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TMI Blog2020 (10) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... t revenue. - ITA No. 5162/Mum/2017 - - - Dated:- 12-10-2020 - Shri M Balaganesh, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : Shri Amit Pratap Singh, DR For the Respondent : Shri Vimal Punmiya, C.A. AR ORDER PER PAVAN KUMAR GADALE - JM: The Revenue has filed an appeal against the order of CIT(A)-9, Mumbai passed u/s 143(3) r.w.s 250 of the Act. The revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO delete the addition made u/s 68 of the Act of ₹ 1,60,00,000/- towards unexplained share application / share premium even though Shri Pravin Jain in sworn statement accepted the factum of giving accommodation entries and creditworthiness of the lender as well as genuineness of transaction was not proved. 2. The appellant craves leave to amend or alter any ground or add new ground which may be necessary . 2.The brief facts of the case are that the assessee is a limited company engaged in the business of manufacturing of Texturing yarn PP Mats. The return of income was filed on 30.09.2012 with tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal and submissions of the assessee and findings of the A.O dealt on the written submissions at para 5.2 of the order and catena of the Hon ble Tribunal and Hon ble High Court decisions in respect of the transactions of unexplained cash credits u/s 68 of the Act and observed that the assessee has discharged its burden by submitting the information and the A.O failed to make enquiries and deleted the addition observing at page 32 para 5.3.4 5.3.5 of the order as under: 5.3.4 Thus, it is concluded that the appellant had done everything in its power to prove the 3 ingredients required to prove the satisfactory nature of the said share application transactions, In these circumstances, the onus had shifter to the AO. If the AO was still not satisfied, he had the option of making inquiries from the alleged lenders by summoning them. He has opted not to comment on the replies furnished by the parties who were summoned nor has he relied on the same However, in my opinion this is not right since such credible material was available with him and which was in fact filed at his insistence since he issued the notice seeking relevant information. Further, if the AO was not satisfied wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitting the information in the assessment proceeding. Whereas, the A.O has ignored the information of investors financials submitted in respect of ₹ 1,60,00,000/- and unilaterally made addition of share capital and share premium in respect of three entities. The Ld. AR substantiated his arguments with written submissions read as under. 11. The Learned AO added the share application money amounting to ₹ 1,60,00,000/- received from the above Investor companies under section 68 of the Act, 1961 on the alleged ground that it is unexplained cash credit. At the outset, the Appellant would like to draw Your Honour s kind attention to the text of Section 68 of the Act that reads as under: 68.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 Assessing officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. i) From a reading of the above section, it is evident that the assessee should be able to provide sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d investments have been duly recorded by them in their books of accounts, they have the financial strength capacity to invest and duly submitted relevant financials bank statements to confirm genuineness of the transactions. III. As regards Creditworthiness of the shareholders: With regard to the capacity and credit worthiness of the Investors, the appellant Company has already placed on record the audited accounts/ financials for the year ended 31-3-2012 of the investee Company/parties. a) The details of the financial strength of the investee companies based on its net worth, as depicted from the Audited Financials of the investee company, which has been placed on record before the A.O. We reproduce the same as under; PERFECT FILAMENTS LIMITED Assessment Year 2011-12 Determination of Creditworthiness of Investee Companies Name of the Investee Company Total Net Worth of the Investee Company as on 31-03-2011 * Total Value of Shares Applied in the Assessee Company Rs. * Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial strength of the investee individual parties based on its tax returns, as depicted from the ITR of the investee parties, which has been placed on record before the A.O., Further, the Appellant submit that the Company s Master Data, Income-tax Jurisdiction details and financials of the Investor s companies/parties proved the identity as well as financial capacity i.e. creditworthiness of the Investor s companies/parties. The Appellant has also allotted the shares to the Investor s companies/parties during the relevant previous year and the details are on record. The AO treated only share application money received by the Appellant as unexplained cash credit under section 68 of the Act on the alleged ground that the Appellant has not brought on record to prove the identity, genuineness of the transactions and creditworthiness of the investors without appreciating that the Appellant has submitted the copies of ITRs, director report, balance sheet, bank statements, share application forms, etc. clearly brought out the nature of the transactions, amount involved and scope of the transaction. Moreover, all the investor companies/parties equally confirmed vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails at page 179 to 233 of paper book. The contentions of the Ld. AR are that substantial details were submitted with the A.O in the assessment proceedings which includes the name, address, pan and jurisdiction of the investor company, income tax return, application filed for allotment for equity share, annual report, directors report, profit and loss account, balance sheet, bank statement and copy of return of allotment. Whereas, the A.O has disbelieved the fact of identity, credit worthiness and genuineness of the transaction, where the payments are made through the banking channels. Further to substantiate the identity of the investors, the assessee has filed the details of the investor s master data i.e company identification numbers, incorporation dates with Registrar of Companies. Secondly on the genuineness of the transaction, the assessee has submitted the share application and the bank statements and finally the credit worthiness substantiated with the financial statements with the reserves Surplus. The Ld. AR submitted that the CIT(A) has considered all the factual aspects and the information submitted by the assessee satisfying the three ingredients of provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate of incorporation and memorandum of Association etc. In spite of assessee filing all the details, prima-facie the A.O has not conducted any investigation or enquiry in respect of the information submitted by the assessee and relied only on the information of a third party whose statement was not cross examined or tested. We find that the CIT(A) has considered the detailed facts and the submissions of the assessee. Whereas, out of the seven investor companies, the A.O has only doubted the three entities belong to Praveen Kumar Jain group and has accepted the investments made by other investor companies including M/S Century Denim Pvt Ltd and M/s Landscape Vincom pvt Ltd were the shares were issued at a premium of ₹ 490/- per share. Similarly, in respect of the three entities of Praveen Kumar Jain group, the shares were also allotted at the same amount. The assessee prima-facie has complied with the ingredients required u/s 68 of the Act of genuinity, identity and creditworthiness. The CIT(A) relied on the Catena of judicial decisions in his order and has test checked the creditworthiness and identity of shareholders and came to a reasonable conclusion that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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