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2023 (7) TMI 785

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..... shows that the assessee was not in existence at the address and secondly, the summons issued u/s 131 has not been complied with by the Director of the Assessee. Both the points do not have much force. The inspector is stated to have visited on local address utilized on share basis. No verification at registered office situated at Kolkata was done. This apart, it is illogical to fasten liability on the assessee merely because director of the subscriber sitting 1500 km away could not personally attend at the command of the AO at a short notice but instead produced his representative in an available time span of merely four days. Thus, when seen in the light of cumulative facts, the allegation made against the assessee by the Assessing Officer has been rightly found to be devoid of any strength by the CIT(A). We concur with the conclusion drawn by the CIT(A) on facts that charge of the AO towards lack of satisfactory explanation contemplated u/s 68 of the Act against the assessee is without any demonstrable basis. Decided in favour of assessee.
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER For the Appellant : Shri Gourav Jain, Adv. For .....

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..... on of the aforesaid amount. In response thereto, the assessee filed replies giving documentary evidences concerning the various shareholders to whom the shares were allotted during the year. The Assessing Officer however claimed that in respect of shares allotted to namely, Pleasant Vyapaar Pvt. Ltd. to whom 83333 shares of Rs.10/- each were allotted at a premium of Rs.260/- per share resulting in flow of Rs. 2,24,99,910/- by way of subscription, the onus which lays upon the assessee under Section 68 of the Act was not discharged. The Assessing Officer accordingly invoked the provisions of Section 68 of the Act and proceeded to make addition of Rs.2,24,99,910/- in the hands of the assessee as unexplained credit/receipt. The income was accordingly assessed at Rs.1,77,44,730/- as against the return loss of Rs.47,55,183/- filed by the assessee. 5. Aggrieved, the assessee preferred appeal before the CIT(A) and vehemently contested the additions so made. A detailed submission were filed as recorded in paragraph 6 of the first appellate order and documentary evidences were placed to justify the bona fides of the aforesaid receipts on the touchstone of Section 68 of the Act. On appraisal .....

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..... company M/s Pleasant Vyapaor Pvt. Ltd. does not exist on the address provided by the assessee company. Summons u/s 131 of the Act was also issued to the above parties but none of the party appeared before the under signed but only reply received from these parties. No reply received from M/s Pleasant Vyapaar Pvt. Ltd. and no confirmation has been submitted by the assessee in respect of Dhoomketu Marketing Pvt. Ltd. from whom the funds were transferred to Pleasant Vyapaar Pvt. In view of this, it becomes crystal clear that Ms Pleasant Vyapaar Pvt. Ltd. exists only on paper and not on horizon of reality. The findings like non-existence of company on given address, no reply to the summon under section 131 of the Act prove the above facts." 9. At this juncture the relevant part of the appellant's submissions before me are reproduced below: "....On page 8 of assessment order, mentions have been made about show cause notice U/s 142(1) dated 22.12.2017 requiring the appellant to furnish the details of the subscribers to the share capital of the appellant company and that summon were issued to five companies on 15.12.2017 and in response the written reply has been subm .....

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..... .2017, various details in respect of increase in capital. These details are: (a) copy confirmation of accounts, (b) return of allotment of shares filed with ROC, (c) working of share premium in the light of rule 11UA, and, (d) list of shareholders, proof of the identity, evidence of their credit worthiness, copies of their ITs, bank statements as per the query raised by A.O. The ld. AO has issued notice u/s. 133(6) to M/s. Pleasant Vyapar Pvt Ltd and other investor companies by email and also send it through speed post on the local office of the Ms Pleasant Vyapaar Pvt Ltd. at D15, Basement, Pamposh Enclave, New Delhi, which was duly received. M/s. Pleasant Vyapar Pvt Ltd has given all the information's called u/s 133(6) through email and also send the replies by courier which was received by the Id AO office on 04.12.2017. After considering these details the Id. AO., vide order sheet entry dated 22.12.2017, informed the appellant about the enquiries conducted by him with the investor/shareholders. Pending these enquiries, the appellant was also required to show cause as to why provision of section 68 may not be invoked as the assessee proved identity, genuinenes .....

