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TMI Blog2023 (4) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... on with all documentary evidences but ld. AO made no efforts to examine those details and found some fault/discrepancy in the same. AO ought to have appreciated that the share subscribers are private limited companies and were having sufficient share capital, reserve and surplus in their regular books of accounts and out of such available funds the alleged share subscribers have invested in the assessee company. In our considered view, ld. AO failed to cross this hurdle as provided under the provisions of Section 68 of the Act before making the addition. We under the given facts and circumstances of the case most importantly that the year under appeal is AY 2008-09 and the proviso to Section 68 of the Act specifically brought in for examining the share application money/share premium received in the case of the companies has been brought into the Income Tax Act w.e.f. 01.04.2013, are of the considered view that prior to this amendment if the assessee had offered sufficient explanation about the nature and source of the alleged sum credited in the books which in this case is share capital and share premium and has discharged its onus by providing complete documentary evidences to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of the ground at the time of hearing of the matter with the leave of the Hon ble ITAT. 3. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the business of investment in shares and security. Income of Rs. 630/- declared in the return for AY 2008-09 filed on 21.10.2008. The return was processed u/s 143(1) of the Act. Thereafter, case was reopened by issuance of notice u/s 148 of the Act and reassessment proceedings were carried out and vide assessment order u/s 147 r.w.s. 143(3) of the Act dated 17.06.2010, income determined at Rs. 34,430/-. Thereafter, ld. CIT(A) invoked the provisions of Section 263 of the Act and carried out the revisionary proceedings and set aside the assessment order dated 17.06.2010 to be framed afresh and in this revisionary order dated 30.03.2013 ld. CIT(A) directed ld. AO to examine the transactions of share capital and share premium of Rs. 10,60,50,000/- received by the assessee. 4. Ld. AO in compliance to the order u/s 263 of the Act carried out the assessment proceedings after serving valid notices. The summons issued u/s 131 of the Act remained uncompiled. Though the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has referred to the following documents pertaining to various share subscribers which form part of the paperbook dated 30.01.2023 and the index of the paperbook is reproduced below: Sl. No. Particulars 1 Asst Order u/s.147/143(3) dated 17.06.2010 for the Asst. Year 2008-09 2 Notice u/s. 148 dated 19.05.2010 3 Audited Accounts of the Company for the Year ended 31.03.2008 4 ITR Acknowledgement for the A.Y. 2008-09 5 Bank Statement of Vysya Bank from 01.04.2007 to 31.03.2008 6 ITR Asst. Order Demand Notice of Hirak Vyapaar Pvt. Ltd. u/s 147/143(3) dt.17.6.10 7 Share Application, Resolution MOA of: i) Bircort Vingon Pvt. Ltd. ii) Daffodil Complex Pvt. Ltd. iii) Kaberi Tie-Up Pvt. Ltd. iv) Keshav Tie-Up Pvt. Ltd. v) Outlook Delcom Pvt. Ltd. vi) Oxide Tie-Up Pvt. Ltd. vii) Pinpoint Tie-Up Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Kashab Tie-up Pvt. Ltd. 75,30,000/- 6,68,70,662/- 9,50,000/- 5 Oxide Tie-up Pvt. Ltd. 1,73,15,000/- 15,49,35,000/- 1,49,50,000/- 6 Pinpoint Tie-up Pvt. Ltd. 1,16,30,000/- 10,37,70,000/- 1,02,00,000/- 7 Sarathi Vyapaar Pvt. Ltd. 1,16,95,000/- 10,43,56,764/- 1,29,00,000/- 8 Shivangan Dealers Pvt. Ltd. 1,08,20,000/- 9,64,80,479/- 19,00,000/- 9 Tanishque Tradelink Pvt. Ltd. 91,70,000/- 8,16,30,000/- 96,00,000/- 10 Tista Vanijyua Pvt. Ltd. 1,06,25,000/- 9,47,27,418/- 1,12,00,000/- 11 Trishna Vanijya Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAKCS7745K U51909WB2007PTC114593 11 Tanishque Tradelink Pvt. Ltd. AACCT7512R U51109WB2007PTC115698 12 Tista Vanijyua Pvt. Ltd. AACCT7377A U51109 WB2007PTC115407 13 Trishna Vanijya Pvt. Ltd. AACCT7513Q U51109WB2007PTC115703 11. All the above referred details which are mentioned in the paperbook as well as the details about the PAN and registration with Ministry of Corporate Affairs and the financial data as taken out from the audited financial statements clearly suggests that the assessee has successfully discharged the primary onus casted upon it to explain the alleged sum. 12. At this juncture, we would like to take note of the provisions of Section 68 of the Act which reads as follows: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing complete documentary evidences to prove the identity and creditworthiness of the share subscribers and the genuineness of the transaction. Now, the third part is that if the explanation offered by the assessee is not satisfactory in the opinion of ld. AO now, for ld. AO has to express his opinion of having not satisfied and the same needs to be supported by specific observation rebutting the explanation