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TMI Blog2021 (11) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... e not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. As detailed in the written submissions of the assessee, the assessee had duly submitted details and evidences to prove the identity and creditworthiness of each of the share subscribers separately - AO, in the impugned Assessment Order has not recorded any peculiar facts of circumstance which would suggest that the assessee had routed his own money through the above stated subscribers. AO has not brought any material or evidence on the file to show that these share applicants were fictitious persons. The another relevant factor on the file is that in response to the notices issued u/ s 33(6) by the earlier AO, the requisite details were furnished by the assessee as well as the share subscribers. After receipt of said details, the concerned AO did not proceed to make further enquiries, which implies that he was satisfied with the evidences and explanations received by him. After the transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) is a non-speaking order. By simply reproducing the contents of the case laws without discussing about their application on the facts of the case, in our view, would not make the order of the ld. CIT(A) justifiable speaking order and hence, the same is not sustainable as per law. - Decided in favour of assessee. - I.T.A. No. 410/Kol/2020 - - - Dated:- 26-10-2021 - Sri Sanjay Garg, Judicial Member And Sri M.L. Meena, Accountant Member For the Assessee : Sh. S.K. Tulsiyan, A/R Smt. Puja Somani For the Revenue : Smt. Ranu Biswas, Addl. CIT, Sr. D/R ORDER PER BENCH: The present appeal has been preferred by the assessee against the order dated 01.10.2019 of the Commissioner of Income Tax (Appeals)-17, Kolkata [hereinafter referred to as CIT(A) ]. 2. It has been pointed out that this appeal is time barred by 74 days. A perusal of the note of the Registry and appeal Form No. 36 reveals that the impugned order passed by the ld. CIT(A) dated 01.10.2019 was communicated to the assessee on 12.02.2020. The appeal was to be filed within 60 days of the communication of the order of the ld. CIT(A). However, the present appeal has been filed wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n short the Act ) was issued on 12.08.2013 by the concerned Assessing Officer (in short the AO ) i.e. ITO, Ward-4(4), Kolkata. In response to this said notice, the assessee filed audited financial statement of accounts on 05.03.2014. Thereafter, a notice u/s 142(1) of the Act was issued by the ITO, Ward-4(4), Kolkata, in response of which, the assessee filed requisite details and documents. 4.1. As noted from para 2.1 of the Assessment Order, to verify the identity and creditworthiness of the shareholders and also about the genuineness of the transaction, the ITO, Ward-4(4), Kolkata issued notices u/s 133(6) of the Act to share subscribers which were duly complied with. Thereafter, the ITO, Ward-4(4), Kolkata did not make further enquiries. The case was, thereafter, transferred to ITO, Ward-1(3), Kolkata on 05.12.2014. Thereafter, summons were issued by the ITO, Ward-1(3), Kolkata to both the directors of the assessee on 09.02.2015 asking them to produce the directors of the subscribing companies on 20.02.2015 personally, for the purpose of verifying the identity and creditworthiness of the subscribers and genuineness of the transaction. 5. We have heard the rival conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He therefore, has submitted that the identity and creditworthiness of these companies was duly established even from the figures tabulated in para 2.5 of the Assessment Order itself. He has further submitted that the AO could not point out any defect or discrepancy in the evidences/documents submitted by the assessee to prove the identity and creditworthiness of the subscribers and genuineness of the transaction. He has further submitted that all the transactions were done through banking channel by the subscriber companies. That even the notices u/s 133(6) of the Act were issued by the earlier AO i.e. ITO, Ward-4(4), Kolkata to all the 21 shareholders asking them to produce the following: i. Number of shares applied for ii. Date of application iii. Amount paid on application with breakup of payment with date iv. Mode of payment v. Number of shares allotted vi. Documents evidencing allotment of shares to you vii. Copy of Bank statements highlighting the transaction viii. Indicate source of your investment. That it has been duly noted by the AO itself that all the 21 share applicant companies duly complied with the notices and submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing allotment of shares to you vii. Copy of Bank statements highlighting the transaction viii. Indicate source of your investment. In response, all the 21 share applicant companies filed replies before the learned AO confirming the transactions with the assessee company and their source of investment in the share capital of the assessee. A copy of the PAN Card/ITR acknowledgment evidencing their identity, relevant Bank Statements evidencing the genuineness of the share transactions and Audited Accounts for the year evidencing their high networth/creditworthiness to invest in the share capital of the assessee was also enclosed with the said reply in response the notice issued u/s 133(6) of the Act. Source of Source of investment was also provided. Copy of the replies of the investor companies is enclosed at page 1-425 of the paper book. 20. Subsequently, the case of the assessee was transferred to ITO, Ward-1(3), Kolkata on 05-12-2014. 