CIT(A) has observed in para 2.4 that the ld.AO has submitted his remand report vide letter No.DJSBPL/2016-17 dated 3.5.2016. The ld.CIT(A) has reproduced the remand report on page nos.13 to 15 of the impugned order. The ld.CIT(A) was not satisfied with the remand report submitted by the AO. He appraised the AO that it appears that you have collected the accounts and bank statements of the above share applicants for verifying the payments made by them towards share application money. But you have not given finding whether the above details are sufficient to prove the genuineness, capacity of the above parties for subscribing shares. The finding recorded was given on page no.18, which reads as under: "2. From the above, it is seen that all the accounts and bank statements of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprise, and he is brother of one of the directors hence, his identity is never in dispute. For buttressing his contention, he made reference to the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Ranchhod Jivabhai Nakhava, 208 TAXMAN 35. He also relied upon judgment of Hon'ble Gujarat High Court in the case of Associated Transrail Structure Ltd. Vs. ACIT, 397 ITR 573 (Guj) as well as judgment of Hon'ble Supreme Court in the case of CIT Vs. Orissa corporation Ltd., 159 ITR 78. He filed written submissions, and in his written submissions he further relied upon the decision of Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure P.Ltd., 394 ITR 680 (Bom), and Shri Shree Giriraj Ferromet P.Ltd. Vs. ITO (ITA No.3697/Mum/2017) dated 12.10.2018 (ITAT, Mum. ). He further submitted that recently, Hon'ble Bombay High Court while dealing in the case of Pr.CIT Vs. M/s.Ami Industries (India) P.Ltd., has considered decision of Hon'ble Supreme Court in the case of Pr.CIT Vs. NRA Iron & Steel P.Ltd., reported in Income Tax Appeal No.1231 of 2017. 7. On the other hand, the ld.DR relied upon finding of the ld.CIT(A) wherein the ld.CIT(A) has reproduced the remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various persons would apply for shares and then give share application money. This amount received from such share holder would naturally be credited in the books of accounts of the assessee. Once the alleged share capital is credited to the accounts of the assessee, then role of section 68 would come. It is pertinent to take note of this section. It reads as under: "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 and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory the sum so credited may be charged to income tax as the income of the assessee of that previous year." 9. A perusal of the section would indicate that basically this section contemplates three conditions required to be fulfilled by an assessee. In other words, the assessee is required to give explanation which will exhibit nature of transaction and also explain the source of such credit. The explanation should be to the satisfaction of the AO. In order to give such type of explanation which could satisfy the AO, the assessee should fulfill three ingredients viz. (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies primarily went by the fact that the assessee had provided sufficient indication by way of permanent account numbers, to highlight the identity of the share applicants, as well as produced the affidavits of the directors. Furthermore, the bank details of the share applicants too had been provided. In the circumstances, it was held that the assessee had established the identity of the share applicants, the genuineness of transactions and their creditworthiness; The Assessing Officer chose to proceed no further but merely added the amounts because of the absence of the directors to physically present themselves before him. The Income-tax Appellate Tribunal has relied upon a decision of this court in CIT v. fair Finvest Ltd. [2013] 357 ITR 146 (Delhi), where in somewhat similar circumstances, it was stated as follows (page 152) : "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 Registrar of Companies in relation to the share application, affidavits of the directors, Form 2 filed with the Registrar of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent Directors have now again filed fresh affidavits confirming the application and allotment of shares with respect to the total amount of ₹ 45 Lacs. It is observed that no attempt was made by the AO to summon the Directors of the share applicant companies. Moreover, it is settled law that the assessee need not prove the "source of source". Accordingly it was incumbent upon the department to have enforced attendance of Shri Mahesh Garg or the erstwhile Directors of the share applicant companies and confronted them with the evidences & affidavits relied upon by the appellant and thereupon given opportunity to the assessee to cross examine these applicants." 12. At this stage, we deem it appropriate to take note of finding of the ITAT, 'SMC' Bench in the case of Pavankumar M. Sanghvi (supra). The relevant discussion is available at para-8 of that order, it reads as under: "8. As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-à-vis the ground realities. The facts of the case cannot be considered in isolation with the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report, but recorded a finding that these companies have disclosed very meager income in their returns of income, and therefore doubted their credit-worthiness. The AO accordingly treated the alleged share application money as bogus, and made addition. Matter went to the ld.CIT(A) who deleted the addition, and thereafter the said order met approval of the Tribunal. Dissatisfied with the order of the Tribunal, Department went to the Hon'ble High Court, and relied upon the judgment of Hon'ble Supreme Court in the case of Pr.CIT Vs. NRA Iron & Steel P.Ltd. (supra). Hon'ble High Court while taking cognizance of this judgment has propounded the following principles culled from this judgment. It reads as under: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are : i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below. 22. Under these circumstances, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost. 16. Hon'ble Court was of the view that in the case of Pr.CIT Vs. NRA Iron & Steel P.Ltd. (supra) the AO has made investigation and detailed inquiry including survey of investor company. On the basis of field report, it revealed to him that shareholders were either non-existent or lacked credit-worthiness. In other words, on one hand cases where the AO has conducted an inquiry and disproved whatever submitted by the assessee, and in other case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction letter has also been attached. The copy of income tax return along with Balance sheet has been furnished. However, on verification of return of income it is seen that there was lossj of ₹ 7,36,567/-. Further copy of bank statement reflecting the transactions have not been furnished. Therefore, the credit worthiness of the applicant is not proved. (iii) Shri Anil Kumar Jain.(Prop of M/s Anil Enterprise) The above party has filed confirmation in respect of payment made of ₹ 70,00,000/- on behalf of Maars Software International Ltd and also submitted allotted share where not allotted by the company and share application money were returned back to him during the accounting year 2012-13.The copy of bank statement and copy of acknowledgement of returns of income have been filed. However, on verification of return of income it is seen that income of ₹ 1,84,617/- has been shown only. Further, credit entries reflected in the bank statement prior to make payment to M/s D J Stock Broking Pvt. Ltd are not verifiable. Therefore, the credit worthiness of the applicant is not proved. b) In view of the above, the credit worthiness of the above persons who have ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he has not conducted any inquiry about both these concerns. When the assessee has been alleging that ₹ 70.00 lakhs received during this period from Maars Software has been returned to the contributor i.e. Anil Enterprises, who had paid it on behalf of the Maars Software, he simply doubted it, the AO should have conducted more inquiries. 19. As far as payment received from Ski High Financial Services is concerned, though according to the AO, the assessee did not file copy of return, and complete bank statement, but assessee has disclosed PAN of this concern. In the paper book, the assessee has filed copy of the return also, under a certificate that it is not sure, whether this copy was filed before the AO or not, but it has been alleged that this document has been obtained from the Income Tax Department. Grievance of the AO is that this concern has shown a meager income, and did not submit complete bank statement. The bank statement submitted by the assessee is for a limited period showing transaction received by it. The document was submitted by the assessee in order to demonstrate that it has received money through account payee cheques. PAN details were submitted in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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