offered by the assessee. But the same is completely absent in the instant case. Though the assessee has provided sufficient explanation with all documentary evidences but ld. AO made no efforts to examine those details and found some fault/discrepancy in the same. Ld. AO ought to have appreciated that the share subscribers are private limited companies and were having sufficient share capital, reserve and surplus in their regular books of accounts and out of such available funds the alleged share subscribers have invested in the assessee company. In our considered view, ld. AO failed to cross this hurdle as provided under the provisions of Section 68 of the Act before making the addition. Ld. AO had sufficient mechanism in the form of departmental machinery and other subordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2. We also draw our force from the decision of Hon ble Jurisdictional High Court of Calcutta in the case of Crystal Network Pvt. Ltd. vs. CIT (supra) which held as under: We find considerable force from the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT(Appeals) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a factor which should be used by the AO in coming to an adverse conclusion against the appellant. On an overall analysis of the issue, I find that the AO has not made out his case with cogent material on record that the appellant could come under the purview of section 68 of the Act with regard to share capital as reflected in the balance sheet when there is no finding with any cogent material evidence that the same was actually bogus in nature. It is accordingly observed that creditworthiness of the share subscribers to make investment in the share capital of the appellant company cannot be a disputed matter as per material facts on record. The aforesaid facts underlined by evidences clearly prove the identity of the share applicants, their creditworthiness and source of funds, as well as the genuineness of the transactions being investments in the share capital issued by the appellant, which was subscribed to by each of them. Thus, it is proved beyond any-doubt or dispute that the share applicants are actually found to have subscribed to the share capital issued by the appellant during the year under consideration as clearly evident not only from their respective books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 14.07.2022 wherein Hon ble High Court succinctly dealt with the aspect whether notices u/s. 133(6) of the Act are issued which are duly acknowledged or responded but ignored by the AO leads to perversity in the assessment order. Relevant extract from the said decision is reproduced as under: Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer issued show cause notice only in respect of one of the lender M/s. Fast Glow Distributors. The assessee responded to the show cause notice and submitted the reply dated 22.12.2017. The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of transaction. There is no discussion by the assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have recorded so with reasons. We find that there is no discussion on the explanation offered ITAT 18 OF 2022 by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause notice in respect of other lenders. However, they are able to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). The Tribunal re-appreciated the factual position and agreed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so-called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness. 11.2. Thereafter, Hon'ble Supreme Court summed up the principles which emerged by deliberating upon various case laws as under: 11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Office is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of namele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethora of judgments and decisions have been considered including Hon'ble Jurisdictional High Court, we, under the given facts and circumstances of the case most importantly that the year under appeal is AY 2008-09 and the proviso to Section 68 of the Act specifically brought in for examining the share application money/share premium received in the case of the companies has been brought into the Income Tax Act w.e.f. 01.04.2013, are of the considered view that prior to this amendment if the assessee had offered sufficient explanation about the nature and source of the alleged sum credited in the books which in this case is share capital and share premium and has discharged its onus by providing complete documentary evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction and ld. AO failed to record any discrepancy in such details, no addition u/s 68 of the Act at Rs. 10,60,50,000/- called for. We thus, set aside the finding of ld. CIT(A), delete the addition made u/s 68 of the Act and allow the effective grounds of appeal in ground nos. 1 to 7 raised by the assessee. 17. Ground no. 8 is general in nature which needs no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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