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TMI Blog2024 (3) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation of the share applicant/subscriber company, we find that the investor company had not merely confirmed the transaction of having invested Rs. 2.05 crore towards share application money with the assessee company but had categorically furnished the complete source from where the said investment was so made. There is no word of whisper by the A.O. as to why the aforesaid confirmation of the investor company was not to be accepted. We are unable to comprehend that now when the investor company had provided the complete details about the source of source of the investment made with the assessee company, then, on what basis the A.O without dislodging or disproving the correctness of the said explanation of the assessee company could have proceeded with and summarily drawn adverse inferences as regards the genuineness of the transaction under consideration. We are of the view that the assessee company had discharged the double facet onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the aforementioned investor company, viz. M/s. Modakpriya Merchandise P. Ltd., viz. (i). by substantiating based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act? 3. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in deleting the addition, thereby not considering and not distinguishing the findings of the AO which is well supported by the ratio of the judgment of Hon'ble Gujarat High Court in the case of Pavan kumar M Sanghvi Vs ITO (2018) 404 ITR 601 (Guj), wherein it is mentioned that 'it is also settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars'? 4. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was justified in deleting the addition which is contrary to the ratio of the decisions in CIT Vs Precision Finance Pvt Ltd 1994 2008 ITR 465, wherein it was held that it is for the to prove the identity of the creditors, the creditworthiness and genuineness of the transaction and mere furnishing of particulars is not enough? 5. Whether on points of law and on facts circumstances of the case, the Ld.CIT(A) was jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect, thereby rendering the decision, which is perverse? 10. Whether on points of law and on facts circumstances of the case, the Id. CIT(A) was justified in ignoring the ratio of Hon'ble Delhi High Court in the case of CIT-II vs. Jansampark Advertising Marketing (P.) Ltd. reported in [2015] 56 taxmann.com 286(Delhi) held that though it is obligation of assessing officer to conduct proper scrutiny of material, in even of assessing officer failing to discharge his functions properly, obligation to conduct proper inquiry shifts to commissioner (Appeals) and they cannot simply delete addition made by assessing officer on ground of lack of inquiry. 11. Whether on points of law and facts circumstances of the case, the Ld. CIT(A) was justified in giving a decision in favour of the assessee and against the revenue though there is no nexus between the conclusion of fact and primary fact upon which without conclusion is based? 12. The order of the Id. CIT(A) is erroneous both in law and on facts . 13. Any other ground that may be adduced at the time of hearing . 2. Succinctly stated, the assessee company which is engaged in the business of real estate and building work had e-filed its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having received share capital/premium of Rs. 2.05 crore from the aforementioned share applicant/subscriber company viz. M/s. Modakpriya Merchandise Pvt. Ltd. The A.O., observed, that the identity of the aforesaid share applicant/subscriber company was not established, and also, the return of income filed by the latter revealed nil income and was not accompanied by any financial statement. Apart from that, the A.O. observed that except for the aforesaid transaction of payment made towards share capital/premium, the bank account of the share subscriber/applicant company revealed no other transaction. Accordingly, the A.O. being of the view that the assessee company in the garb of share capital/premium had laundered its unaccounted money, thus, made an addition of the entire amount of Rs. 2.05 crore (approx.) u/s. 68 of the Act. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) who after deliberating at length on the contentions advanced by the assessee found favor with the same by observing as under: 2.3 I have gone through the submission of the appellant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital advanced to the assessee is Rs 2.05 cr. Company has share capital of Rs 1.12 cr and Reserves Surplus of Rs 10.0 cr. Ap has furnished details of source of source also. The capital of Modak has come from sale of investments and list of buyers of investment was furnished. Modakpriya has. given Rs. 39,99,970/- to another company Shree Rupandham Steel Pvt Ltd Raipur. In case of M/s Rupandham Steel Pvt Ltd in the Assessment Order dated 31.12.2019 for AY 2017-18 the capital has been accepted treating the share capital from M/s Modakpriya as genuine. As per the these facts, the addition has been made because as per the AO, the existence of the investor company could not be established. However such inference was drawn by the Ld. AO on the basis of the inquiry at the incorrect address. No adverse inference can be drawn against the assessee on the basis of these facts. In any case, I find that no adverse facts have been brought on record by causing any inquiry by the AO. Assessee has furnished all the documents such as ROC certificate with the address of the investor company, share on, bank statement, ITR of the investor. The identity is established by PAN and