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TMI Blog2020 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... the payments through banking channel, confirmations from the investors, copies of ITRs and balance sheets of the investors along with share application forms and share certificates. The DDIT (Inv.) Wing Kolkata also issued notices to these 13 investors and required their presence. - none appeared but they filed their replies furnishing therewith copies of balance sheets, bank statements, share certificates and confirmations. The DDIT(Inv) finally submitted the report to the AO citing all these facts. See ORISSA CORPORATION PVT. LIMITED [ 1986 (3) TMI 3 - SUPREME COURT] and LOVELY EXPORTS (PVT) LTD [ 2008 (1) TMI 575 - SC ORDER] and M/S. AMI INDUSTRIES (INDIA) P. LTD. [ 2020 (2) TMI 269 - BOMBAY HIGH COURT] Once the assessee has filed the necessary evidences to prove identity, creditworthiness and genuineness by proving sources of investments, then the onus on the assessee is fully discharged and it is for the department to prove to the contrary. We have also perused the case laws relied upon by the Ld. D.R. but found that the same are not applicable to the facts of the present case. - Decided in favour of assessee. - ITA No.1482/M/2015 - - - Dated:- 15-7-2020 - Shri Rajes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestors, balance sheets of the investors along with MOA and IT returns, copies of bank statements evidencing the payment received through account payee cheques and banking channels, bank statement of the investors evidencing the investments made in the assessee company. The assessee also submitted before the AO that the assessee is an old company and has been doing business and showing a consistent growth in the business and there were reserves as on 31.03.2009. It was also stated that the valuation of share was based upon DCF calculation at that time and copy of the same was also submitted before the AO besides assessee filing share allotment forms, proofs of delivery of shares through courier, board resolutions, share certificates etc. The assessee raised the share application money from the following parties:- Sr. No Name and address of the person No. of equity shares Amount (Rs.) 1 Maple Mercantile Pvt. Ltd 18A, Ramakanta Bose Street, Kolkata, West Bengal-700 003 60,000 30,00,000 2 Trammel Trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies on single day on 04.03.2013 which were incomplete and were in the same format. Thereafter, the AO asked the assessee to furnish certain details hence original shareholder register , original share application money forms, proofs of dispatch of notice of annual general meeting of shareholders for financial year 2009-10 2010-11 and proofs of dispatch of share certificates to the shareholders and entries in the share register. On 25.03.2013, the assessee submitted its reply that all 13 parties were served with the notices by DDIT (Inv.) Wing Kolkata and in response, all of them have filed their requisite documents in the office of DDIT on 04.03.2013. The assessee resubmitted some of the documents such as confirmations of transaction and creditworthiness of the investors etc. The assessee also stated that not only these parties have confirmed their investments in the assessee company but also produced their bank accounts and balance sheets evidencing the transactions and also creditworthiness. Besides the assessee submitted that on 08.03.2013 the copies of share certificates issued to all 13 parties were produced. However, the AO came to a conclusion that assessee has no e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chi Finance Pvt. Ltd. having registered office at ISA, Ramakanta Bose Street, Kolkata, M/s Rameshwar Investment Advisory Pvt. Ltd. having registered office at 18, Sir Harirarn Goenka Street, Burrabazar, Kolkata, the summons were issued on 22.02.2013 and 04.02.2013 but no reply was received. The report of the DDIT(Inv.) Unit Kolkata received on 22.03.2013 and was communicated to the A/R of the assessee company on the said date vide order sheet entry and the case was fixed for 25.03.2013. 3.3 On 25.03.2013 the AO was informed by the assessee company that all the thirteen parties submitted the requisite documents to the office of the DDIT(Inv.) Kolkata on 01.03.2013 and some of them resubmitted on 11.03.2013. The copies of the information submitted with the DDIT was also filed with the AO. It was further stated before the AO that all the parties who invested in the share capital of the assessee company submitted their bank statement, balance sheet for A.Y, 2010-11 and copy of the share certificate. The original were also produced for verification. 