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TMI Blog2023 (3) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... es is duly recorded in the financial statement and is part of the cash in hand available with the assessee in the due course of business. Thus, we fail to find any infirmity in the finding of ld. CIT(A). Appeal of revenue dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Name Share Capital Share Premium 1 Gajanan Dealers Pvt. Ltd. 1.50 Cr 6 Cr 2 Rich Valley Traders Pvt. Ltd. 40 lakh 1.60 Cr 3 Sarovar Dealers Pvt. Ltd. 10 lakh 40 lakh Total 2 Cr 8 Cr For AY 2012-13 Sl. No. Name Share Capital Share Premium 1 Rich Valley Traders Pvt. Ltd. 9 lakh 36 lakh 2 Sarovar Dealers Pvt. Ltd. 55 lakh 2.20 Cr Total 64 lakh 2.56 Cr 6. During the course of assessment proceedings, the assessee filed the financial statements and other details but ld. AO was not satisfied and due to non-compliance to the letters u/s 133(6) of the Act, he treated the alleged share capital and share premium as unexplained. For reference, the finding of ld. AO for AY 2011-12 is reproduced below: "8.1 The assessee could not furnish any documentary evidence in support of its claim that it had received share capital from the above companies. Requisition letters u/s 133(6) dated 10-03-2015 were issued to the above three Companies to confirm with documentary evidences about their investments in the Satyam Ispat (NE) Ltd. But till the completion of the assessment no reply from their end has been received. As already mentioned above, the Companies from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any's own unaccounted money which is introduced in the garb of Share Capital. As shown in the table, the total amount of shares claimed to have been allotted during the year to the above three Companies I Parties amounts to Rs.2,00,00,000/-. In view of the discussions made above, Share Capital of Rs.2,00,00,000/- has been treated as bogus and the amount is brought to taxation as undisclosed income. [Add: 2,00,00,000/-] b) Share Premium: On perusal of the details filed, it is also seen that the assessee has shown an amount of Rs.8,00,00,000/- as Share Premium received during the year. This share premium of Rs.8,00,00,000/- is shown to have received from the Companies shown in the table in Para(a) above. As per details furnished, the assessee claims to have allotted shares at a premium of four times the share capital. For the reasons discussed in (a) above, the Share Premium of Rs.8,00,00,000/- has been treated as assessee's own money invested in the garb of Share Premium and brought to taxation as Undisclosed Income. [Add: Rs.8,00,00,000/-]" 7. Further for AY 2012-13, ld. AO almost gave the similar finding and confirmed the impugned addition. Accordingly, the addition u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and all the alleged share applicants are having sufficient creditworthiness to invest in the share capital and share premium of the assessee company and no defect has been pointed out by ld. AO even in the remand proceedings in various documents filed before ld. CIT(A). Thus, prayer was made to confirm the finding of ld. CIT(A). 12. We have heard rival contentions and perused the records placed before us. The Revenue is aggrieved with the deletion of addition made u/s 68 of the Act by ld. CIT(A) for the following share capital and share premium received by the assessee during the AY 2011-12 & AY 2012-13: For AY 2011-12 Sl. No. Name Share Capital Share Premium 1 Gajanan Dealers Pvt. Ltd. 1.50 Cr 6 Cr 2 Rich Valley Traders Pvt. Ltd. 40 lakh 1.60 Cr 3 Sarovar Dealers Pvt. Ltd. 10 lakh 40 lakh Total 2 Cr 8 Cr For AY 2012-13 Sl. No. Name Share Capital Share Premium 1 Rich Valley Traders Pvt. Ltd. 9 lakh 36 lakh 2 Sarovar Dealers Pvt. Ltd. 55 lakh 2.20 Cr Total 64 lakh 2.56 Cr 13. We notice that the assessee filed complete details to explain the said credit received in the form of share capital and share premium. It is impleaded by the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by us to the assessing officer in course of the assessment proceedings as noted by the assessing officer at page 3 of the assessment order. The evidences in support of the share capital/ premium could not be furnished to the assessing officer as these were misplaced and were not traceable in course of the assessment proceedings. Moreover, the appellant was not given proper and meaningful opportunity of being heard as explained herein before in this written submission. (b) We are enclosing herewith the following details for your kind perusal: (i) Chart showing name & address of the share holders/ applicants, no. of shares applied for/ allotted face value of shares, premium paid, mode of payment, PAN No., CIN nos. of the applicant companies. (ii) Copies of our statements with the following banks showing the receipt of share capital/ application money:- (a) HDFC Bank (b) State Bank of India (C.A.) (c) State Bank of India (C.C.) (iii) Copies of Memorandum & Articles of Association and audited balance sheets in respect of corporate share holders/ applicants. (iv) Copies of returns of allotment filed by us in respect of shares allotted during the previous year relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the remand report from ld. AO since various details filed by the assessee were not considered by ld. AO, deleted the addition u/s 68 of the Act for alleged bogus share capital and share premium observing as follows: "12.2. I have considered the submissions made before me by the appellant. I have also perused the assessment order and the remand report sent by the Assessing Officer. In his remand report the Assessing Officer has simply stated that the addition was made on the basis of findings recorded in the assessment order. However, he has further stated that he had no objection to the admission of any fresh or additional evidence if it was considered to be relevant for disposal of the issue. 