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TMI Blog2025 (1) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... h were started 6 to 12 months prior to investment in M/s. Lupin Commodities Pvt. Ltd., which is a closely held company of Uttamchand Jain and his family members. 2) On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in ignoring the fact that the DDIT (Inv.), Kolkata, could not find the company, M/s. Lupin Commodities Pvt. Ltd., at the given address, and the assessee failed to furnish the changed address of the said company, even subsequent to this. 3) On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in relying on the decision of Hon'ble High Court of Madhya Pradesh, which is reported in 245 ITR 160, to state that source of source cannot be asked, whereas in the case of the assessee, the Assessing Officer made independent enquiries with regard to the concerns, which had invested in M/s Lupin Commodities Pvt. Ltd., which is in accordance with the decision of the Hon'ble High Court. 4) Reliance is placed on the decision of Hon'ble High Court of Delhi in the case of CIT vs. Globus Securities & Finance Pvt. Ltd. (2014), reported in 41 Taxmann.com 465, in which reference was also made to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, however, the Assessing Officer was not satisfied about the same and accordingly he treated the same as unexplained credits and held that assessee has routed its unaccounted money in the guise of share application and share premium. The Assessing Officer accordingly made addition of Rs. 538 lakh to the total income of the assessee company. 3. In appeal, the learned CIT(A) deleted the addition for detailed reasons indicated in the appellate order. 4. The learned Departmental Representative ("the learned D.R.") placed reliance on the order of the Assessing Officer to submit that addition is correctly made for the detailed reason indicated in assessment order. The Learned D.R. submitted that the assessee has not been able to explain the source of source of share capital contribution received by the assessee company during the year under consideration. It was submitted that the learned CIT(A) has not correctly appreciated the facts and evidence on record and was not justified in deleting the addition made under section 68 of the Act. The learned D.R. thus submitted that the relief granted by the learned CIT(A) be reversed and the order passed by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se was noted found. (Para 7.5 of assessment order). E) A.O. has verified bank statement of corporate share holder and it was noted that there are no cash deposit in the bank account of corporate share holder. Nothing adverse can be considered from the details on record. (Para 7.5 of assessment order). F) The Hon'ble Bombay High Court has concluded that prior to Asstt. Year 2013-14 law laid down by Hon'ble Apex Court in the case of Lovely Exports (P) Ltd. will be applied and thus revenue is not entitled to assess the share capital as unexplained cash credit. Reliance on: i) ITA No.1613 of 2014 in the case of M/s. Gagandeep Infrastructures vide order dated 20/03/2017. (P- 10 - 16) (14, 15) [Vol. - II] G) It is settled proposition of law that contribution to share capital is capital receipt. The shareholder is corporate shareholder assessed to income tax. Assessee has established identity, creditworthiness of share applicant and genuineness of transaction by placing legal evidences on record. No addition can be made for the same as unexplained income. Reliance on: i) (2008) 216 CTR 0195 (SC) CIT vs. Lovely Exports (P) Ltd. (P- 1 - 2) [Vol.- II]; ii) (2008) 307 ITR 03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is not based on any incriminating evidence or material found in the course of search on Mahavir Global Coal Ltd. (MGCL). The present assessment is framed u/s 153C of I.T. Act 1961. Only addition made is in respect to Share Capital and that too not based on any incriminating material found during the course of search. Addition made not based on incriminating material unsustainable as A.O. has no jurisdiction to make such addition u/s 153C of I.T. Act 1961. Reliance on: i) Hon'ble Bombay High Court order in ITA No.923 of 2012 in the case of Bharati Vidyapeeth vide order dated 11/09/2014. L) Decision of Hon'ble Delhi High Court in the case of CIT vs. Globus Securities & Finance Pvt. Ltd. relied upon by revenue is distinguishable on facts and is inapplicable to the facts in the case of assessee." 