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TMI Blog2023 (1) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... ering that the share subscriber companies were having sufficient net worth to invest in the assessee company has deleted the addition so made by the AO. Assessee has further submitted that even otherwise, there was no doubt / suspicion raised by the AO either about the identity or of the creditworthiness of the share subscribers. He, in this respect, has submitted that the assessee company, during the year, had received share capital from four companies out of which three companies were group concerns of the assessee company and the fourth company i.e. Fort Projects Pvt. Ltd was a reputed company of Kolkata engaged in the profession of real estate developer/builder. That the said company i.e. Fort Projects Pvt. Ltd had a net worth and profits/turnover in millions of rupees. That even in the earlier years, the share application money was received by the assessee from the said company which was accepted by the Department. For Nortex Reality Ltd., was group company of the assessee company and the company s net worth and profits/turnover was also in millions of rupees. The company has furnished all the details in respect of notice u/s 133(6) of the Act. That the company was also enjoyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re applicants and genuineness of transactions could not be verified." 3. "That on the facts and the circumstances of the case, the Ld. CIT(A) has erred in overlooking the principles which has been laid down by the Hon'ble Supreme Court in the case of Pr.CIT(Central)-1, Delhi Vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161), which suggests that the assessee is under a legal obligation to prove the receipt of share capital premium to the satisfaction of the A.O., failure of which, would justify addition of the said amount to the income of the assessee." 4. "That on the facts and the circumstances of the case, the Ld. CIT(A) has erred in ignoring the principle which has been laid down by the Hon'ble Supreme Court in the case of Pr.CIT(Central)-1, Delhi Vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161), which also suggests that 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. In the facts of the case, in spite of best efforts made by the assessing officer, he could not verify the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) forwarded the said details to the ld. Assessing Officer for his remand report. The Assessing Officer examined the details and documents furnished by the assessee and sent the remand report , the relevant part of this is reproduced as under: "Result emanated from Remand Proceeding: At the outset to discuss this issue, the undersigned is inclined to draw kind attention of the appellate authority towards other long-term liabilities as per the audited books of accounts. From Para No.5 and 5.1 of the audited books of accounts, it is observed that a sum of Rs. 5,97,58,500/- and Rs. 422800600/- had been shown as other long-term liabilities as 31.03.2011 and 31.03.2012 respectively. From Note 5.1, it is further found that the sum had been shown as advance receipt from promoters and associates against issue of shares and depending upon the capital structure of the company will be adjusted there against final allotment of shares. To verify the shares through limbs of transaction viz. Genuineness, creditworthiness and capacity, notices u/s 131 of the Income Tax Act 1961 have firstly been issued on 13.02.2018, however, none appeared. Thereafter, on account of change in incumbency furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the financial capacity to make the investment in question, to the satisfaction of the A.O, so as to discharge the primary onus. Here in this instant case, had the companies, being the subsidiary/group entities, with whom the assessee-company has claimed to have had regular transactions, had any real existence, the assessee would have produced them in person which could have proved the authenticity of the transactions. Furthermore, as aforementioned the subscribing parties have merely made paper submission viz. Audited books of account, copy of ITR, bank statement etc. from where source to source of the alleged transaction in the guise of share application money could not be verified." As against the said remand report, the counsel for the assessee made his rebuttal submissions. 5. The ld. CIT(A), after considering the remand report and the rebuttal submissions of the counsel for the assessee, deleted the impugned additions, observing as under: "DECISION: After considering all the facts, it is noted that the assessee company received share application money from the share applicants in various trenches spread over five years i.e. A.Y 2007-08, 2008-09, 2009-10, 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yntensia Network Security India Put Ltd Vs ITO 11(2)(1) ITA No.2927/Mum/2017 wherein it has been held that no addition u/s 68 is called for where adjustment is made against opening balance brought forward from earlier years, that is to say, if no sum of money is found credited in the books in the year under consideration then no addition is warranted in the year under consideration, in the said decision, the Hon'ble ITAT Mumbai has relied on the decision of the Hon'ble ITAT Kolkata Bench in DCIT vs. M/s. Global Mercantiles Pvt. Ltd ITA No 1669/1Kol/2009 as well as that of Hon'ble Kolkata High Court in the case of Jatia Investment Co. VS. Commissioner Of Income Tax reported in (1992) 60 CCH 0516(Cal.) The appellant has also relied upon following judicial pronouncements in support of its above contention:- (a) V.R. Global Energy (P) Ltd. vs. Income Tax Officer, (2018) 305 CTR (Mad) 228: (2018) 170 DTR (Mad) 412 (2018) 407 ITR 145 (Mad); (b) Income Tax Officer, Ward-1(1), P-7, Kolkata vs. M/s Dazzle Projects Pvt. Ltd., ITA No.757/Kol/2018, ITAT Kolkata Bench-C, Kolkata; (c) M/s. Abhijeet Enterprise Ltd. vs. Income-tax Officer, Wd-2(2), Kolkata, 1.T.A. No. 308/Kol/2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved have responded