ROC certificate. Once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax (Appeals), the assessee sought permission for adducing additional evidence under rule 46A of the Income-tax 2, which was accepted and appeal of the assessee was allowed on the basis of additional evidence adduced by the assessee as also keeping in view of the fact that for subsequent assessment year, the share holders investment was confirmed during the assessment proceedings. The appeal preferred by the Revenue was dismissed by the ITAT. Before the honorable HC, it was submitted on behalf of the department that apart from the reasons assigned by the respondent, the Tribunal, wherein it has been held that the investment has been verified on the basis of the additional evidence adduced by the assessee, in view of the latest judgment of the hon'ble Supreme Court in the matter of CIT Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 ; [2008] 216 ITR (St.) 195, investment by the alleged bogus shareholders in a company cannot be regarded as the undisclosed income of the assessee-company, though individual investors can be proceeded against by the Department. The Court has deliberated that in the matter of Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5, the question be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 8. Before proceeding any further, it would be relevant to point out that the case of the assessee company for the assessment year 2013-14 would be governed by the provisions of post-amended Section 68 of the Act, which reads as under: 68. 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 the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation before him. However, as observed by the A.O., the aforesaid notice u/s. 142(1) dated 08.03.2016 could not be served upon the assessee company and was returned by the postal department with the remark incomplete address . Because all the earlier correspondence at the aforesaid address with the assessee company was duly served and complied with, the A.O held a conviction that the assessee company had intentionally evaded the service of the aforesaid notice to avoid producing the investor company for necessary examination before him. Accordingly, the A.O. deputed an Income Tax Inspector on 16.03.2016 to effect service of the aforementioned notice u/s. 142(1) of the Act on the assessee company, but the Inspector is stated to have reported that the assessee company had refused to receive the said notice. Backed by the aforesaid facts, the A.O observed that the assessee company had failed to discharge the primary onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money of Rs. 2.05 crore from the aforementioned investor company. 11. As can be gathered from the assessment order, the A.O. had as per the direction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut by the A.O. about the existence of the share applicant/subscriber company, viz. M/s. Modakpriya Merchandise Pvt. Ltd., Kolkata was carried out at the back of the assessee company and findings were never confronted to it. The CIT(Appeals) had also observed that while the correct address of the investor company was Mango Lane, Kolkata , the report filed by the Income Tax Inspector was, in turn, based on the inquiry carried out at the wrong address, i.e. Synagogue Street, Kolkata . Referring to the notice issued u/s. 142(1), dated 08.03.2016 issued by the A.O to the assessee company which as stated in the assessment order was returned by the postal authority, the CIT(Appeals) observed that the said observation of the A.O was incorrect as the said notice was not received by the assessee company. The CIT(Appeals) was further of the view that now when the assessee's counsel was regularly appearing before the A.O., then, in all fairness, he ought to have brought the fact as regards returning of the notice u/s. 142(1) of the Act dated 08.03.2016 to the notice of the assessee company so that necessary compliance could have been affected. Referring to the observation of the A.O. that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also placed on record source of source of the investment made by the share applicant/subscriber company. It was observed by him that the investment of Rs. 2.05 crore made by the share applicant/subscriber company with the assessee company was sourced from the sale of its investments, and complete details of the same were filed with the A.O. Apart from that, the CIT(Appeals) observed that the share applicant/subscriber company, viz. M/s. Modakpriya Merchandise Pvt. Ltd., Kolkata had also invested Rs. 39.99 lacs (approx.) with another company, i.e. M/s. Rupandham Steel Pvt. Ltd. during A.Y.2017-18, which was accepted by the A.O while framing assessment u/s. 143(3) dated 31.12.2019 for A.Y. 2017-18 of the aforementioned company. 16. Based on his aforesaid deliberations, the CIT(Appeals) was of the view that the adverse inferences drawn by the A.O as regards the existence of the investor company could not be sustained for the reason that the same was based on an inquiry carried out by the department at an incorrect address. Also, the CIT(Appeals) observed that as the assessee company had placed on record all the supporting documentary evidence, viz. copy of the share application form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of his order had referred to the new address of the share applicant/subscriber company, viz. 3, Mango Lane, 4th Floor, Kolkata (WB)-700 001 . Apart from that, the ROC record of the assessee company also revealed its new address, viz. 3, Mango Lane, 4th Floor, Kolkata (WB)-700 001 . Based on the fact that the A.O. despite being well aware that the share applicant/subscriber company had shifted to its new