21. To verify the credit in the books of accounts of the assessee, the learned ITO, Ward- 1(3), Kolkata issued summons u/s 131 of the Act dated 09-02-2015 to both the Directors of the assessee company and specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emark insufficient address . However, the learned AO has not mentioned the name of those companies to whom summon were unserved. 25. Now, it is pertinent to note that notice u/s 133(6) of the Act was issued to all the 21 share subscribers dated 12/20-06-2014 by the preceding learned AO and the same was duly replied to by all the share subscribers. This suggests that the correct address of all the companies was available in the file of the learned AO. Summon u/s 131 of the Act was issued by the succeeding learned AO on 25-02-2015 and 02-03-2015 i.e within 8-9 months of the issue of notice u/s 133(6) of the Act. Notices u/s 133(6) were duly served on all the 21 companies and the same is also acknowledged in the assessment order but summon u/s 131 of the Act issued just 8-9 months after the issue of notice u/s 133(6) of the Act were returned unserved by the postal authorities for some companies. More so, the assessee came to know about the issuance and non-service of summon to some of the share applicant companies only on perusal of the assessment order. Had the assessee been informed about such non-service of summon, it would have arranged for the new addresses of those parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Tiger Mercantile (P) Ltd 28-09-2007 7,12,95,750 19,47,707 6,43,00,000 270 5. Ontime Vintrade (P) Ltd 14-02-2011 20,72,76,250 327 20,96,00,000 329 6. Rr Commosale (P) Ltd 16-11-2010 8,89,36,250 758 8,88,00,000 363 7. Kamna Housing (P) Ltd 24-08-2011 15,13,63,750 231 15,50,00,000 353 8. Rs Dealcom (P) Ltd 16-11-2010 9,37,13,750 546 9,86,00,000 478 9. Tiger Vanijya (P) Ltd 28-09-2007 7,32,22,500 6,288 2,45,75,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,13,750 216 7,09,00,000 315 On a perusal of the same, it may kindly be noted that the learned AO has doubted the creditworthiness of the investor companies as these companies have reported low taxable income in their income tax return. In the said chart, the learned AO has himself admitted that all the investor companies are duly incorporated with the Registrar of Companies and in the last column he has tabulated the taxable income of these investor companies as reported in the Income Tax Return filed by these companies. This in itself shows that all the investor companies are duly incorporated bodies and are regular income tax assesses who have duly filed their return of income for the relevant year. Thus, the identity of these companies should not have been questioned by the learned AO. Admittedly, the learned AO has himself shown in his chart the amount of share premium and non-current investment in the books of these investor companies. On a perusal of the same, it is evident that the reserves and surplus of these companies is commensurate with the investment made by these investor companies. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of proof of identity of the creditors and confirmation of transactions by many documents, such as, share application form etc. First appellate authority also noted that there was no requirement under Section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that nonresponding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and creditworthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. Thus, it is not the taxable income but the source of investment which needs to be proved u/s 68 of the Act. Admittedly, the investor companies have invested in Non-Current Investment in shares. The income will aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osale (P) Ltd 9,02,00,758 27,00,000 120- 142 7. Kamna Housing (P) Ltd 15,34,00,231 27,00,000 143 - 162 8. Signature Manufacturing (P) Ltd 4,33,00,856 5,00,000 163 - 182 9. Ss Vintrade (P) Ltd 12,17,00,454 10,00,000 183 -201 10. Ontime Vintrade (P) Ltd 21,00,00,327 45,00,000 202 - 222 11. Nandita Mercantile (P) Ltd 2,84,00,470 30,00,000 223 - 241 12. Satlink India (P) Ltd 2,02,83,666 11,00,000 242 - 259 13. Sidhu Suppliers (P) Ltd 2,27,02,920 5,00,000 260 - 277 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment made in the assessee-company including share premium is ₹ 71,00,000/-. Entire Share Application money was received by the assessee through normal banking channels. Share Application Money of ₹ 5,00,000/- was received on 19-10-2011, ₹ 10,00,000 on 18-11-2011, ₹ 16,00,000/- on 24- 01-2012, ₹ 15,00,000 on 31-01-2012, ₹ 9,00,000 on 15-02-2012 and ₹ 16,00,000/- on 23- 02-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee through normal banking channels. Share Application Money of ₹ 15,00,000/- was received on 22-10-2011, ₹ 15,00,000 on 05-11-2011, ₹ 20,00,000/- on 22- 12-2011, ₹ 12,00,000 on 28-03-2012 and ₹ 25,00,000 on 29-03-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued us 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 4. RS DEALCOM (P) LTD With respect to this share applicant, please note th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 6. RR COMMOSALE (P) LTD With respect to this share applicant, please note that the documents are placed at page 120- 142 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AAFCR0226D. On a perusal of its Audited Accounts (Page 129-141), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is ₹ 9,02,00,758/-, refer page 133 of the