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TMI Blog2021 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case as discussed above, no addition was warranted under Section 68 - CIT(A) has rightly deleted the addition. - Decided against revenue. - ITA No.3050/AHD/2016 - - - Dated:- 30-6-2021 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Rasesh Shah - CA For the Respondent : Ms.Anupama Singla Sr.DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue pertaining to assessment year 2012-13, is directed against the order passed by the ld.Commissioner of Income Tax(Appeals)- 2, dated 04.08.2016, which in turn arises out of an assessment order passed by the ld.Assessing Officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the Act ] dated 31.03.2015. 2. Grievances raised by the Revenue are as follows: 1. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) has not erred in deleting the additions of ₹ 1,80,00,000/.- on account of unexplained cash credit u/s 68 of the Act on account of share capital share premium. 2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addresses of the Share Holders No.of Shares Amount of Capital received Amount of Share Premium, if any received Total Date in which received in bank account of the assessee 1) Yash Buildhome Developers Ltd., 3/304, Ashish Complex, New Rajdhani Enclave, Vikash Marg, New Delhi 50000 500000 2000000 2500000 11.05.2011 10000 100000 400000 500000 13.05.2011 60000 600000 2400000 3000000 18.05.2011 40000 400000 1600000 2000000 24.05.2011 TOTAL 8000000 2) Yash Tradex Overseas Pvt. Ltd., 3/304, Ashish Complex, New Rajdhani Enclave, Vikash Marg, New Delhi 100000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiries in relation to other three investor concerns of Delhi and the share application money received from these three investor companies was treated as undisclosed on account of the findings that the audit report and the bank, statement of these investors are not reconciled, the income level of the investor is too low; major discrepancies in the bank account; shares have been issued at the premium of ₹ 40/-, though the EPS of the assessee was only ₹ 0.02 and no dividend have been paid to the investors. Therefore, based on these facts, assessing officer has issued a show cause notice dated 23.03.2015 wherein the assessee was asked to show cause as to why an amount of ₹ 1,80,00,000/-, being the amount claimed to be received towards share application money and premium, should not be treated as unexplained cash credit under section 68 of the Act. 5. In response, the assessee submitted before the AO that all the transactions were duly supported by share application form, acknowledgement of return of income, audited financial statements, bank statements, MOA and AOA of the share applicant. It was contended that the transactions have been made through proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee had miserably failed to explain the nature and source of the sums in question, so the AO has rightly added the sums u/s. 68 of the Act. 9. On the other hand, Shri Rasesh Shah, Learned Counsel for the assessee, assailing the order of the assessing officer, drew our attention to the fact that the assessee is a Private Limited company which is engaged in the business of wholesale trading of imported and local yarns. The assessee company has shown gross profit of ₹ 6,07,78,660/- @ 6.65% on total turnover of ₹ 91,33,30,051/- as against gross profit of ₹ 2,77,29 240/-, @ 5.45% on total turnover of ₹ 50,91,94,705/- shown in the immediately preceding year, i.e. A.Y. 2011-12. These turnover figures of the assessee company shows that assessee company is a profit making company and not a mere paper company. The assessee company has goodwill in the market.The assessee submitted before the AO that all the transactions were duly supported by share application form, acknowledgement of return of income, audited financial statements, bank statements, MOA and AOA of the share applicant. It was contended that the transactions have been made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n.Com 272 (Bom), held that amendment to section 68 is prospective and applicable only from assessment year 2013-14. In the assessee`s case, the assessment year involved is Assessment Year 2012-13, therefore, we note that the amended provisions of section 68 of the Act, does not apply to the assessee under consideration. 11.With this background, now we shall proceed to examine in the assessee`s case under consideration, whether assessee has discharged his onus to prove, prima facie, the identity, creditworthiness and genuineness of the share capital and share premium received by it from share subscribers companies. We note that during the assessment stage the assessee has submitted the following documents and evidences: (i). Share application form, (ii). Acknowledgement of return of income, (iii).Audited financial statements, (iv).Bank statements, (v).Memorandum Of Association and Articles Of Association of the share applicants. (vi) The transactions have been made through proper banking channels. (vii) The investor companies are registered with ROC and are active companies as per ROC records. (viii) PAN of Share applicants, Balance Sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the investor company as