address, viz. 3, Mango Lane, 4th Floor, Kolkata (WB)-700 001 was looking for its existence and availability at its old address, we are unable to approve the adverse inferences so drawn by the A.O. 18. Also, the fact that the investment of Rs. 39.99 lacs ( approx.) made by the aforesaid share applicant company, viz. M/s. Modakpriya Merchandise Pvt. Ltd. with M/s. Rupandham Steel Pvt. Ltd. during A.Y.2017-18, which, thereafter, had been accepted by the department vide its order u/s. 143(3) dated 31.12.2019 while framing the assessment for A.Y 2017-18 of the aforementioned company, viz. M/s. Rupandham Steel Pvt. Ltd. dispels all doubts about the existence of the aforesaid share applicant/subscriber company. Also, the fact that the notice u/s. 133(6) of the Act that was issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application money from the share applicant/subscriber company, viz. confirmation of the share applicant/subscriber company, bank statement, copies of the return of income, financial statements of the investor company, copy of share application forms, copy of PAN, copy of memorandum and articles of association, copy of board resolution and return of allotment in Form No.2. On a perusal of the confirmation of the aforesaid share applicant/subscriber company, Page 38 of APB, we find that the investor company had not merely confirmed the transaction of having invested Rs. 2.05 crore towards share application money with the assessee company but had categorically furnished the complete source from where the said investment was so made. For the sake of clarity, the relevant contents of the same is culled out as under: We are assessed the Income Tax and Filing Income Tax regularly. The amount is shown in our balance sheet, Our PAN no. is AAECM4128L. The Investment made out of fund received against the sale of old investments to M/s Fantasy Dealcom Pvt. Ltd., 40/4 Banerjee Para Road , Kolkata-700041 PAN-AABCF5164A vide cheque no./RTGS dated 18/01/2013 for Rs. 20,00,000/-, cheque no./RTGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., (ii) M/s. Jolly Vinimay Pvt. Ltd.; (iii) M/s. Strongwell Commodeal Pvt. Ltd., (iv) M/s. Fantasy Dealcom Pvt. Ltd., Page 59 to 63 of APB. 23. Based on the aforesaid facts, we are of the view that the assessee company had discharged the double facet onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the aforementioned investor company, viz. M/s. Modakpriya Merchandise P. Ltd., viz. (i). by substantiating based on documentary evidence the nature and source of the amount so credited in its books of account, i.e. receipt of the share application money from the aforementioned investor company; and (ii). by coming forth with a duly substantiated explanation about the nature and source of the sum so credited in the name of the investor company, viz. M/s. Modakpriya Merchandise P. Ltd. as per the mandate of the 1st proviso to Section 68 of the Act. However, we find that the A.O had not uttered a word about the aforesaid documentary evidence which was filed by the assessee company in discharge of the primary onus that was cast upon it as regards proving the authenticity of its claim of having received genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that the A.O merely based on generalized observations and without making any attempt to dislodge the documentary evidence which were filed by the assessee before him, as well as disproving the explanation of the assessee company as regards its claim of having received genuine share application money from the aforesaid investor company, had summarily drawn adverse inferences, which we are afraid cannot be accepted. 26. Our aforesaid view that in a case where the assessee had placed on record sufficient documentary evidence to prove the authenticity of its claim of having received genuine share application money from the investor, viz. confirmation letter, PAN details, assessment report, mode of payment for share application money (through banks), bank account statements, cheque numbers, copy of board resolution, copy of balance sheet, Profit Loss account for the year under consideration, the A.O could not merely based on generalized observation draw adverse inferences as regards the authenticity of the transaction without considering the documents placed by the assessee company before him, is supported by the judgments of the Hon'ble High Court of Delhi in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enticity of the assessee s claim of having received genuine share application money from them was liable to be drawn. The aforesaid view taken by the Tribunal, had thereafter, been approved by the Hon'ble High Court, which had dismissed the appeal filed by the revenue. Also, our aforesaid view is supported by the order of ITAT, Surat in the case of Pr. CIT Vs. Gandhi Capital (2022) 194 ITD 396 (Surat) and that of ITAT, Kolkata in the case of BST Infratech Ltd. Vs. Deputy Commissioner of Income-tax [2023] 146 taxmann.com 406 (Kolkata Trib.). 28. We, thus, based on our aforesaid observations, find no infirmity in the view taken by the CIT(Appeals) who had rightly observed that as the assessee company had duly discharged the onus that was cast upon it as regards proving identity and creditworthiness of the share applicant company, viz. M/s. Modakpriya Merchandise P. Ltd. and also, the genuineness of the transaction of receipt of share application money from the said investor, uphold the same. 29. In the result, the appeal filed by the revenue in ITA No.95/RPR/2020 for A.Y.2013-14 is dismissed in terms of our aforesaid observations. CO No.08/RPR/2023 A.Y.2013-14 30. The assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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