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TMI Blog2024 (11) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. We fail to find any justification in such observation of AO. Rather than mentioning the documents as voluminous paper work, he/ she should have move ahead to examine the correctness of those documents and should have discussed the same in the assessment order. General observation that the AO is not satisfied with the documents filed by the assessee cannot meet the requirement of law. We on perusal audited the balance sheet of the alleged share applicant companies notice that they have sufficient net worth in the form of share capital and accumulated reserve and surplus to explain the source of investment made in the assessee company. Even the provisions which entitles the revenue authorities to examine the case where a company not being a company in which public are substantially interested receive from any person in any consideration for issue of shares that exceeds the face value of such share, the aggregate consideration received for such shares as exceeds the fair market value of the share to be treated as income of other sources u/s 56(2)(VIIB) of the Act has been inserted by the Finance Act, 2012, with effect from 1st April, 2013 and is therefore not applicable for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act and was of the view that assessee could not explain the nature and source of alleged sum to his satisfaction and he concluded the assessment by making addition u/s 68 of the Act at ₹2,30,00,000/- and also made minor addition u/s 14A of the Act at ₹1010 and assessed the income at ₹2,29,68,322/-. 3. Aggrieved assessee preferred the appeal before the ld. CIT (A) challenging the addition made u/s 68 of the Act and again filed various documents and evidences to prove the identity and creditworthiness of the share applicants and genuineness of the transactions and also submitted that replies to notice u/s 133(6) of the Act has been filed and that transactions have not carried out through banking channel. However, the ld. CIT (A) confirmed the addition based on the principle of preponderance of the probabilities observing that contention of the assessee company regarding share capital and premium cannot be accepted. The finding of the ld. CIT (A) is appearing at para 8 of the impugned order and reads as under:- 8.0 After carefully considering the action as recorded by the Ld. A.O. as also considering the detailed submissions made by the Ld. A.R for the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding to do so. During the course of assessment proceedings, the identity, capacity and the genuineness of the transaction has not been established by the appellant. Therefore, on preponderance of probabilities the contention of the assessee company regarding share capital and premium cannot be accepted. 4. After going through the above finding, the ld. CIT (A) has referred to plethora of decisions and has dismissed the assessee s appeal. Now, the assessee is in appeal before this Tribunal. 5. The ld. Counsel for the assessee vehemently argued referring to the written submission filed before the ld. CIT (A) and also referring to the decisions and the judgments mentioned in the written submissions filed before the ld. CIT (A). The ld. Counsel for the assessee also took us through the detailed paper book which contains 273 pages with the relevant documents of each share applicant company so as to prove that all are duly assessed to tax, registered with the Ministry of Corporate Affairs, all have replied to the notice u/s 133(6) of the Act and most of the share applicant company have been assessed u/s 143(3) of the Act for the very same assessment year. 6. On the other hand, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,82,000 9,00,000 13. Prayash Dealcom Pvt. Ltd. PAN: AAGCP3894C 40, Weston Street, 3rd Floor, Kolkata-700 013 2200 22,000 10,78,000 11,00,000 Total 46,000 4,60,000 2,25,40,000 2,26,00,000 8. We note that the assessee is a NBFC, holds registration certificate issued by Reserve Bank of India bearing no.B0504173 dated 10th April, 2001. The companies which are registered with NBFC are required to make compliance to various rules and regulations of the RBI on timely basis. The assessee is into this business since past 11 years. Now, the issue in dispute is about the applicability of Section 68 of the Act on the share capital and share application money totalling to ₹2,30,00,000/- received from 13 share applicants named above. Section 68 of the Act has a direct bearing on the issue and therefore, is reproduced below:- Section 68 in The Income Tax Act, 1961 68. Cash credits. - 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] [ Substituted by Act 4 of 1988, Section 2, for Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Officer is duty bound to investigate the creditworthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 11. The Hon ble Supreme Court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted above, the Assessing Officer in this case has not made any inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment -- 72 -- (iv) Blackcherry Marketing Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 73 -- Copy of IT Acknowledgement -- 74 -- Audited Financial Statement 75 -- 84 Copy of Share application -- 85 -- Copy of allotment advice -- 86 -- Copy of relevant bank statement -- 87 -- Copy of assessment order u/s 144 for A.Y. 12-13 87A -- 87L (v) Dynasty Tradelink Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 88 -- Copy of IT Acknowledgement -- 89 -- Audited Financial Statement 90 -- 102 