6. We have heard the arguments of rival parties in the light of the judicial precedents relied upon, perused the other material available on record and gone through the orders of the authorities below. In assessee's case, addition has been made by the Assessing Officer at Rs. 538 lakh under section 68 of the Act, in respect to share capital contribution including share premium rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo years are also placed on record. The investment made in assessee company is properly reflected in financial statement of corporate share holder. The financial statements clearly established creditworthiness of the corporate share holder to contribute the share capital contribution of Rs. 538 lakh. Bank statement of corporate shareholder is placed on record and no cash deposit is found in bank statement. The transaction of contribution of share capital is through proper banking channel. On above undisputed factual position identity and creditworthiness of the corporate share holder as well as genuineness of transaction of contribution of share capital contribution stands established. Before us, the Revenue is not able to show any adverse evidence on record which discredits the legal evidence on record to explain the cash credit. Even in search conducted, no incriminating evidence is found in respect to contribution of share capital contribution. On above undisputed factual position, addition in respect to share capital contribution under section 68 of the Act 1961 is unjustified and unsustainable. 9. In assessee's case, the learned CIT(A) has considered evidence available on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit." 11. The ratio laid down by the decision of Hon'ble Jurisdictional High Court squarely applies to the facts in the case of assessee and respectfully following the same, addition made in the case of assessee is held to be unjustified. Addition made by the Assessing Officer is contrary to law laid down by the Hon'ble Jurisdictional High Court referred to hereinabove. On the facts and evidence on record, the assessee has established and satisfied all the three ingredients being identity, creditworthiness and genuineness of share capital contribution to explain credit in terms of provisions of section 68 of the Act. Argument of the learned Departmental Represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... World Telefilms Ltd. (Earlier known as Link International Services Pvt. Ltd.) vide order dated 12/10/2009 "2. The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the Apex Court in the case of CIT V/s. Lovely Exports (P) Ltd. reported in [2008] 216 CTR 195 (SC) wherein the Apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA / GIR number and had also given the cheque number, name of the bank. It was expected on the part of the assessing officer to make proper investigation and reach the shareholders. The assessing officer did nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable'. In our considered view, the assessing officer ought to have found out their details through PAN cards, Bank accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Services Ltd. Vs. CIT 368 ITR 01, wherein it has been held that the share premium being on the capital amount cannot be subjected to tax as income" viii) CIT v/s Dwarkadhish Investment (P) Ltd. [2011] 330 ITR 298 (Del.) "8. In any matter, the onus of proof is not a static one. Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuine-ness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the „source of source‟." ix) CIT v/s Metachem, [2000] 245 ITR 160 (MP) "4. .................. If that person owns that entry, then, the burden of the assessee-firm is discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and credit-worthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors:- a) PAN number of the companies; b) Copies of Income Tax return filed by these three companies for assessment year 2010-11; c) Confirmation Letter in respect of share application money paid by them; and d) Copy of Bank Statement through which cheques were issued. 20. Tribunal noted that Assessing Officer had referred the matter to the investigation wing of the department at Kolkata for making inquiries into the three creditors from whom share application money was received. Though report from the investigation wing was received, Tribunal noted that the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked credit-worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed by the corporate share holder before Investigation Wing along with documentary evidence. The evidence brought on record in an independent enquiry has not been found to be incorrect or adversely commented in the assessment order. Thus nothing adverse can be drawn from the said decision in the case of assessee. The Tribunal, Delhi Bench, Delhi, has decided the appeal after remand order of Hon'ble Delhi High Court vide order dated 07/12/2018. In the aforesaid judgment, the appeal filed by the Revenue has been dismissed on account of tax effect. In view of above nothing adverse remains in the judgment of Hon'ble Delhi High Court in the case of Globus Securities & Finance Pvt. Ltd., as finally addition made in the aforesaid case is held to be unjustified and stands deleted. 15. Considering the totality of facts and circumstances in the case of assessee we hold that assessee has explained the identity, creditworthiness and genuineness of transaction of share capital contribution in terms of provisions of section 68 of the Act. We hold that the learned CIT(A) has correctly deleted the addition in the case of assessee under section 68 of the Act and does not call for any inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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