12.3. I find that the appellant had submitted the details of share capital and share premium in course of the assessment proceedings. This fact has been noted by the Assessing Officer in para 8 of his order. The appellant could not submit the documents in support of share capital/premium as these were not readily traceable at the time of assessment proceedings. The appellant has further submitted that it was not given proper and meaningful opportunity of being heard to produce the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply notice u/s.133 (6) of the Act, is not justified. This is a settled proposition by the various judicial pronouncements. 12.5. The appellant has filed complete details of share holder companies viz - their names & addresses, No. of shares applied for/allotted, face value of shares, premium paid, mode of payment, their PAN No., CIN No., copies of Memorandum & Articles of Association, audited balance sheets and copy of return of allotment. A perusal of the bank statements filed by the appellant show that all the transactions have taken place through banking channels. On examination of these details/documents, I do not find any reason to doubt the identity of the share holders, their credit worthiness and the genuineness of the transactions. It is settled law that once an assessee provides details regarding identity of the share applicants/holders, their permanent account numbers, bank details, balance sheets, A/D receipt in support of filing of income tax returns, copies of Memorandum & Articles of Association etc., the share application money/capital cannot be treated as unexplained in the hands of the assessee. This view has been taken in the following cases: (i) Principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness of the share applicants we come to the genuineness of the transaction. Ld. AO while making the addition has given a finding which in our view is perverse and not at all relevant to the facts of the case. The finding of ld. AO for one of the year under appeal i.e. AY 2012-13 in para 7.1 of the assessment order reads as under: "7.1 The assessee could not furnish any documentary evidence in support of its claim that it had received share capital from the above persons / companies, except Ratan Sharma. It may be stated here that the assessee Company is not a reputed Company. It is improbable that the Companies would invest such huge amount, and that too with share premium of four times the share capital, in such a small, unknown and un-reputed Company where there is no guarantee of getting their money back and when they have many other scopes of investing their money in other reputed Companies or Banks, etc from where they could expect good returns. It is beyond human probabilities that investors would invest such a huge amount in a small, an unknown and an un-reputed Company. Further, even if the assessee's A/R claims that the payments were received by RTGS, no any ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liers Pvt. Ltd. in ITA No.38/Kol/2021 order dated 28.12.2022 which reads as follows: "9. We have heard the rival contentions and gone through the material placed on record. Admittedly, it is a fact on record that notices u/s. 133(6) of the Act were issued by Ld. AO to all the sixteen share subscriber companies and all of them had duly replied directly to the ld. AO, along with relevant documents and details. Copies of the replies duly acknowledged under seal and stamp of the office of the Ld. AO are placed on record. We note that Ld. AO without even going through and discussing these details submitted by the sixteen subscriber companies, insisted for personal appearance to prove the identity, creditworthiness of the subscriber companies and the genuineness of the transactions. 