paper book and the investment made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 8. Signature Manufacturing (P) Ltd With respect to this share applicant, please note that the documents are placed at page 163- 182 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AANCS3324D. On a perusal of its Audited Accounts (Page 170-181), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is ₹ 4,33,00,856/-, refer page 174 of the paper book and the investment made in the assessee-company including share premium is ₹ 5,00,000/-. Entire Share Application money of ₹ 5,00,000/- was received by the assessee through normal banking channels on 13- 01-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant, please note that the documents are placed at page 200- 222 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AABC04391A. On a perusal of its Audited Accounts (Page 211-221), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is ₹ 21,00,00,327 /-, refer page 214 of the paper book and the investment made in the assessee-company including share premium is ₹ 45,00,000/-. Entire Share Application money was received by the assessee through normal banking channels. Share Application Money of ₹ 25,00,000/- was received on 27-01-2012, ₹ 10,00,000 on 15-03-2012 and ₹ 10,00,000/- on 15.03.2021. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus Reserves and Surplus) of the company as on 31.03.2012 is ₹ 2,02,83,666/-, refer page 251 of the paper book and the investment made in the assessee-company including share premium is Rs.l 1,00,000/-. Entire Share Application money was received by the assessee through normal banking channels. Share Application Money of Rs.l 1,00,000/- was received on 14-02-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 15. Avtaar Projects (P) Ltd. With respect to this share applicant, please note that the documents are placed at page 296- 312 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AAKCA3997R. On a perusal of its Audited Accounts (Page 301-310), it may kindly be noted that the Networth (Share Capital plus Reserves an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 17. Tiger Mercantile Pvt Ltd With respect to this share applicant, please note that the documents are placed at page 333- 349 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AACCT7577N. On a perusal of its Audited Accounts (Page 338-348). it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is ₹ 7,43,47,707/- refer page 341 of the paper book and the investment made in the assessee-company including share premium is ₹ 10,00,000/-. Entire Share Application money of ₹ 10,00,000/- was received by the assessee through normal banking channels on 23-03- 2012. This share applicant company has filed Pan Card, 1TR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a Private Limited Company and its Permanent Account No. is AAKCA3685N. On a perusal of its Audited Accounts (Page 374-384), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is ₹ 3,07,00,251/- refer page 377 of the paper book and the investment made in the assessee-company including share premium is ₹ 25,00,000/-. Entire Share Application money of ₹ 25,00,000/- was received by the assessee through normal banking channels on 03- 04-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare Application money was received by the assessee through normal banking channels on 05-04-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head Investments . The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 27. However, as evident from the assessment order, the succeeding learned AO completely ignored the submissions filed by the assessee and the replies filed by the share applicant companies for reasons best known to him and solely on the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under head Investments . Further, if the bank statements and the source of source of funds submitted by the share applicant companies would have been examined by the learned AO, he would have noted the source of the funds of the share applicant companies is well explained and that the entire inflow and outflow of funds were effected through normal banking channels. Hence, the creditworthiness of these parties and the genuineness of the transactions also could not be doubted. 30. On the backdrop of the above facts, undoubtedly the assessee has successfully discharged the onus which lay upon it by producing all the evidences for proving the creditworthiness of the investors. It has given full particulars of the transactions and it has also provided material which would enable the Assessing Officer to track the investors. 31. Further, as evident from the assessment order, the learned AO has not recorded his satisfaction which would even remotely suggest that the share application money received by the assessee was unexplained money of the assessee. He has not prepared any money trail/fund flow in his order which would even remotely suggest that the assessee's own m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so credited to be charged to income-tax as the income of the assessee of that previous year by the A.O. the following have to be present: (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year ; and either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Thus, it is clear from above that in order to establish the receipt of the sum as unexplained cash credit, as required under Section 68 of the Income-tax Act, 1961, the assessee must satisfy three conditions, viz., (i) identity of the creditor, (ii) genuineness of the transaction, and (iii) creditworthiness of the creditor. Now, it