Copy of Share application -- 103 -- Copy of allotment advice -- 104 -- Copy of relevant bank statement -- 105 -- (vi) Regius Tie Up Pvt. Ltd. Copy of reply to notice u/s 133(6) 106 -- Copy of IT Acknowledgement 107 -- Audited Financial Statement 108 119 Copy of Share application 120 Copy of allotment advice 121 Copy of relevant bank statement 122 (vii) Shivkripa Creation Pvt. Ltd. Copy of reply to notice u/s 133(6) 123 -- Copy of IT Acknowledgement 124 -- Audited Financial Statement 125 136 Copy of Share application 137 Copy of allotment advice 138 Copy of relevant bank statement 139 Copy of assessment order u/s 144 for A.Y. 12-13 139A -- 139C (viii) Subham Commotrade Pvt. Ltd. Copy of reply to notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application and making due payment, allotment has been issued. Copies of the bank statement of each of these companies are available on record and there is no immediate cash deposit prior to issuing of cheque for making alleged investment. Revenue authorities also failed to rebut this fact that against the notice issued by the ld. AO u/s 133(6) of the Act all the share alleged share applicants have replied and had furnished the details along with cover. It is also observed that most of the alleged share applicants have also passed through the scrutiny proceedings for the very same assessment year i.e. A.Y. 2012-13 u/s 143(3) of the Act. All these documents speaks loud enough that identity and creditworthiness of alleged share applicants is established beyond doubt. Genuineness of the transactions is also proved because these companies have sufficient net worth to make the investment and they have applied in a NBFC company for better returns. Once, the assessee has discharged his primary onus, the burden of proof shifts on to Revenue authority and observations of Ld. AO that they are not satisfied with these details will not serve the purpose. At some part of the assessment order th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such who could advance the alleged loans. There was no effort made to pursue the socalled alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. emphasis ours} b) The ITAT Kolkata Bench in ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 dated 2.3.2016, held as follows: 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.2004-05 Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicants and in response, they all confirmed the transactions submitted the details/document in respect of the subscription of shares of the appellant. In the course of the appellate proceedings, the appellant filed copy of each of the assessment orders passed in all the 6 cases of the shareholders for that year in which the share subscription amount has been received by the assessee company. Besides, the income-tax return filing acknowledgment, Audited Balance and sheets as on 31.03.2012, relevant bank, copy of the notices issued u/s 133(6) to the shareholders and reply thereof were also submitted. It is observed form the details documents furnished by the appellant that in the cases of 2 share holders, namely 1) M/s Alfort Merchants Private Limited, 2) M/s Sharekhan Merchants Private Limited, the Assessment Orders u/s 143(3) for Lne AY 2012-13 were passed u/s. 143(3) without taking any adverse view. Therefore, it can be assumed that the respective Assessing Officers have all verified the accounts and therefore any amount that is credited from these two companies to the assessee company is fully explained. The assessment in the case of the other 4 share holders, namely, 1) M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g part of the order of the CIT(A) reveals that the ld. CIT(A) has not only taken note of the accounts of the share subscribers but also, noted that all the six share subscribers were assessed u/s 143(3) of the Act. Out of which, no additions were made in case of two share subscribers. However, in the case of other four share subscribers, the additions were made regarding their source of income. Now, it is settled law, once the addition has been made in the hands of the share subscribers, the investments by which share subscribers in the hands of the other company whose shares have been subscribed stood explained then no additions in such a case would be warranted in the hands of the assessee company as it would amount to double additions of the same amount. Even if the said addition stand confirmed in the appeal or stand deleted, in both the instances, the investment in the hands of the assessee company will stand proved. Reliance has been placed in this respect on the decision of the Coordinate Kolkata bench of the Tribunal in the case in the case of DCIT vs. M/s Maa Amba Towers Ltd. in ITA No.1381/Kol/2015 vide order dated 12.10.2018. The aforesaid decision has been further relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies, the burden would shift on the revenue to establish their case. Further the jurisdictional Calcutta High Court in the case of Crystal networks (P) Ltd. vs CIT (supra) has held as under: We find considerable force of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been some illegalities in the assessee s transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three 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 had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was 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, it could be safely held that the assessee had discharged his initial burden and the burden shifted onto the Assessing Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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