9.1. To our mind, ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details received in his office from all the sixteen subscriber companies and also pointing out as to what further investigation was needed by him by way of recording of statement of the directors of the assessee and the subscriber companies. We draw our force from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him. Ld. AO has simply added the amount of share capital and share premium on the ground that assessee has not produced the directors/shareholders. Ld. AO has ignored the reply given in response to notice issued u/s. 133(6) of the Act which are on record under duly acknowledged seal and stamp of his good office. From the perusal of the order of Ld. CIT(A), we note that Ld. CIT(A) has perused the evidence in the nature of documents and details and on their examination has deleted the addition made by the Ld. AO. Thus, going by the records placed by the assessee and by all the share subscribing companies in response to notices issued u/s 133(6), it can be safely held that the assessee has discharged its initial burden and the burden shifted on the ld. AO to enquire further into the matter which he failed to do so. 10.1. Ld. CIT(A) has elaborately appreciated the evidence and details placed on record and has given his factual findings, crux of which is contained in para 8.1 of his order, which is extracted below for ease of reference : "8.1. Basically the law requires documentary evidences on record in dealing with the issue of authenticity. It is not the case of the AO that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this account. Thus, these grounds of the appeal are allowed." 10.2. Further, we note that ld. CIT(A) has taken into consideration the creditworthiness of all the sixteen subscriber companies by going through the records and the net worth of each of them (refer the details tabulated above). It is also noted that all the investing companies have substantial own funds available with them to make investment in the assessee. In this respect, all the investing companies have also explained their source of funds in their reply to notices issued u/s. 133(6) of the Act. 10.3. From the perusal of the paper book and the replies filed by share subscribing companies in response to notice u/s. 133(6) of the Act, it is vivid that all the share applicants are (i) income tax assessees, (ii) they are filing their income tax returns, (iii) share application form and allotment letter is available on record, (iv) share application money was paid by account payee cheques, (v) details of the bank accounts belonging to share applicants and their bank statements are on record, (vi) in none of the transactions, there are any deposit of cash before issuing cheques to the assessee, (vii) all the share a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted in full in the assessment order and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tenets of law before invoking his power under Section 68 of the Act. Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued under Section 133 (6) of the Act which fact has not been denied by the assessing officer. On going through the records and the net worth of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations: "8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance (P) Ltd. [1995] 82 Taxman 31/[1994]208 ITR 465 (Cal.): Proof of Identity of the creditors; Capacity of creditors to advance money; and Genuineness of transaction This Court in the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls furnished by the assessee before him. As observed above, the assessee having discharged its initial burden casted upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, it shifted on the ld. AO to examine the evidences furnished and even make independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee by confronting with the same to the assessee. In view of this, the aforesaid decision of the Hon'ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd., in our humble view, is not applicable to the facts and circumstances of the case in hand. 12. Considering the facts and circumstances of the case and the material placed on record, we find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions. Accordingly, considering these facts and in the light of the judicial precedents referred above, we find no reason to interfere with the fact-based findings given by the Ld. CIT(A) and uphold his decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave considered the submissions made before me. I have also perused the assessment order and the remand report sent by the Assessing Officer on this issue. I find that in his very first statement recorded on 12.03.2011 u/s.132 (4) of the Income Tax Act, 1961, Shri Banwarilal Jat, from whose possession the cash was seized had admitted that the cash belonged to M/s. Satyam Ispat (North East) Ltd. i.e. the appellant company. Subsequently, on 23.05.2011 the statement of Shri Kamal Sharma, Director of the appellant company was recorded u/s.131 of the Income Tax Act, 1961. In his statement Shri Kamal Sharma also admitted that the said cash of Rs.28,00,000/- found and seized by the Department during the course of search on 12.03.2011 belonged to the appellant company and the source of the said amount was accumulation of cash sales and collection from various sundry debtors. Shri Kamal Sharma further stated that the said cash of Rs.28,00,000/- was duly recorded in the books of accounts of the appellant company i.e. M/s. Satyam Ispat (North East) Ltd. The appellant has submitted a copy of its audited balance sheet as on 31-03-2011 for my perusal. I find that the seized cash of Rs.28,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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