9911796707
TMI Blog2024 (8) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that transaction was done through banking channel or account payee instrument. The assessee company has to discharge the onus cast upon it by demonstrating as to how the two parties are known to each other, the manner and mode by which the parties approached each other, whether transaction was entered through written agreement to protect the investment, creditworthiness, objects and purpose for which the investment was made. In the present case, these facts and information are within the exclusive knowledge of the assessee company. The fact that the assessee company received huge share capital/share premium when the Rainbow Ventures Limited is a loss making company triggered the doubts in the mind of the AO as to the genuineness of the very transaction. AO gave a finding that it is nothing but unaccounted money of the assessee company. This allegation had not been proved to be wrong by the assessee company. In the circumstances, the order of the CIT(A) is bereft of factual discussion on the above aspects. Nor the assessee company filed any evidence or material in an attempt to discharge the onus cast upon it in terms of provisions of section 68 of the Act. Therefore, the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar relevant to the assessment year under consideration, the assessee company had issued 151480 shares of Face Value of Rs. 10/- each at a premium of Rs. 1584/- to Rainbow Ventures Limited. The total amount claimed to have been received from Rainbow Ventures Limited of Rs. 24,14,59,120/-, Ambit Pragma Fund Scheme of Rs. 5,85,41,244/-. 3.2 The AO observed that the said company Rainbow Ventures Limited was incorporated in Mauritius on 06.08.2009. There was introduction of capital to the tune of USD 70,35,957 in the said company with the total capital reserves of USD 85,65,084. The business of the company is stated to be a investment company and there is no other activity. The AO called upon the assessee to prove the identity, genuineness and credit worthiness of the parties who have contributed the share capital. However, the assessee company could only produce the financial statements of Rainbow Ventures Limited. 3.3 In the circumstances, the AO drew an inference that it is nothing but unaccounted money of the assessee company and was brought to tax the share capital/share premium received from Rainbow Ventures Limited, Mauritius of Rs. 24,14,59,120/- and Ambit Patwardhan at Rs. 5,85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company is in Cross Objection. The Revenue is in appeal before the Tribunal being aggrieved by the decision of CIT(A) deleting the addition on account of receipt of share capital/share premium of Rs. 30,00,00,364/-. Cross Objection No.03/PUN/2024 8. At the first instance, we shall take up the assessee s cross objection challenging the validity of reassessment proceedings, as it goes to the root of the matter. 9. We heard the rival submissions and perused the material on record. In the present case, the original assessment proceedings was completed u/s. 143(3) vide order dated 28.03.2014. From the perusal of the assessment order, it would suggest that the issue of receipt of share capital/share premium was never examined by the AO. Therefore, it cannot be said that the AO formed an opinion as to the genuineness or otherwise of the transaction of receipt of share capital/share premium. Therefore, it cannot be said that it is a mere change of opinion. In this regard, reference can be made to the decision of Hon ble Supreme Court in the case of ITO Vs. Tech Span India Pvt. Ltd.(2018) 92 taxmann.com 361 (SC) wherein the Hon ble Supreme Court held as under : 12. Before interfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the satisfaction of the AO. The AO also is duty bound to verify the Identity, investigate the Creditworthiness of the investors and ascertain whether the transaction is genuine, whether these are bogus entries of lenders. When the assessee fails to discharge the onus of proving the Identity, creditworthiness and genuineness of the transaction by producing the cogent and credible evidences with plausible explanation to the satisfaction of the AO, the AO would be justified in making the addition to the total income of the assessee. 14. A perusal of the assessment order would show that, in the present case, the assessee company had failed to discharge the onus cast upon it in terms of provisions of section 68 of the Act. During the course of proceedings before the CIT(A), the assessee company had filed the financial statement of Rainbow Ventures Limited. Based on the financial statements and the Registration certificate of Ambit Pragma Fund Scheme, the CIT(A) called for a remand report from the AO, who in turn admitted that reference was made during the course of assessment proceedings for the A.Y. 2012-13 to the Foreign Tax and Tax Research (FT TR) Authority seeking informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditworthiness or genuineness of the transaction is not established by merely showing that the transaction was through banking channels or by account payee instrument. It may, as in the present case required entail a deeper scrutiny. It would be incorrect to state that the onus to prove the genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation to protect the investment, whether the investor professes and was an angel investor, the quantum of money, creditworthiness of the recipient, the object and purpose for which payment/investment was made etc. These facts are basically and primarily in knowledge of the assessee and it is difficult for revenue to prove and establish the negative. Certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. The fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness of the investor and genuineness of the transaction, to the satisfaction of the assessing officer. The Hon'ble Supreme Court observed that the courts have held that in the case of cash credit entries, it is necessary for the assessee to prove not only the identity of the creditors but also the capacity of the creditors to advance money, and establish the genuineness of those transaction. The initial onus of proof lies on the assessee. The decision in Roshan Di Hatti v. CIT (1977) 2 SCC 378/[1977] 107 ITR 938 (SC) was referred to wherein it was held that if the assessee fails to discharge the onus by producing cogent evidence and explanation the assessing officer would be justified in making the addition back into the income of the assessee. 23. The decision in N.R. Portfolio (P.) Ltd. ( supra ) was quoted with approval wherein it has been held that creditworthiness or genuineness of a transaction regarding share application money depends on whether two parties are related or known to each other, or mode by which parties approached each other, whether a transaction is entered into through written documentation to protect investment or whether the investor was a angel i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man 525/126 ITR 48 (Delhi) wherein it was held that the whole catena of sections starting from section 68 have been introduced in the taxing enactment step by step in order to pluck loopholes and in order to plug certain situation beyond doubts even though there were judicial decisions covering some of the aspects. It was pointed out that even prior to the introduction of section 68 in the statute book, the courts have held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered, in the opinion of the ITO, not satisfactory, the sum so credited would be charged to income tax as income of the assessee during the relevant previous year. That section 68 was inserted in the Act only to provide statutory recognition to a principle which had been clearly adumbrated in judicial decisions. Section 68 thus only codified the law as it existed before 01.04.1962 and did not introduce any new principle or rule. Subsequently, the above decision was quoted with approval again by the Hon ble Calcutta High Court in the case of Balgopal Merchants Pvt. Ltd. Vs. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