3.4 The AO has given the detailed findings for making addition u/s 68 by treating the investment in share capital as unexplained cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the share application money is received by the assessee company from alleged bogus shareholder whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as - undisclosed income of assessee company 3.8 The AO has relied upon the decision of Hon'ble Delhi High Court in the case of Nipun Builders Developer (P) Ltd. (2013) 350 ITR 407 and the judgment of the Hon'ble Supreme Court in the case of P. Mohankala. The head notes of the judgment of Delhi High Court are reproduced as under to understand the findings of the Hon'ble Delhi High Court:- Income-Cash Credit -Evidence given by Assessee -Not satisfactory - Onus of assessee Ambit For enquiry of accommodation entries, AO issued summons u/s 131 to share-holders of assessee company which returned unserved Unsatisfactory explanations were submitted by assessee, failing its onus to prove genuineness - Addition was made by AO-Held, u/s 68 onus is upon assessee to prove three ingredients, i.e., identity and creditworthiness of person from whom the monies were taken and genuineness of transaction-In case when A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducing any tangible material to doubt the veracity of the documents furnished by the assessee. The Income Tax Appellate Tribunal concurred with the views taken by the Commissioner of Income-tax (Appeals). Moreover, the A/R of the appellant has pointed out in the written submissions that the case of the Hon'ble Delhi High in the case of Nipun Builders Developer (P) Ltd is not applicable as there was specific information from the investigation wing to the AO about parties engaging bogus transactions. 3.10 The judgment of the Hon'ble Supreme Court in the case of P Mohankala has been distinguished by the A/R of the appellant by giving the facts that in this case the Hon'ble Supreme Court dealt with the gifts declared by the NRI relatives of the assessee and not with the share subscription. 3.11 The Hon'ble Delhi High Court in the case CIT vs Oasis Hospitalities (P) Ltd. (2011) 333 ITR 119 has also held that primary onus stands discharged where the assessee company has filed copies of PAN, ITRs/Bank account/Statements of the share applicants. It has been further held that the remedy lies in reopening of the cases of the investors and no addition can be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law, referred supra. 3. We have heard the learned Senior Standing Counsel appearing for the appellant and perused the order passed by the Tribunal and the authorities below. 4. Before adverting to the merits of the case, it would be relevant to refer to Section 68 of the Act, which reads as under: Section 68. Cash credits.-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. 5. A bare reading of Section 68 of the Act makes it clear that in a case where any sum is found credited in the books of account and the assessee has not given satisfactory explanation in respect of the same, the Assessing Officer can treat the same as undisclosed income and add it to the income of the assessee. All that the said provision contemplates is that the assessee has to give satisfactory explanation about the nature and source of such sum found credited in the books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation of penalty proceedings u/s 271(l)(c) is premature as no penalty has been imposed. 5. In the result, the appeal is allowed. 7. The Ld. D.R. submitted before the Bench that the investors who invested in the share capital of the assessee company were bogus as they have failed to appear before the DDIT (Inv.) Wing Kolkata. The DDIT (Inv.) Wing Kolkata in his report dated 08.03.2013 has clearly stated that none of the parties appeared in person and submitted their replies on single day on 04.03.2013 in a standard format. The Ld. D.R. submitted that out of 13 parties 7 parties were having same address and other 5 parties having same address and also have common directors. The Ld. D.R. also submitted that the Ld. A.R. has relied on the case laws which were not applicable to the assessee s case. The Ld. D.R. also referred to page No.70 to 76 by pointing out that there are different signatures on the confirmations as filed at page No.70 and filed at page No.76. The Ld. D.R. also submitted that human probabilities have to be seen in this case as Kolkata is a hub of entry providers and all scams. The Ld. D.R. also relied on the Hon ble Supreme Court decision in the case of Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. Therefore, all the three ingredients were duly satisfied in the case of these investors and the addition under section 68 is unwarranted and may be deleted. In defence of his argument, the Ld. A.R. relied on the decision of Hon ble Bombay High Court in the case of Pr. CIT vs. M/s. Ami Industries India Pvt. Ltd. ITA No. 1231 of 2017 dated 29.01.2020. In this case, the Ld. A.R. submitted that a similar issue has been decided after considering the decision of Pr. CIT vs. NRA Iron and Steel Pvt. Ltd.(Supra). Therefore, the Ld. A.R. prayed that the order passed by Ld. CIT(A) after considering the decisions of the Hon ble Supreme Court in the case of CIT vs. Lovely Export Pvt. Ltd. (2008) 216 ITR 195 and CIT vs. Orissa Corp. Pvt. Ltd. (1996) 159 ITR 78 and therefore same may kindly be upheld. 9. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts of the case are that the assessee has raised share capital by issuing shares of face value of ₹ 10/-each at premium of ₹ 40 thereby raising a sum of ₹ 4,83,50,000/-. The details of the investors have been given hereinabove while narrating the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked creditworthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case. 22. Therefore, on a thorough consideration of the matter, we are of the view that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf. This rule was inserted as a result of directions of Hon ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment . In the rules so framed, as a result of these directions, the expression ordinarily has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 14. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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