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TMI Blog2021 (8) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company. In this connection we note that the assessee has not filed any copy of the income tax return filed by them in their country of residence i.e. USA. Likewise, the assessee has also not filed the bank statement of these parties maintained by them in their country of residence except the NRE accounts maintained in India. Admittedly, all the transactions were routed through the banking channel i.e. NRE account. In this regard, we find that there is a circular issued by the CBDT bearing number 05 of 1969 dated 20-02-1969 wherein it was instructed that there cannot be any tax liability on the amount remitted by the NRI in India for investment in India Thus the amount received by the assessee from the NRIs in the manner as discussed above cannot be treated as unexplained cash credit under the provisions of section 68 of the Act. Accordingly, there is no question for treating the amount of share capital received by the assessee as unexplained cash credit under section 68 - Appeal of the assessee is allowed. - ITA No. 2721/AHD/2016 And ITA No. 2769/AHD/2016 - - - Dated:- 6-8-2021 - Shri Mahavir Prasad, Judicial Member, And Waseem Ahmed, Accountant Member F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s appeal challenging initiation of penalty proceedings u/s. 271(l)(c). He ought to have appreciated, inter alia, that in the peculiar facts and circumstances of the appellant's case, there being absolutely no warrant/justification for initiating the penalty proceedings, he ought to have ordered for their being dropped, thereby saving both the appellant and the Department from long drawn unnecessary litigation. 7. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 3. The only issue raised by the assessee is that the learned CIT (A) erred in confirming the addition of ₹ 80,00,000/- in part out of the total addition of ₹ 2,56,50,000/- u/s 68 of the Act instead of deleting the addition in entirety. 4. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of Manufacturing of Guar Gum Powder. The assessee in the year under consideration has received share application money for ₹ 2,56,50,000/- from five individuals who are NRIs and residing in USA. The details of such individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- represents unexplained cash credit u/s 68 of the Act. 5. Aggrieved assessee preferred an appeal before the Ld.CIT(A), who called for the remand report from the AO. 6. The Ld. CIT(A) after considering the submission of the assessee and remand report submitted by the AO allowed the relief to the assessee in part by observing as under: After going through the facts of the case, it is seen that the depositors (table supra) at Sr.No.1 to 2 are filing the federal return of income with US authorities Statements of foreign bank accounts of Vimal Patel and Mayur Patel were furnished with details of funds transfer. During the course of hearing in connection with remand proceedings before the AO, the appellant explained that the said shareholders namely Mayur Patel Vimal Patel were residing at USA since more than 20 Years for which evidences were furnished and that they had sizable income for last several years having their own Social Security Numbers. The genuineness of investment is already accepted being form official banking channels of NRI bank accounts. It is pertinent that in the Federal Income Tax returns in the statement No 8938, the above shareholders have sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AR also contended that the money was received through the RBI channel and drew our attention on the receipts of share application money which is placed on pages 145 to 157 of the paper book. 9.2 The Ld. AR also filed the copy of the Income-tax return of Shri Mayur Patel and Shri Vimal Patel which are placed on record. 9.3 In view of the above, the Ld. A.R contended that the assesse has discharged its onus cast u/s 68 of the Act and thus no addition whatsoever is warranted under the provision of section 68 of the Act in the given facts and circumstances. 10. On the other hand, the Ld. DR contended that the assessee has failed to furnish the credit worthiness of the parties and therefore the amount of share application money represent unexplained cash credit u/s.68 of the Act. 11. Both the Ld. AR and Ld. DR vehemently supported the order of the authorities below to the extent favorable to them. 12. We have heard the rival contentions of both the parties and perused the materials available on record including the case laws cited by the learned AR and the learned DR at the time of hearing. The assessee in the present case has received share application mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue as all the transactions were carried out through the banking channel. As all the subscribers of the shares of the assessee company are the NRIs i.e. residing in USA, the payment was made by them for acquiring the shares through the NRE account. The necessary details of the NRE account of all the subscribers are placed on pages 17 to 51 of the paper book. 12.3 Now the issue revolves with respect to the creditworthiness of the parties who have subscribed the shares of the assessee company. In this connection we find that the assessee has filed the income tax return of two NRIs for the last two years along with the bank statement maintained in USA as well as NRE account in India. The name of these two NRIs are as under: S. No. Name of Investor Amount credited 1 Shri Mayur Patel ₹ 89,50,000/- 2 Shri Vimal Patel ₹ 87,00,000/- Total ₹ 1,76,50,000/- 12.4 The copies of the bank statement and the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax. Therefore, there is no question of a remittance into the country being subjected to income-tax in India. The question of assessment to tax arises only when there is no evidence to show that the amount, in question, in fact represents such remittance. In other words, in the absence of proper supporting evidence, the taxpayers story that the money has been brought into India from outside may be disbelieved by the Income-tax Officer who may then proceed to hold that the money had in fact been earned in India. 3. If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no questions at all are asked by the Income-tax Officers as to the origin of the money or assets brought in. It is only in case where the money is claimed to have been brought from outside otherwise than through banking channels and there is no evidence regarding the transfer of the money, that the department has to make enquiries about the source thereof. 12.7 Besides the above, we also note that the Hon ble Gujarat High Court in the case of CIT vs. Harishbhai R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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