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TMI Blog2019 (5) TMI 2025X X X X Extracts X X X X X X X X Extracts X X X X ..... AL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER For the Appellant : Shri Robin Choudhury, Addl CIT-DR For the Respondent : Shri Manish Tiwari, FCA ODER PER S.S.GODARA, JUDICIAL MEMBER:- This Revenue's appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-7, Kolkata's order dated 30.01.2018 passed in case No. 242/CIT(A)-7/Kol/Ward-3(3)/16-17, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short 'the Act'. Heard both the parties. Case file perused. 2. The Revenue's sole substantive grievance seeks to challenges correctness of CIT(A)'s action reversing the assessment findings treating assessee's share application / premium receipt amounting to ₹ 4,53,00,000/- as unexplained cash credits liable to be added u/s 68 of the Act. The CIT(A)'s detailed discussion to this effect reads as under:- "5. Conclusion: I have carefully read the order 01' the A.O as well as the detailed submission of the assessee, The sole issue for my consideration is that whether the sum of Rs. 4,53,00,000/- received by the appellant from sore share applicant M/s Lakshmirarnan Investment: & Finance L.td can be considered as unexplained cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discharge the onus cast upon it under section 68 of the Act. I also find that both the share applicant company as well as the appellant company are operational companies having business as well as substantial net worth. I find from the audited accounts of the appellant company that indeed it is holding real estate' and investments in mutual fund apart from other investments. Thus there remains no doubt that the appellant is not a paper company involved in rotating money. I find that the share applicant company M/s Lakshrnirarnan Investment & Finance Ltd is a registered with the RBI as a Non Banking Finance Company. In compliance to the summon issued u/s 131 the share applicant through its director furnished its identity as well as address proof, Copy of MOA & AOA, Copy of NBFC certificate, copy of annual return filed with the ROC, Copies of Audited accounts for FY 2010-11 & 2011-12, copies of bank statement. It also explained in details about the source as well as the source of source of fund for making the investment in the appellant company. I find that the share applicant had filed explanation for justification of premium paid for acquiring the shares of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them and copy of the allotment advise received by them from the appellant in respect of shares allotted to them. The return of allotments as well as the annual return for the assessment year 2012-13 filed by the appellant with the Registrar of Companies, Ministry of Corporate Affairs, further categorically proves the fact: of allotment of shares-to the share applicant. It is further observed that the net worth of the share applicant, as disclosed in its Balance Sheets, far exceeded the amount of Investments made by them in the shares of the appellant company. It is accordingly observed that it adequately prove their creditworthiness to make investment in the share capital of the appellant. The aforesaid facts underlined by evidences clearly prove the identity of the share applicants, their capacity and source of funds, as well as the genuineness of the transactions in relation to the share capital issued by' the appellant, which was subscribed to by the share applicant. It is observed that the onus, which lay on the appellant, in relation to s. 68 of the Act, has been duly discharged by it and nothing further remains to be proved by it on the issue. There is no evidence on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2012, its corresponding ledger accounts in appellant-company for financial year(s) 2010-11 and 2011-12 as well as various judicial precedents; stands perused. 4. Learned Departmental Representative vehemently contends during the course of hearing that the CIT(A) has erred in law as well as on facts in deleting the impugned unexplained share application / premium addition amounting to ₹ 4,53,00,000/-. He invites our attention to the assessment order dated 23.03.2015 to this effect quoting the Assessing Officer's reliance on hon'ble apex court's decision in CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) and Sumati Dayal vs. CIT (1995) 80 Taxmann.com 89/214 ITR 801 (SC) in holding that the assessee failed in proving genuineness / creditworthiness of its investor parti(es) by applying human probability test. He reiterates the said findings during the course of hearing to plead for reviving the impugned addition which stand deleted in the lower appellate proceedings. 5. The assessee on the other hand draws strong support from the CIT(A)'s action deleting the impugned addition. It first of all submits that the impugned share application amount has come from the holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to verify the Share capital contributed/invested by one General Capital and Holding Company Pvt. Ltd. to the tune of Rs. 9,99,99,900/-. The Assessing Officer therefore, issued a summons u/s. 131 and in response to the same Shri Viral Shah appeared before the Assessing Officer and produced original bank statement of General Capital and Holding Company Pvt. Ltd. from which he has issued the cheques for subscribing to the capital of the Company. Inspite of The fact that there are no cash deposit stated in the said bank statement, bank account or for that matter whatsoever in the books of accounts of the said Company, the Assessing Officer absolutely incorrectly mentioned that he has noticed regularity, a pattern, in the methodology of infusing cash into the accounts and within a short while afterwards withdrawing sums to pay for the shares. The said Principal Officer Shri Viral Shah filed authenticated photocopy of the original PAN card of all shareholders and also that of the Company but the Assessing Officer surprisingly mentions on Page-4 that