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..... ement of filing of income tax return for AY under reference audited accounts for the three years. The AO did not verify any of these documentary evidences in order to find out the truth in the matter. The appellant also submitted the source of funds of M/s Pleasant VyaparPvt It received from Ms DhoomketuPt Ltd. The annual accounts, copies of bank statements, PAN, & ITR-V of M/s. DhoomketuPvt Ltd are also submitted before the Ld AO. In respect of genuineness of transaction, we have to state that against the funds provided by M/ Pleasant VyapaarPt Ltd the company has allotted shares to the company along with other four allottee and proper return of such allotment has been filed with Registrar of Companies (RoC). The allotment of share capital during the course of normal business scenario to an investing company which has the genuine identity and capacity should be considered as normal business activity and beyond doubt. Thus, the AO failed to make any inquiry on these documentary evidences which are part of Revenue record as well. These documents clearly showing that the M/s. Pleasant Vyapaar Pvt. Ltd. had sufficient funds for investing in the Appellant company. The Ld. AO ha .....

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..... that their contents are contradictory and only a perfunctory enquiry was made. It is also clarified that the enquiry was made at local address furnished and not at its registered address. As mentioned earlier notice Us 133(6) & 131(1) issued by the Id AO were duly served by the postal authorities on this address. IV. The Id AO has issued notice Us 133(6) to M/s. Pleasant Vyapar Pvt Ltd by email and also send it through speed post on the local office of the company at D-15, Basement, Pamposh Enclave, New Delhi, which was duly received. M/s. Pleasant Vyapar Pvt Ltd has given all the information's called Us 133(6) through email and also send the replies by courier which was received by the Id AO office on 04.12.2017. V. Thereafter the Id AO has issued summon Us 131 of the Act to M/. Pleasant VyaparPt Ltd. and other investor companies for the personal deposition. M/s. Pleasant Vyapar Pvt Ltd has duly authorized Mr. Pankaj, Chartered Accountant, to produce before the Id AO against the Summon issued, since the registered office of the M/s Pleasant VyapaarPt Ltd is situated in Kolkatta. The Id AO on 22.12.2017 and 29.12.2017 has refused to accept reply of M/s. Pleasant VyoparPut .....

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..... kata and Head Office situated at 396, Ground Floor, Swadha Plaza, Jessore road, Kokata. All the business activities ore going on these two addresses situated in Kolkata. These both the addresses can be confirmed from the records of ROC and income tax. …… From the above explanations, it is clearly proves that all the transactions of shore capital ore genuine and were made by proper banking channel only. There is no involvement of cash at any stage in the whole process of transactions. Creditworthiness of the investor companies are clearly proved from the above mentioned explanation and documents. Major amount of the capital is from ultimate source of Amtek Auto which is a well known listed company having huge business of auto parts with a turnover of Approx. 4000 crores. All these explanation and documents roves the identity, creditworthiness and genuineness of transactions which are necessary for the satisfaction of section 68 of the Income Tax Act, 1961." 12. As evident from above the registered office of the company in question is at Kolkata and a small office on sharing basis is being maintained by PVPL in Delhi. The fact that notice u/s 133(6) was sent to .....