is further submitted that the phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd.,(supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt Ltd vs UOI and others (WRIT PETITION NO.871 OF 2014) wherein the definition of income u/s 2(24) of the Act was discussed in detail and it was held that capital receipts cannot be considered as income unless the mandate of law permit them to do so. Relevant extract of the judgment is produced below: 25. But we have examined the issue afresh. The word income for the purpose of the Act has a well understood meaning as defined in Section2(24) of the Act. This even when the definition in Section 2(24) of the Act is an inclusive definition. It cannot be disputed that income will not in its normal meaning include capital receipts unless it is so specified, as in Section 2(24) (vi) of the Act. In such a case, Capital Gains chargeable to tax under Section 45 of the Act are, defined to be income. The amounts received on issue of share capital including the premium is undoubtedly on capital account. Share premium have been made taxable by a legal fiction under Section 56(2)(viib) of the Act and the same is enumerated as Income in Section 2(24)(xvi) of the Act. However, what is bought into the ambit of income is the premium received from a resident in excess of the fair market value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of taw as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for. Relying on the above judgment of the Hon ble Apex Court the Hon ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 held that Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation (1986) 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the assessee. 34. In the present case, the learned AO has doubted the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Reliance is also placed on the following judgments. CIT vs Value Capital Services Pvt Ltd.(2009) 221 CTR 0511 (Del) Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2001-02 - If department wants to make addition on account of share applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court wherein dismissing the said appeal reported in (2001) 251 ITR 0263, it was held, We have read the question which the High Court answered against the Revenue. We are in agreement with the High Court. Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The appeal is dismissed. No order as to costs. The Hon'ble Delhi High Court order in CIT v. Gangeshwari Metal (P.) Ltd. [IT Appeal No. 597 of 2012, dated 21-1-2012] after considering the decisions in the case of Nova Promoters Finlease (P.) Ltd. [342 ITR 169 ] and judgement in the case of CIT v. Lovely Exports 2008] 216 CTR 195 (SC) held as follows:- 'As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal is correct in law' Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(A11.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- 4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (Hi) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order. Further reliance is placed on the judgment of the Hon'ble jurisdictional ITAT in the case of ITO vs. Roseberry Mercantile Pvt Ltd (ITA No. 2119/Kol/2009) The ratio laid down by the Hon'ble Supreme Court in the case of M/s. Lovely Exports Pvt. Ltd would be square ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 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. Further reliance is placed on the judgment of the Hon'ble jurisdictional High Court of Calcutta in the case of CIT v. Leonard Commercial (P) Ltd dated 13 June, 2011 in ITAT NO 114 of 2011 wherein the Court held as follows: The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of ₹ 8,52,000/-, ₹ 91,50,000/- and ₹ 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to uphold the order of the Ld. Commissioner of Income Tax (Appeals). 29. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act Le. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal of assessee is allowed. 36. In the result, the appeal of the assessee is allowed. Again, in the case of Satyam Smertex (P.) Ltd vs DCIT reported in [2020] 117 taxmann.com 93 (Kolkata - Trib.) pronounced on 29-05-2020, the Hon ble jurisdictional ITAT held that 30. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source, it shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record, including that of the directors and share holders of share subscribing entities as discussed supra. Accordingly all the three conditions as required u/s. 68 of the Act Le. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT vs Green Infra Limited reported in [2017] 392 ITR 7 (Bom) held that The identity of the subscribers was confirmed by virtue of the Assessing Officer issuing a no under section 133(6) to them. Further, it holds that the revenue itself makes no grievance of identity of the subscribers. So far as the genuineness of the transaction of share subscrib concerned, it concludes as the entire transaction is recorded in the books of account and refit in the financial statements of the assessee since the subscription was done through the ban channels as evidenced by bank statements which were examined by the Tribunal. With regard U capacity of the subscribers the impugned order records a finding that 98 per cent of the shares is by IDFC Private Equity Fund-II which is a Fund Manager of IDFC Ltd. Moreover, the contribution in IDFC Private Equity Fund-II are all by public sector undertakings. [Para 3(b)] The Tribunal has examined the case of the revenue on the parameters of section 68 and foun facts that it is not so hit. Therefore, section 