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TMI Blog2023 (10) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies. These evidences furnished by them have been neither controverted by the AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. Ld. AO has simply added the amount of share capital and share premium on the ground that assessee has not produced the directors/shareholders. AO has ignored the reply given in response to notice issued u/s. 133(6) of the Act which are on record under duly acknowledged seal and stamp of his good office. From the perusal of the order of Ld. CIT(A), we note that Ld. CIT(A) has perused the evidence in the nature of documents and details and on their examination has sustained the addition made by the Ld. AO. Thus, going by the records placed by the assessee and by all the share subscribing companies in response to notices issued u/s 133(6), it can be safely held that the assessee has discharged its initial burden and the burden shifted on the ld. AO to enquire further into the matter which he failed to do so. CIT(A) has not taken into consideration the creditworthiness of all the subscriber companies by going through the records and the net worth of each of them. It is also noted that all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certified by him in earlier years in detailed assessment. 9. That the addition made by ld. Assessing Officer and uphold by ld. the Commissioner of Income Tax (Appeal) are liable to be set aside. 10. That the appellant may add, alter, delete, withdraw or modify any of the ground at the time of hearing of the matter with the leave of the Hon ble ITAT. 2. Brief facts of the case are that the assessee filed its return of income for the A.Y. 2009-10 by declaring income of Rs. 473. Subsequently, the order u/s 143(3)/147 of the Act was based on 27.05.2010 on a total income of Rs. 1,16,973/- as against the returned income of Rs. 473/-. Immediately after passing the assessment order u/s 147 of the Act read with section 143(3) dated 27.05.2010 was set aside by ld. CIT, Kolkata-2 by exercising his power u/s 263 of the Act vide order dated 05.03.2013. Consequent to that effect, the ld. AO issued notice u/s 142(1) of the Act by directing the assessee to submit inter alia details of share holders along with necessary evidence in support of its claim for share capital and share premium. On this context, the ld. AO issued notice u/s 131 of the Act to the assessee and all the subscribers of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e further submitted that the ld. CIT, Kolkata in order u/s 263 dated 05-03-2014 had specifically directed the AO to conduct independent enquiry not through the assessee therefore, the question of assessee producing the directors of subscribers company does not arise and in any case, it is well settled law that merely non appearance of directors of assessee or subscribers cannot be a ground to draw an adverse inference. The subscribers in the instant case are all corporate bodies duly registered under the Companies Act, 1956 (2013) and are income tax assessees, hence, their identity stands proved. Nonappearance of the directors of such corporate entities cannot be a ground to draw adverse inference. 3.5. The ld. AR relied on the following decision in order to substantiate his claim in the case of Cristal Networks Put. Ltd., Vs. CIT reported in (2013] 353 ITR 171 (Cal.), it is held by the Hon'ble Calcutta High Court that when the assessee files all the necessary evidences or records before the Assessing Officer then mere failure of the creditor parties to appear cannot form the basis to invoke Section 61/Section 68 of the Act. The Hon'ble Tribunal considering the judicial pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in the case of M/s BST Infra-tech Ltd., Vs. DCIT reported in 2022-VILL1525-1TAT-Kol, it is held by the Kolkata Bench of the Hon'ble Tribunal that when the assessee furnished the required documents before the Assessing Officer to prove identity, credit worthiness of the share subscribers and genuineness of transactions, the Assessing Officer without pointing out any defect or discrepancy in the documents submitted by the assessee straight away added share application money into the income of the assessee under Section 68 holding same as unexplained cash credit. The assessee has proved identity of share subscribers. The share subscribers are the body corporate available at registered address. In respect of genuineness of transactions, assessee has established that share application money was received through proper banking channels and share holders had sufficient funds for purpose of investments and the investments were reflected in their books of accounts. The Assessing Officer or CIT(Appeal) has not brought any evidence on record to show that it was assessee's own fund that was brought back in form of share application money. The addition made by the Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 15,51,00,000/- in the books of the assessee was nothing but own money of the assessee company in the garb of share capital including share premiums. 4. However, the ld. AR stated that there is absolutely no evidence in support of the said finding but is based on assumption and presumption and in the case of DCIT Vs. P P Highrise Put. Ltd., reported in 2022-VIL-1410-ITAT-Kol., it is held by this Hon ble Tribunal that the Assessing Officer added entire amount under Section 68 of the Act by holding that the assessee has brought its own unaccounted money in garb and share capital including premium which is deleted by the CIT (Appeal). The assessee by submission of the materials had established identity of share applicants, genuineness of transactions and their credit worthiness. The Assessing Officer had not conducted any enquiry for pointing out faults in details submitted by the assessee. The Assessing Officer merely relied upon finding of DDIT (Inv.) but that was not an adjudicatory findings. The Assessing Officer is bound to verify the contentions of the assessee in the light of materials in an analytical manner but that exercise is totally missing, hence, the CIT (Appeal) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. 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 have ignored this fact finding. 8. We also take note of the fact that all the share subscriber companies have filed their return of income with the department which have been either processed u/s. 143(1) of the Act for which intimations have been issued or have been assessed u/s. 143(3) or 147 on substantive basis, for which the respective intimation/assessment orders are placed on record in the paper book. We also take note of the fact that all the share subscriber companies have responded to the notice issued u/s. 133(6) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also from the decision of Hon ble jurisdictional High Court of Calcutta in the case of PCIT vs. Shree Leathers in ITAT/18/2022 (IA No. GA/02/2022) dated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- and 75,00,000/-. Therefore, the assessing officer if in his opinion found the explanation offered by the assessee to be not satisfactory, he 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer ought to conduct an independent enquiry to verify the genuineness of the 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 creditworthiness. 9.2. 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 creditworthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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