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TMI Blog2022 (7) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... self has not conducted any inquiry which could indicate that the impugned transactions were not genuine. In our considered view, the suspicion however strong cannot substitute the documentary evidence, until proved to be false. Therefore, in our considered opinion, the impugned addition on the facts of the case is not sustainable. Also we would like to make a reference to the judgement of the Hon'ble Apex Court in the case of CIT vs Lovely Exports [ 2008 (1) TMI 575 - SC ORDER] held that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the Department is free to proceed to reopen their individual assessment in accordance with law but it cannot be regarded as undisclosed income of the assessee company. Therefore, for the reasons given in the preceding paragraphs, we hold that the impugned addition u/s 68 of the Act is not sustainable in the eyes of law and while setting aside the order of the Ld. CIT(A), we direct the AO to delete the impugned addition. - Decided in favour of assessee. - ITA No. 382/CHD/2018 - - - Dated:- 31-5-2022 - SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SUDHANSHU S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submitted that all the financial transactions had been carried out through banking channels and the investors had also submitted their letters of confirmation alongwith supporting evidences in respect of the investments made by them. It was also highlighted by the assessee that all the information available was the in public domain and was accessible on the site of the Registrar of Companies and that even the balance sheets of these companies could be downloaded from the said site. 2.2 Thereafter, the AO proceeded to issue notice u/s 133(6) of the Act to the shareholders and the notice to M/s Nilay Distributors (P) Ltd was received un-served, whereas, the other five investing companies did not respond. The AO, thereafter, again required the assessee to produce Shri Tarun Kumar Sah, the common director of all the six companies but the assessee again could not do so and requested the AO to adjourn the hearing for 10 to 12 days so that effort could be made to produce Shri Tarun Kumar Sah before the AO. Thereafter, the AO directed the assessee to provide some further information like details of shares sold by the entities who had purchased shares of the assessee company along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions rendered and evidence placed on record which is illegal, arbitrary and unjustified. 4. The entire case law relied upon by the Commissioner of Income Tax(Appeals) and Assessing Officer is distinguishable on the facts of the instant case while the case law relied upon by the assessee has been brushed aside and as such upholding of the impugned addition is illegal, arbitrary and unjustified. 5. That the order of the Ld. Commissioner of Income Tax (Appeals) is arbitrary, opposed to the facts of the case and thus untenable. 3.0 The Ld. Authorised Representative (AR) submitted that the inability of the assessee to produce Shri Tarun Kumar Sah, the common director in all the six investing companies is not a valid reason for rejecting the assessee s contention because the assessee had explained before the AO that due to demonetization exercise carried out by the Government of India, Shri Tarun Kumar Sah was unable to travel from Kolkata to Ludhiana for the purpose of deposing before the AO. It was further submitted that it is not the case of the AO that the assessee had not complied with the queries raised by the AO and that the assessee had not produced documentary e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transactions. It was submitted that the AO had given a factual finding of fact that the addresses of M/s Daisy Suppliers (P) Ltd and M/s Zinnia Sales (P) Ltd were found to be nonexistent even though all three companies, as per records, had been incorporated on the same day. It was further pointed out that the AO had noted that M/s Virat Commonsale (P) Ltd as well as M/s Nilay Distributors (P) Ltd. had the same address and in fact, as noted by the AO, there were 39 companies which were said to be operating from same address. The Ld. Sr. DR also drew our attention to the chart placed at pages 28 of the assessment order, wherein, the AO had given a snap shot view of the financials of the various investor companies and it was pointed out that in none of the companies, the profit for F.Y. 2013-14 was above Rs. 2,00,000/-. Our attention was also drawn to the Table B at para 4.4 of the assessment order, wherein, it has been brought out by the AO that the source of investment was either from sale of shares or from loan and advances received and that further even these sources were inter company sources. It was submitted the three ingredients required under the provisions of section 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that both the lower authorities have relied on numerous judicial precedents which are in support of the Revenue and against the assessee. The Ld. AR has also relied on numerous judicial precedents and has filed a voluminous paper book in support of his contentions. A perusal of the record shows that it is not in doubt that the six investors had confirmed the impugned transactions and it is only from the information made available by the investors that the AO had come to know the source of investments of the investing companies i.e. either loans or sale of shares. It is also a point to be noted that the assessee was saddled with the impossible task of establishing source of source with requisite evidence by the AO and since the assessee was unable to do so, it was held by the AO that the impugned transactions failed the test of human probability. Another failure on the part of the assessee, which as per the AO leads one had believe that the assessee had failed to discharge the onus, was the inability of the assessee to produce Shri Tarun Kumar Sah, common director in all the six companies for the purpose of recording of the statement. Although, the AO had doubted the creditworthine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of time for the common director Shri Tarun Kumar Sah to appear before the AO and sought some time to produce him but perhaps since the assessment was getting time barred, the AO did not grant any further time. It is also to be noted that in the case of NRA Iron Steel Ltd (supra), it has been observed by the Hon'ble Apex Court in para 8.2 that as per the settled law, the initial onus is on the assessee to establish by cogent evidence, the genuineness of the transactions and creditworthiness of the investors under section 68 of the Act. Thereafter, the Hon'ble Apex Court has referred to its own judgement in the case of Kala Khan Mohammad Hanif vs CIT 50 ITR 1 (SC) and Roshan Di Hatti vs CIT 107 ITR (SC) wherein it was held that once the assessee has submitted the documents relating to the identity, genuineness of the transactions and credit-worthiness, then the AO must conduct inquiry and call for more details before invoking section 68 of the Act. In the present case, apparently, the AO has not carried out any inquiry and has just harped on the inability of the assessee to produce Shri Tarun Kumar Sah, the common director, and the assessee s inability to prove the sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld the addition made by the AO and even the AO in the present case had relied upon the order of the Ld. CIT(A) while discussing the issue but the assessee was granted relief by the co-ordinate Bench of the Tribunal. The Relevant observations are being reproduced herein under:- 9. A perusal of the above reveals that the assessee had furnished the relevant documents to prove the identity, creditworthiness of the investors as well as genuineness of the transactions. However, the Assessing officer harped the assessee to produce the directors of the investor company before him, in reply, to which the assessee submitted as under:- Inspite of the best efforts made by the assessee company, none of the subscriber is agreed to be personally present before Your Honor, since, all these are staying in Kolkata or other places which are far from Ludhiana. The assessee company has already submitted confirmations giving their full addresses. Your Honor is requested to kindly summon these parties by using Your good office. The assessee company is ready to make payment of diet money for the same . 10. The Ld. counsel in this respect has also relied on the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been verified from the account opening forms etc. It is in the common knowledge that the accounts are opened in the bank through introducers who approve that the account holder is known to him / her and is genuine. Enquiries could have been made from the said introducers also. Apart from that, the companies have been duly registered at the given address and duly audited by the auditors. The assessee had also produced on the file the report of the auditors in the case of both the investor companies who have audited the accounts of the aforesaid firms. If there was any doubt about the existence of such companies, the concerned auditors, CA of the respective companies could have been enquired / investigated. It has been explained that the M/s Lawa Marketing (P.) Ltd. had paid share application money of Rs. 25 lacs through RTGS and the same was sourced out of the sale of shares for Rs. 32 lacs to M/s Ability Dealmark (P.) Ltd.). Similarly, the source of funds in the case of M/s Pansy Dealer (P.) Ltd. has been explained that the same were sourced by sale of shares of M/s Malcom Marketing Pvt. Ltd. There is voluminous record placed on the file such as share application forms, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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