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TMI Blog2022 (9) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... hat account further investigation was needed by way of recording of statement 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 AO has passed the impugned Assessment Order in a hurried manner even without pointing out any defect or discrepancy in the evidences and details furnished by the assessee. A perusal of the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Order dated 25.03.2015, are that the assessee filed its return of income for the relevant assessment year (in short the 'AY') on 13.08.2012. The case of the assessee was selected for scrutiny. Accordingly a notice u/s 143(2) of the Income Tax Act, 1961 (in short the 'Act') was issued by the concerned Assessing Officer (in short the 'AO'). Thereafter, a notice u/s 142(1) of the Act was also issued by the AO. In response to the above notices, the assessee filed requisite details and documents and financial statement of accounts. 4.1. The assessing officer noted from the accounts of the assessee that the assessee during the year issued fresh shares to different private limited companies at a high premium. Further that the funds collected through issue of shares were further invested in other companies. Besides that there was no significant asset of the assessee company. To verify the identity and creditworthiness of the shareholders and also about the genuineness of the transaction, the assessing Officer issued summons u/s 131 of the Act to the directors of the assessee company and the directors of the share subscriber companies. Since in most of the cases, the summons were return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of examining the relevant documents, insisted for the personal presence of the directors of the subscribers which was not in the hands of the assessee. He therefore, has submitted that the identity and creditworthiness of these companies was duly established. 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 instead of pointing out any defect or discrepancy in the evidences and the details furnished by the assessee, the AO proceeded to take adverse inference only on the ground that the directors of the subscriber companies did not appear personally before the AO. He has further submitted that the subscriber companies were investment companies, therefore, the low business income was not a relevant factor to doubt about the genuineness of the transaction. The ld. Counsel for the assessee has further relied upon the decision of the co-ordinate Kolkata Bench of the tribunal in the case of 'M/s Satyam Smertexpvt. ltd. vs. DCIT', ITA No.2445/Kol/2019 vide order dated 29.05.2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enclosed herewith. When the addition is made without considering the reply of the shareholder, the addition itself was bad in law. The details of each of the subscriber companies enclosed herewith are explained below: 1. M/s. Cindrella Barter Pvt. Ltd having PAN No. AADCC8512F filed a confirmation along with all the requisitions made by the AO viz. allotment advice, copy of Audited P/L Ac and Balance Sheet as on 31st March 2012, the sources of funds and their bank statement highlighting the Source of payment made, form 18. Payment of Rs.20,00,000 was made on 30.08.2011 to Umila Properties Pvt Ltd for purchase of 8000 shares through cheque no 629461. The copy of reply to the notice u/s. 133(6) showing the requisitions made and the documents submitted are enclosed herewith. The source of fund was Rs. 20,00,000 from M/s Sarbottam Alloy & Fiscal Pvt. Ltd. of Lake Land Country Club, Munshidanga, Nibra, Howrah 711403 having PAN No AAHCS2686Q. The company had net worth of Rs. 3,12,90,311/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties Pvt. Ltd for purchase of 12000 shares through cheque. The source of fund was Rs. 20,00,000 received from M/s. Natureview Merchants Pvt Ltd. of 21, ghola road ,belghoria, Kolkata-700083 &Rs 5,00,000 each received from VisheshDudheria of 14/2, Old China Bazar street ,Room 308, Kolkata-700001 having PAN ADLPD3616K & from Ram Krishna Das of Dwipamalita, Janapara, Bagnan, Howrah 711303 having PAN No. AJIPD6470E respectively. The company had net worth of Rs. 2,22,01,948/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for. Further, it is worthwhile to note that the present share subscriber company was incorporated during the F.Y. 2011-2012 with Share capital of Rs 9,84,000 & Share Premium of Rs.2,12,16, 000/- and the same money raised was invested in the Assessee Company. The assessment of this company pertaining to A.Y. 2012-2013 was completed u/s 143(3) of the Act a copy of which is enclosed