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TMI Blog2025 (1) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of assessee u/s 68. Also see Orissa Corporation Pvt. Ltd. [ 1986 (3) TMI 3 - SUPREME COURT ] and Orchid Industries Ltd. [ 2017 (7) TMI 613 - BOMBAY HIGH COURT ] Validity of re-assessment proceedings - We find that the ld. AO in the reasons recorded referred to the material found during the course of search and based on the search enquiries that the assessee is a beneficiary of bogus share capital. We note that that the ld. AO has not made any enquiry independently and just made the conclusion as to reopening the assessment based on the search enquiries. Therefore, this is the case of borrowed satisfaction by the AO. The case of the find support from the decision of Meenakshi Overseas (P.) Ltd. [ 2017 (5) TMI 1428 - DELHI HIGH COURT ] Accordingly, the re-assessment proceedings as well as assessment order is hereby quashed. Assessee appeal allowed. - Shri Rajesh Kumar, AM And Shri Pradip Kumar Choubey, JM For the Assessee : Shri Suni l Surana, AR For the Revenue : Shri Jitendra Kanti lal Surti, DR ORDER PER RAJESH KUMAR, AM: This is an appeal preferred by the Department and CO by the assessee against the order of the Commissioner of Income-tax (Appeals), kolkata-21,(here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urned. Thereafter, the ld. AO issued show cause notice u/s 26.11.2018, giving the final opportunity to the directors of the subscriber companies, the same also remained non-complied with. Finally, the ld. AO concluded that the money raised by the assessee was not explained as the assessee failed to establish the identity, creditworthiness of the subscribers and genuineness of the transactions and added the same to the income of the assessee u/s 68 of the Act and framed the assessment u/s 143 read with section 147 of the Act dated 18.12.2018. 05. The ld. CIT (A) allowed the appeal of the assessee by observing and holding as under:- Discussion Findings I have carefully examined the impugned assessment order, the submissions of the appellant, remand report, rejoinder to remand report, the citations relevant to this appeal as well the other materials on record. Thereafter, this appeal, ground-wise, is being disposed as under: This ground agitates against the action of the AO in making addition of a sum of Rs. 1,48,00,000/- on account of share application money received on the ground that the share applicants were not found at the given address. During the year under consideration the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee share subscriber companies, viz. the following facts emerge: Name of Company Capital and Reserves Investment with assessee Dynamic Sarees P Ltd. 1,32,38,356/- 13,00,000/- Berhampur Finance Leasing Ltd. 32,91,75,291/- 50,00,000/- Pilot Barter Ltd. 3,68,88,760/- 73,00,000/- Swift Barter Ltd. 8,82,24,382/- 12,00,000/- Evidently all the share applicant companies had sufficient funds with them for the purpose of making such investments. In support of Genuineness of Transaction, the appellant submitted Bank statements showing the transactions through banking channel. I find that the AO has not been able to dispute these facts placed by the appellant, both during the course of assessment proceedings as well as appellate proceedings. The agitation of the appellant is further vindicated by the following statement in his submissions during the course of appeal proceedings that : It may be stated here that the same company m/s Berhampur finance leasing pvt. ltd. contributed share capital in another group company of the assessee namely kohinoor sarees p ltd which case also was reopened and the Ld AO accepted the capital in respect of the said company but added only in respect of the receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, in the assessment order itself, the AO has discussed that as per the Inspectors Report submitted before ADIT(Inv) Unit-3(4), that the Inspector was able to serve notice u/s 131 on the three companies at the registered office of the companies on 15.02.2016. During the course of assessment proceedings or appeal proceedings, however no Inspector enquiry has been made by the AO to ascertain the whereabouts of the said companies. In the case of Kohinoor Sarees Pvt Ltd for the assessment year 2009-10, shares were issued to one of these common shareholders namely M/s Berhampur Finance Leasing Ltd. The AO assessing them accepted the contribution from Berhampur Finance Leasing Ltd. The Ld AO himself found the said party as genuine and accepted the share capital received from M/s Berhampur Finance Leasing Ltd. Therefore, when in another group company, the said shareholder was found and complied and the AO has accepted the same, then how can the creditworthiness of the said shareholders or genuinity of transaction be disputed in another group company. During Appeal Proceedings also the Appellant submitted all the relevant document inter alia including the following: In support of Id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions. The appellant has submitted a plethora of judgements in support of his contention. I find that various courts including the Hon. Jurisdictional High Court has held that where the assessee offers an explanation to the AO by placing evidence regarding the identity of the investor along with relevant documentary evidences such as relevant bank statements, share certificates etc, the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness, which in the instant case has not been made. It is observed that the AO in her Remand Report has placed reliance upon the judgement of the Hon. Delhi High Court in CIT vs Oasis Hospitalities Pvt. Ltd. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh account payee cheque has been established. In a very recent judgement, the Hon'ble Calcutta High Court in the case of PCIT Vs. Naina Distributors Pvt. Ltd. in ITAT/113/2023, IA No. GA/1/2023 dated 28.06.2023 has decided the issue in favour of the assessee by holding that mere non-production of director cannot be the ground for making any addition in the hands of assessee u/s 68 of the Act. The operative part is reproduced as under: After carefully considering the findings recorded by the Commissioner of Income Tax, (Appeals) 7 Kolkata (CITA) in his order dated 21.09.2020 and the findings recorded by the learned Tribunal we find that the entire matter is fully factual. The learned Tribunal has independently examined as to the genuinity of the transaction in the matter of raising share capital and the Tribunal noted that even during the assessment proceedings, the assessee has furnished all details ill respect of the share capital and share premium raised by the assessee besides the details of the investors by their submission dated 9.6.2014 in reply to the notice issued by the Assessing Officer under Section 142 of the Act dated 5.5.2014. The Tribunal also noted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion recovered during search and post search operation that the assessee has been beneficiary of bogus share capital from three subscribers amounting to ₹ 1,48,00,000/-, the details of which are given in extraction of the appellate order above. We note that the ld. CIT (A) has given very comprehensive findings while deleting the addition. The ld. CIT (A) noted that these transactions were routed through banking channel and all the evidences were placed before the ld. AO qua these subscribers. The ld. CIT (A) in page no. 37 have been discussed the total net worth of the subscribes and money advanced to the assessee company. The ld. CIT (A) even noted that from one of the subscriber s M/s Berhampore Finance Leasing Pvt. Ltd. was raised Rs. 50 lacs was accepted in the assessment framed. The ld. CIT (A) even called for remand report but the ld. AO did not give any finding in the remand report and merely oppose the deletion of addition. Finally, the ld. CIT (A) has noted that the assessee has filed all the evidences whereas the AO has not pointed out any defect or deficiency in these documents which are on record. The ld. CIT (A) after following the decision of Hon'ble Jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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