short term loans and advances. The Investor company shows no turnover and the income breakup is not given and the various entries in the bank accounts related to Ginny Enterprise and Surya Industries it not reflected in the balance sheet. The AO found that the transactions in the bank account of Bank of Maharastra and the bank statements of Bank of Baroda do not match with the audit report. The AO in the assessment order has given a finding that the bank account transactions of the investor companies is not corelated to the audit report. The AO issued commission u/s 131(1)(d) of the Act to the Investigation Wing, Delhi to investigate 7 companies which have invested in the above Investor company i.e. Yash BuildHome Developers Ltd. The Investigation Wing reported that summons could not be served in the case of 4 companies and in case of 2 companies details were filed in Tapal/Daak and in case of 1 company no compliance was made. The AO held that the affairs of the investor company are not genuine and therefore the amount of share capital received by the assessee is not genuine and made the addition u/s 68 of the Act. (a)(ii) The assessee submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the assessee authorised capital was only ₹ 5 lacs. The summons was issued u/s 131 of the Act which was served on the investor company and the details were also furnished before the Investigation Wing, Delhi. During the appellate proceedings, the case records were obtained from the AO and the details on record were examined. The Investigation Wing Delhi vide its report dated 17.03.2015 had submitted that the summons were served in the case of Yash Buildhome Developers Ltd. and in compliance to the summons, the details of the return of income, balance sheet, ledger account, etc. were filed before the Investigation Wing. The AO had also issued notice u/s 133(6) of the Act to this Investor Company and the compliance was also made and the details were filed before the AO as per the query raised u/s 133(6) of the Act. The AO in the assessment order had mentioned that the Inquiries were conducted in this case examine the flow of funds and the AO had held that the funds were transferred through 3 layers of various persons which proved that these are non-genuine companies. The report of the Investigation Wing dated 17.03.2015 alongwith the annexures was perused and it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount received from various parties should find a mention in the balance sheet or not. Queries relating to accounting entries in the books of investors can be raised in their individual cases and relevant explanation can be called for from them. But no such efforts have been made by the AO. He has suo-motto picked up the few details from the financial statements and has drawn adverse comments based on his own conjectures and surmises without following the principles of natural justice. It is also not the case of AO that prior to making investment in assessees share capital, cash deposit is made in the bank account of investors. (a)(vi) In view of the above facts and circumstances, it the finding of the AO that the share application money received from Yash Buildhome Developers Ltd. is not verifiable is erroneous finding as this investor has filed the confirmations in response to the notice u/s 133(6) of the Act and also compliance was made in response to the summons issued. The AO has taken adverse views in regards to the companies which have been invested in Yash Buildhome Developers Pvt. Ltd. as discussed above as not traceable without appreciating the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he perusal of the details, it is observed that the investor company had raised its authorised share Capital from ₹ 50,00,000/- to ₹ 1,50,00,000/- in the subsequent years as per the ROC details filed by the assessee which shows that the AO has wrongly observed that the assessee authorised capital was only ₹ 50 lacs. The summons was issued u/s 131 of the Act which was served on the investor company and the details were also furnished before the Investigation Wing, Delhi. During the appellate proceedings, the case records were obtained from the AO and the details on record were examined. The Investigation Wing Delhi vide its report dated 17.03.2015 had submitted that the summons were served in the case of Yash Tradex Overseas Pvt. Ltd and in compliance to the summons, the details of the return of income, balance sheet, ledger account, bank statement etc. were filed before the Investigation Wing. The AO had also issued notice u/s 133(6) of the Act to this Investor Company and the compliance was also made and the details were filed before the AO as per the query raised u/s 133(6) of the Act. This investor company was also found traceable at the given address and no adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from various parties should find a mention in the balance sheet or not. Queries relating to accounting entries in the books of investors can be raised in their individual cases and relevant explanation can be called for from them. But no such efforts have been made by the AO. He has suo-motto picked up the few details from the financial statements and has drawn adverse comments based on his own conjectures and surmises without following the principles