herewith wherein no adverse view about share capital and share premium raised was taken by AO, that is, there was no addition u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company. Therefore, all the three limbs ie., identity, genuineness and creditworthiness are proved and no addition is called for. 5. M/s. Green Gold Plantation & Nursery Limited Pvt. Ltd having PAN No AABCG3571G filed all the documents requisitions made by the AO and the same are enclosed herewith, viz. copy of ITR Acknowledgement, allotment advise, Audited P/L Ac and Balance Sheet as on 31st March 2012, the sources of funds and their bank statement highlighting the source of payment made. Payment of Rs 17,50,000&Rs 4,00,000 was made on 15.11.2011 to Umila Propeties Pvt. Ltd for purchase of 8600 shares through cheque. The source of fund was Rs.17,50,000 received from M/s Oasis Agro Products Ltd on 09.12.2011 of 14, Amenian Street, 1st Floor, Room No.18, Kolkata 700001. &Rs 25,15,741/ received from M/s. MokshAgarbati Company. The company has net worth of Rs.6,65,46,208.58/- as is evident from the balance sheet, This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for. Further, the amount was received from the above mentioned companies on account or loan r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta Bench "B", in the case of M/s C.P. Re-Rollers Ltd Vs D.C.I.T, Cir-1, Durgapur& also by hon'ble Kolkata ITAT in the case of ITO, Ward 12(2), Kolkata Vs M/s, Happy Structure Private Limited reported in 1TA No. 1977/Kol/2016 which has been referred to above. 7. M/s. Nature View Merchants Private Limited having PAN No AACCL1305J filed all the documents requisitions made by the A0 and the same are enclosed herewith, viz. the ITR Acknowledgement for the A.Y. 2012-13, allotment advise, Audited P/L A/c and Balance Sheet as on 318t March 2012 and their bank statement highlighting the payment made. Payment of Rs 30,00,000/- was made on 28.11.2011 to Umila Properties Pvt Ltd for purchase of 12000 shares through cheque. Further, it is indispensable to note that the present share subscriber company was incorporated during the F.Y. 2011-2012 with Share capital of Rs 10,65,5001- & Share Premium of Rs 9,55,84,500/- and the same money raised was invested in the Assessee Company. The company had net worth of Rs. 9,66,50,374.86/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs ie., identity, genuineness an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 held the following. "Therefore, we are of the view that based on the factual position narrated above and the fact that in case of two companies, Viz Gannet VintradePvt. Ltd and Prism VintradePvt. Ltd, the amount of their share capital and share premium have already been disallowed by assessing officer under section 263/147/143(3) of the Act, therefore no further disallowance is warranted." Similar observations were also made in an identical case in DCIT VsMaaAmba Towers in I.T.A No: 1381/Kol/2015 & also in a recent judgment pronounced on 22.05.2019 by Hon'ble Kolkata TTAT "B Bench in the case of ITO, Ward 12(2), Kolkata Vs M/s. Happy Structure Private Limited reported in ITA No. 1977/Kol/2016. 9. M/s. Sarbottam Alloy & Fiscal Pvt. Ltd. having PAN No. AAHCS2686Q filed a confirmation along with all the requisitions made by the AO viz. the copy of their I.T. Acknowledgement along with Audited PIL A/C and Balance Sheet as on 31st March 2012, allotment advise, the sources of funds and their bank statement highlighting the payment made. Payment of Rs 15,00,000&Rs 8,00,000 was made to Umila Properties Pvt Ltd for purchase of 9200 shares through cheque no. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012, the sources of funds and their bank statement highlighting the payment made. Payment of Rs 15,00,000 was made on 23.09.2011 to Umila Properties Pvt Ltd through Cheque No. 466737 for purchase of 6000 shares. The copy of reply to the notice u/s. 133(6) showing the requisitions made and the confirmation filed along with the above documents are enclosed herewith. The source of fund was Rs. 15,00,000 received from M/s Deb Enterprises of 15, Ganesh Chand Avenue, Kolkata-700013 on account of advance received on sale of shares. The company had net worth of Rs. 1,48,39,846.35/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for. Further, the Ld AO neither disputed the investments made by the company in the assessee company during the F.Y. 2011-2012 nor disputed the advance received against sale of shares during the assessment year under consideration which implies that the Ld AO has rightly accepted the genuinity of transactions. Thus, the allegations levelled against the assessee company by the Ld AO that share capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt made. Payment of Rs 7,50,000 was made to Umila Properties Pvt Ltd for purchase of 3000 shares through cheque no. 989056. The source of fund was Rs. 20,00,000 received from M/s. DivyaTrexim Pvt Ltd. of Vivian Valley, Apartment No 218, 2nd Floor, Kona, Nibra, Howrah-711403 having PAN No. AADCD9006F. The company had net worth of Rs.98,97,760/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for. Further, it is worthwhile to note that the present share subscriber company was incorporated during the F.Y. 2011- 2012 with Share capital of Rs 9,72, 000 & Share Premium of Rs 89,25, 760/- and the same money raised was invested in the Assessee Company. The assessment of this company pertaining to A. Y. 2012-2013 was completed and intimation was received u/s 143(1) of the Act, a copy of which is enclosed for your kind perusal wherein the total income of the assessee is duly accepted. Also, no adverse view regarding the share capital and share premium raised was taken by AO, that is, there was no addition u/s 68 of the Act, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for. It is to be noted that while doing the scrutiny assessment of the above company u/s 143(3) of the Act for the A. Y. 2012-2013, a copy of which is enclosed herewith, the Ld. AO did not dispute the investments made by the company in the assessee company during the F.Y. 2011-2012 which implies that the Ld AO has rightly accepted it as genuine investments. Thus, the allegations levelled against the assessee company by the Ld AO that share capital and share premium raised by it is nothing but ploughing back its own unaccounted money through various paper companies or entities is baseless, frivolous and vexatious. Having said that the additions made in the Return income of the assessee company ought to be deleted. It is stated that the proviso to section 68 i.e. to prove the source of source is applicable from A.Y 2013-14 onwards and cannot be applied retrospectively as per the recent judgement of the Hon'ble Bombay High Court in the case of Gagandeep Infrastructure (P) Ltd. in 394 ITR 680 which held that: (a) We find that the proviso to Section 68 of the Act has been intro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arent from the assessment order that the AO took up the hearing and in the course of hearing issue notice u/s. 133(6) to all the shareholders. Reply was duly given by all the share subscriber companies in response to the notices issued to them u/s 133(6) of the Act. The AO also alleged to have issued notice u/s. 131 to all the subscriber companies vide para 12 of the order which according to him have been returned unserved by postal authorities. It is surprising note that when the notice u/s. 133(6) could be served, how the notices u/s. 131 could be served. The AO there after did not proceed further after all the documents namely the Audited Financial Statements, bank statements, acknowledgement of filing of return by the shareholders, and their PAN details were filed before him. The AO made up his mind on the basis of his presumption that the share capital raised by some other companies was not genuine. The action of the AO was premeditated and he was predetermined to make the addition. Addition based on suspicions and surmises cannot be made as was upheld by the Hon'ble Apex Court in the case of Omar Salay Mohamed Saitvs CIT. It is submitted that the assessee duly discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 267 ITR 439 (Gauhati), the hon'ble court held that: In the instant case, the Tribunal found that the identities of the creditors had been established and all essential particulars were furnished by the assessee. The assessee had discharged its burden to the satisfaction of the Tribunal. There was fact no Scope for re-appreciation of the materials on record as the High Court was required to tender its opinion on the question of law on the given facts and circumstances of the case. Therefore, the Assessing Officer was wrong in adding the aforesaid amount to the income of the assessee. No opinion contrary to the views expressed by the Tribunal in directing deletion of the aforesaid sum was plausible in the given facts of the instant case. Not only that there were number of judgments on the issue that when the identity of the share capital contributors was not disputed, no addition can be made in the hands of the company receiving subscriptions. Even the Coordinate bench of the ITAT in the case of ChichingaFatika Cold Storage Pvt Ltd, Kol. ITA No.1279/Kol/2008 dated 3rd March, 2009 which was even an ex parte order accepted the share capital on the ground that when the id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, it is