68 cannot be invoked. The revenue has not been at show in any manner the factual finding recorded by Tribunal is perverse in any manner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. The revenue would not be justified in drawing an adverse inference only because the share applicant failed to respond to notices. As held by Hon'ble Delhi High Court AO is duty-bound to investigate the creditworthiness of the share applicant and the genuineness of the transaction. Further, the AO the assessed has discharged its onus of proving the identity of the share applicants. In the given facts the AO had not brought any material or evidence which would indicate that the share applicants were (a) benamidars or (b) fictitious persons or (c) that any part of the share capital represented the company's own income from undisclosed sources. In view of the facts and precedent before us, we are of the view that CIT(A) has rightly deleted the addition and we confirm the order of CIT(A) on this issue. DCIT Vs Bhaijee Commodities (P) Ltd. (ITAT Delhi) dated 13-06-2019 in ITA No. 5323/Del/2015 5.3 On the anvil of the above judgement to the facts of this case, it is seen that the assessee has filed sufficient documents e.g. Permanent Account Numbers, bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. 5.4 We note that as held by the Hon ble Delhi High Court in the case of CIT vs. Value Capital Services Pvt. Ltd. in ITA No. 348/2008, that there is an additional burden cast on the revenue to prove that the investment made by the share applicants actually emanated from the coffers of the assessee, so that the amount was to be treated as undisclosed income. As observed by the Ld. CIT(A), in the present case, the AO did not bring anything on record to the effect that the investment made by the share applicant had come actually from the coffers of the assessee company only. 5.5 We further note that the Hon ble Supreme Court of India in the case of Pr. CIT vs. Chain House International (P) Ltd. (2019) 103 taxguru.in 435 (SC) vide its decision dated 18.2.2019 has observed that once genuineness, creditworthiness and identity of investors are established, no addition could be made as cash cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these investor companies. On a perusal of the same, it is evident that the reserves and surplus of these companies is commensurate with the investment made by these investor companies. So creditworthiness of the parties is proven. (iii) It has been repeatedly held by the Hon ble High Courts and Hon ble ITATs that noncompliance of summons issued by the Assessing Officer under section 131 by the alleged share applicant companies will not be sufficient to draw and adverse inference against the assessee. (iv) The Department has failed to bring on record any adverse material to reject/disprove the explanations and evidences submitted by the Assessee and share applicant companies. (v) It is pertinent to note that at no stage of the assessment proceedings the Assessee was informed of the fact that summon issued u/s 131 of the Act remained unserved in case of certain investors. The names of the parties in whose cases notices were allegedly received back unserved and the addresses at which such notices were issued to such parties were not revealed to the Assessee in course of the reassessment proceedings and have also not been specified in the Assessment Order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. In this case, as detailed in the written submissions of the assessee, the assessee had duly submitted details and evidences to prove the identity and creditworthiness of each of the share subscribers separately. However, the ld. AO, in the impugned Assessment Order has not recorded any peculiar facts of circumstance which would suggest that the assessee had routed his own money through the above stated subscribers. The AO has not brought any material or evidence on the file to show that these share applicants were fictitious persons. The another relevant factor on the file is that in response to the notices issued u/ s 133(6) of the Act by the earlier AO, the requisite details were furnished by the assessee as well as the share subscribers. After receipt of said details, the concerned AO did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmann.com 27 (Delhi) has held that the CIT(A) is statutory first appellate authority and has independent power of calling for information and examination of evidences and possesses co-terminus power of assessment apart from appellate powers. However, a perusal of the impugned order of the ld. CIT(A) shows that the ld. CIT(A) has not discussed anything about the material facts of the case. He has not pointed out any defect and discrepancy in the evidences and details furnished by the assessee but simply cited the case laws rendered in the case of M/s. Rajmandir Estate Pvt. Ltd. reported in GA No. 509 of 2016 by the Hon ble Calcutta High Court and further on the judgement of Hon ble Supreme Court in the case of Principal Commissioner of Income Tax (Central) - 1 vs. NRA Iron Steel Pvt. Ltd. arising out of Arising out of SLP (Civil) No. 29855 of 2018, even without pointing out as to how these case laws were applicable to the facts and circumstances of this case. The order of the ld. CIT(A) is a non-speaking order. By simply reproducing the contents of the case laws without discussing about their application on the facts of the case, in our view, would not make the order of the ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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