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..... e appellant vide it's letter dated 06.09.2018 has also furnished the assessment order u/s 143(3) of M/s Dhoomketu Marketing Pvt. Ltd. (DMPL) for Asstt. Year 2014-15 to establish the fact that M/s DMPL is a bonafide and legitimate company. The certified and confirmed copy of account of M/s DMPL has also been furnished, to explain the source of the source. 16. Thus, after considering the entire evidence submitted by the appellant before me I find that the appellant has more than sufficiently discharged its onus as envisaged under the provisions of section 68. The AO has observed at page 13 of the assessment order that the appellant company has been unable to prove the creditworthiness, genuineness and the identity of the creditor and hence the addition u/s 68 has been made by the AO. In this context, it will be relevant to reproduce the financials of the PUPL as submitted by the appellant vide letter dated Nil, submitted via email on 27.02.2018; "The appellant company has received the share application money from M/s Pleasant Vyaapar Pvt. Ltd. of Rs. 2,25,00,000 on 26.082014 through proper banking channel. M/s Pleasant Vyaapar Pvt Ltd. is having net worth of Rs. 55.80 .....

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..... allowed." 6. Aggrieved by the relief granted by the CIT(A) to assessee, the Revenue filed appeal before the Tribunal. 7. The ld. DR for the Revenue relied upon the action taken by the Assessing Officer and contended that the CIT(A) has misdirected himself in law in failing to appreciate the observations of the Assessing Officer that the onus which lay upon the assessee under Section 68 of the Act has not been discharged. It was further submitted that adequate details were not furnished in respect of PVPL. The confirmation of the source of source, i.e., M/s. Dhoomketu Pvt. Ltd. who had extended the funds to the subscriber namely PVPL has not been furnished and the summons issued under Section 131 to the subscriber company for personal deposition was not complied with. The ld. DR thus submitted that in the absence of proper evidence, the Assessing Officer was justified in holding that the onus placed upon the assessee under Section 68 of the Act was not discharged and consequently the Assessing Officer was fully justified in making additions on account of unexplained credit under Section 68 of the Act in respect of shares subscription in relation to PVPL. The ld. DR thus urged fo .....

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..... alf of the PVPL from Mr. Pankaj while accepting the replies concerning other investor companies. (f) The limited scrutiny of the return initially proposed was converted into fully fledged scrutiny with the approval of the Pr.CIT dated 18.12.2017. However, the assessment was completed without any reasonable opportunity in gross infringement of guidelines prescribed by the Department and the assessment order was passed hurriedly on 30.12.2017 disregarding all relevant evidences. 9. The ld. counsel submitted that, on its part, the assessee has submitted multiple evidences such as registration of the subscriber company way back on 03.03.1994; IT return of the subscriber company; confirmation of the account; return of allotment of shares; bank statement; audited accounts of the subscriber company for last three years; source of funds and last but not the least; the source of source of funds. The assessee company received subscription from PVPL which company in turn received funds from M/s. Dhoomketu Marketing Pvt. Ltd. M/s. Dhoomketu Pvt. Ltd. realized the fixed deposit of Rs.224 lakhs possessed by it which was the source of funds to PVPL. Both PVPL and Dhoomketu Marketing Pvt. Ltd .....

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..... he case records, one M/s. Dhoomketu Marketing Pvt. Ltd. transferred the funds to PVPL out of realization of fixed deposit placed by it with banks. The proceeds so transferred were utilized by PVPL for subscription of the preference share of the assessee company. Noticeably, the assessment order framed under Section 143(3) of Dhoomketu for Assessment Year 2014-15 is also part of the paper book. Thus, where the assessee furnished the incorporation certificate, the PAN details, IT returns audited annual accounts for several years, no aspiration can be cast on the identity of the subscriber per se as rightly concluded by the CIT(A). 13. As regards genuineness of the transaction, we note that fund provided by PVPL has arisen from definite source, i.e., realization of fixed deposit by Dhoomketu. This also explains the creditworthiness aspect. Coupled with this, the net worth of PVPL is stated to be Rs.55.80 crore as on 31.03.2015 and similar net worth is declared in the preceding years as well. The cash and bank balance of PVPL itself is declared at Rs.4.04 crore and the subscriber also owned real estate and having FDRs. The company subscriber, i.e., PVPL is in existence since 1994 and .....

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