stated that whenever a company invites applications for allotment of shares from different applicants, there is no procedure contemplated to find out the genuineness of the address or the genuinity of the applicants before allotting the shares. The Court in CIT v. Expo Globe India Ltd. 2012 (7) TMl 802 has observed that the share application money or the source of the share application money had been satisfactorily explained on the basis of income tax returns, balance sheets, ROC particulars and bank account statements. Further, in CIT v. Dolphin Canpack Ltd. 283 ITR 190 the Court observed that the assessed had disclosed to the AO not only the names and the particulars of the subscribers of the shares but also their bank accounts and the PAN issued by the Income- Tax Department. Superadded to all this was the fact that the amount received by the company was all by way of cheques which was sufficient to discharge the onus that lay upon the assessed. The Court in A-One Housing Complex Ltd. v. ITO 110 ITD 361 where the share capital and the share application money was liable to be assessed u/sec 68 and the notices u/sec 133(6) of the Act were issued to all the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as relied on the judgment of Allahabad High Court and coordinate Bench. Therefore the addition made on the said basis is also not in accordance with law. The AO even otherwise could have made independent enquiries by down loading the information with regard to the creditworthiness of the share applicants which the assessee has been able to do. It is submitted that section 68 nowhere speaks of production of the creditor for acceptance of the cash credit. IT only requires that the assessee has to prove the nature and source of the credit. The assessee has proved that the amount was received towards the share application and the source as well as the source of source was also proved which is apparent from the replies given by the share holders. In any case, there was no legal obligation on the assessee to produce directors of the applicant companies and the same cannot be a ground for making addition u/s 68 before the AO as has been held by the Hon'ble Allahabad High Court in the case of Rajkumar Agarwala and ITAT in the case of Devendra Kumar Sant. Further, recently in the case of ITO vs Wiz-Tech Solutions Pvt. Ltd, ITAT Kolkata has held the following: "Addition cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. Relevant extract of the judgement is reproduced below: "Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. [Para 52] Once the genuineness, creditworthiness and identity are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. [Para 53] There is no dispute about the receipt of funds through banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusions were clearly baseless and false. This Court is constrained to observe that the AO utterly failed ITA No. 1977/Kol/2016 M/s Happy Structure Pvt. Ltd. to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. We also rely on the judgment of the Coordinate Bench of ITAT Kolkata in the case of M/s Jagannath Banwarilal Texofabs in ITA No.1762/Kol/2016, for A.Y 2012-13, order dated 26.10.2018 where based on same facts, and identical and common grounds and coordinate Bench deleted the addition made u/s 68 of the Income Tax Act, 1961. Thus, in view of the above submissions, documents enclosed and judgements cited it is requested before your honour to direct deleting the addition of Rs.2,53,00,000/- made unjustifiably in the total income of the appellant." 6. The ld. D/R on the other hand, has relied upon the observations made by the AO. He has further relied upon the impugned order of the ld. CIT(A). 7. We have considered the rival submissions of the ld. representatives of the parties and also gone through the record. In this case a perusal of the Assessment Order would reveal that the AO has duly acknowledged the receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal 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 AO has passed the impugned Assessment Order in a hurried manner even without pointing out any defect or discrepancy in the evidences and details furnished by the assessee. 7.1. It has to be further noted that though powers of the ld. CIT(A) are co-terminus with the AO and the ld. CIT(A) had all the plenary powers as that of the AO. The Hon'ble Delhi High Court in the case of Commissioner of Income-tax vs. Manish Build Well (P.) Ltd. reported in [2011] 16 taxmann.com 27 (Delhi)has held that the CIT(A) is statutory first appellate authority and has independent power of calling for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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