and furnished replies, iii) The reply Constitute documentary evidences regarding the share application money, iv) Physical appearance was not made, v) Source of source of the investment made could not be verified in remand proceedings, vi) Reference of decision of Hon'ble Apex Court in the case of NRA Iron and Steel Pvt. Ltd. was made, vii) Finally, it is stated that if the share applicants have any real existence the assessee would have produced them in person. In response to these arguments, the assessee in his rebuttal stated as under: The appellant has received the copy of the remand report dated 21.10.2019 sent by the A0. In this connection it is reiterated that during the year the assessee issued the following shares: SL. No. Name of share holder Consideration for which share were allotted Share application money b/f from earlier years Further amount received during the year 1 Vivek Kumar Kathotia 100000/- 100000/- Nil 2 Fort Projects (P) Ltd. 45620000/- 2,12,00,000/- 2,44,20,000/- 3 Nortex Realty Ltd. 4,58,00,500/- 25,00,500/- 4,3300,000/- 4 Poddar Udyog Ltd. 5,12,58,000/- 2,93,58,000/- 2,19,00,000/- 5 Pavan K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors should personally appear when there is no dispute about the identity, creditworthiness and genuinity of the transactions. The issue is squarely covered by the Judgement of the Hon'ble Calcutta ITAT in the case of Cygnus Developers Put Ltd and Devendra Kumar Sant, a copy of the said decisions has already been filed before your honour. The other reason for not accepting the investment is that the source of source was not proved. Needless to mention that the assessment relates to the assessment year 2012-13. There was no requirement in law to prove source of source in so far as the assessment year 2012-13 is concerned. The amendment in the IT Act came into force from 01.06.2012 i.e. assessment year 2013-14. The issue is covered by the judgment of Hon'ble Jurisdictional ITAT in the case of Bidit Financial Management in ITA No.579/Kol/2017 pronounced on 15.03.2019 which has followed Hon'ble Bombay High Court in the case of Gagandeep Infrastructure reported in 394 ITR 680. The Ld. A.O has further relied on the judgment of the Apex Court in NRA Iron Steel Pvt. Ltd. However, the said judgment is not applicable. In view of the fact that in the said case none of the shareholde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sustained and therefore, I direct the A.O to delete the same. Therefore, this ground is allowed." 6. Being aggrieved by the said order of the CIT(A), the Revenue has come in appeal before us. 7. We have heard the rival contentions and gone through the record. During the earlier hearings, the counsel for the assessee had produced on record the observations of the Assessing Officer that no director of the share subscriber companies except Fort group had appeared for recording of statement in response to the notices/summons issued u/s 131 of the Act, was factually wrong that, in fact, Sri Pavan Kumar Poddar, managing director of M/s Poddar Udyog Ltd. who is also the director of the assessee company had appeared before the Assessing Officer in response to notice u/s 131 on 21.12.2017 and his statement was also recorded. He had also produced on file the copy of the statement dated 21.12.17 of Sri Pavan Kumar Poddar. However, the ld. DR raised some aspirations about the correctness of the said statement. Therefore, the Tribunal passed the following order dated 21.02.22: "The ld. CIT(DR) has casted some aspiration on the correctness of the remand report vis-a-vis the statement pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ensuring the compliance." On the date of hearing i.e. 24.11.22, the ld. DR has come along with the assessment records. He has submitted that there was no copy of the statement recorded u/s 131 in the assessment records. However, he has fairly admitted that the assessment records were not properly maintained at all. There were no file orders after 23.09.2015; whereas, the statement u/s 131 was recorded on 21.12.2017; there was no index or page numbering; even though, there was a copy of the remand report but, there was not file order in that respect. The assessment records were totally mismanaged. The ld. DR, in this respect, has submitted that the statement was recorded by the earlier Assessing Officer and that the remand report was given by the subsequent Assessing Officer and therefore, the Assessing Officer missed the statement of the director of the assessee company namely Sri Pavan Kumar Poddar who also happens to be the director of the share subscriber company also. A perusal of the copy of the aforesaid statement recorded u/s 131 of the Act reveals that the same is the photocopy of a certified copy issued by the same Assessing Officer who had issued remand report, in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oddar on 21.12.17. That even in respect of the said statement recorded, the Assessing Officer has neither recorded any adverse comment nor could draw any adverse inference in relation to the transaction/share application money received by the assessee. The ld. counsel for the assessee has further submitted that even otherwise, there was no doubt / suspicion raised by the Assessing Officer either about the identity or of the creditworthiness of the share subscribers. He, in this respect, has submitted that the assessee company, during the year, had received share capital from four companies out of which three companies were group concerns of the assessee company and the fourth company i.e. Fort Projects Pvt. Ltd was a reputed company of Kolkata engaged in the profession of real estate developer/builder. That the said company i.e. Fort Projects Pvt. Ltd had a net worth and profits/turnover in millions of rupees. That even in the earlier years, the share application money was received by the assessee from the said company which was accepted by the Department. The second company, namely, Nortex Reality Ltd., was group company of the assessee company and the company's net worth and pro ..... 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