of natural justice. It is also not the case of AO that prior to making investment in assessees share capital, cash deposit is made in the bank account of investors. (b)(vi) In view of the above facts and circumstances, it the finding of the AO that the share application money received from Yash Tradex Overseas Pvt. Ltd. is not verifiable is erroneous finding as this investor has filed the confirmations in response to the notice u/s 133(6) of the Act and also compliance was made in response to the summons issued. The AO has pointed out discrepancies regarding certain accounting entries in the books of the investor companies which have got no relation with the investment made in the share capital. The cash deposit found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor companies as it has to be explained and examined by the investor company itself. (c)(iii) On the perusal of the details, it is observed that the investor company had raised its authorised share capital from ₹ 25,00,000/- to ₹ 1,30,00,000/- in the subsequent years as per the ROC details filed by the assessee which shows that the AO has wrongly observed that the assessee authorised capital was only ₹ 25 lacs. The AO held that the notice u/s. 133(6) was not served on the assessee but as per the report of the Investigation Wing, the summons were issued by the Investigation Wing, Delhi and served on the investor company. The name of the company Yash IT Solutions Pvt. Ltd. was earlier VS IT Solutions Pvt. Ltd. as per the ROC record which was subsequently changed. The AO has given a finding that the examination of the bank statement of the investor company shows that the cash deposits of ₹ 10,35,000/- had been made in the account on various dates from 25.06.2011 to 13.10.2011 which revealed that the company was not having sufficient cash balance. During the appellate proceedings on the examination of the bank statement of the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cash deposits relates to September 2011 to March 2012. Hence, the investment made by Yash IT Solutions Pvt. Ltd. of ₹ 50,00,000/- is found to be genuine and the addition made the AO u/s 68 is deleted. 6.1.4. On the perusal of the details, it is observed that the AO at para 5 in the assessment order has mentioned that the assessee has charged premium of ₹ 90 per share while at para 5.2 it is mentioned as ₹ 40 per share. On the verification of the details it is found that the assessee had charged premium at ₹ 40 per share instead of ₹ 90/- as mentioned. The AO has accepted the charging of the premium at ₹ 40/- from the sister concerns namely M/s Rama Trade link Pvt. Ltd. as genuine during the year. The assessee is in the business of trading of yarn and the turnover of the assessee s companies for the last 3 years was examined which is as following: A.Y. Turnover (Rs.) Reserves Surplus (Rs.) 2010-11 38,36,82,254 3,53,01,860 2011-12 50,91,94,750 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. 15. Our attention was also drawn to the decision of the Hon'ble Supreme Court in the case of Lovely Exports as has been reported in CTR at 216 CTR 295: Can the amount of share money be regarded as undisclosed income under section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of ClT. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 17. We note that once the basic documents such as, confirmation, copy of bank account, copy of share application and copy of income tax returns of the creditors, or share applicants have been furnished by the assessee, the onus of proving the above three elements required for section 68 is discharged. It is also held that if there is any doubt regarding source of the said creditors / share applicants, the matter can be examined by the concerned AO in the assessment of the creditor / share applicant. For that we rely on the following binding decisions of Hon'ble jurisdictional High Court Gujarat: (i)CITv/s Ranchhod Jivabhai Nakhawa ITA No. 50/2011,(Guj) (ii) CIT v/s Ujala Dyeing and Printing Mills (P) Ld, 328 ITR 0437 (Guj) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed part of total paid up capital of ₹ 3.80 crores of the assessee which was duly reflected in the balance-sheet; and that the return of allotment was also filed with Registrar of Companies. In the aforesaid factual matrix, the Tribunal was of the view that the respondent had discharged the burden and accordingly reversed the findings of the Commissioner (Appeals). 6. Thus the Tribunal has after appreciation of the evidence on record found as a matter of fact that the assessee had supplied addresses and permanent account numbers as well as confirmation letters of the share applicants. In the circumstances, it was for the revenue to make further inquiry in case it was of the opinion that the share applicants were not genuine. In absence of any findings recorded by the Assessing Officer to the effect that the share applicants are bogus, there is nothing on record to doubt or disbelieve the confirmations and application forms submitted by the depositors. In the circumstances, no infirmity can be found in the impugned order of the Tribunal in holding that the assessee had discharged its burden. Whether burden has been discharged or not is a question of fact. 7. I ..... 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