they prima facie are not found correct. He has also filed the Confirmation of Account, Audited Accounts, Income Tax Returns and Copy of PA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant company wherein the share investment of Rs. 9,99,99,900/- received from the said company clearly proving that they were received by account payee cheques as per Page 81 to 88. Copy of bank statements, Confirmation of Account and Pan card of the shareholders of the said investing company General Capital and Holding company Pvt ltd is enclosed as per page 89 to (5) The appellant has to submit that the investing company is still holding the shares of Assessee Company. We are attaching herewith the copy of the Demat Holding Statement dated 04.09.2013. of the investing company i.e General capital and Holding Pvt Ltd as per page no 120 to 122. (6) Thus the appellant has to submit that the said party investing in the shares of the appellant company is also a Private Limited Company, assessed to Income Tax in Circle 4 with PAN No AADCG1059M The said company confirmed before the Assessing Officer that it has invested in the appellant company by issuing Account payee cheque. The bank statement of this company clearly proves that there is no cash deposit whatsoever. The bank statement of the appellant company clearly proves that the entire amount has been received by acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Investing Company. (iii) High Court of Calcutta in the case of CIT vs. Ruby Traders & Exporters Ltd. 263 ITR 300 (Cal) Here the Assessing Officer disbelieved the genuineness of the subscription received by the assessee. In course of inquiry, nothing was disclosed about identity of the subscribers. Addition made u/s. 68, which Tribunal deleted on the ground that amounts were received by Account Payee cheques. High Court confirmed the addition on the ground that identify of the subscriber and genuineness did not get proved. In appellant's case identity, genuineness and creditworthiness are proved beyond doubt. (iv) ITAT Delhi Bench "C" in the case of ACIT vs. Rajeev Tandon- 108 ITD 560 (Delhi). In this case the amount was received by the assessee as gift. The Assessing Officer wanted genuineness and creditworthiness of the donour to make such big gift. Bank statement and corroborative evidence of donor to prove creditworthiness was not proved. In absence of any financial credibility of the gift, the same was treated as income of the assessee. In appellant's case the appellant is a listed Public Company and had received more than Rs. 54.67 crores as Public iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three ingredients, namely; identify, genuineness and creditworthiness. In appellant's case, as stated above a/I the three ingredients are proved and the Assessing Officer has disregarded the same and wrong/y interpreted that there Is a pattern and methodology of infusing cash In to the account and within a short while afterward withdrawing them to pay for the shares to the appellant's company. These are absolutely incorrect and untrue statements of the Assessing Officer as can be seen ITA No. 102/Ahd/14 [DCIT vs. Gyscoal Alloys Ltd. ] A.Y. 2010-11 - 6 - from the bank statement of General Capital and Holding Pvt. Ltd., copies of which are filed. Copies of decisions are enclosed as per Page 123 to 145. SUBMISSION: It is therefore submitted that the Assessing Officer has made an addition, which is totally incorrect, absolutely unjustified, on wrong facts, on incorrect observation and felling untrue things on paper. The assessee has proved identify, genuineness and creditworthiness, particularly so because Mr. Viral Shah, who appeared on behalf of General Capital & Holding Pvt. Ltd. is Managing Director of the Assessee company. General Capita/ & Holding Pvt. Ltd. h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n deposited and subsequently cheque were issued is factually incorrect. The director of the company also attended before AO and ITA No. 102/Ahd/14 [DCIT vs. Gyscoal Alloys Ltd. ] A.Y. 2010-11 - 7 - confirmed the fact. It is also noted that both the companies, that is the appellant company as well as the share applicant are managed by the same group of persons. Honourable High Court of Gujarat has consistently held that if the assessee has given sufficient proof in respect of the share application no addition can be made in the hands of the assessee. If the AO has any doubt about the source of the share applicant further investigation can be made in the hands of the share applicant but not in the case of the appellant. The following recent decisions on the issue are worth mentioning: - "1. CIT vs. Shree Rama Multi Tech Ltd. [20I3] 34 taxmann.com 177 (Gujarat) Section 68 of the Income-tax Act, 1961 - Cash credit [Share application money]- Assessment year 2005-06 - Whether where assessee company had furnished complete details of receipt of share application money along with share application forms, names, addresses, PAN and other relevant details of share applicants, share appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of share application money received by it during the ITA No. 102/Ahd/14 [DCIT vs. Gyscoal Alloys Ltd. ] A.Y. 2010-11 - 8 - year. No addition on account of the fact that the share applicant money had no employees and was being managed from the residential premises can be made as it has sufficiently shown that it has made investment. If the AO had any doubts about the source of income of the share applicant company he could have made further enquiries in respect of that company, in case the same was assessed with him, or by passing the information to the AO, in case it was not assessed with him. It appears that the share applicant company is not assessed to tax with the present A.O. therefore, he is directed to pass this information to the AO of the share applicant company for further examination. The AO has placed reliance on the judgements of honourable Delhi High Court in various cases. However, it is noted that the facts of the present case are different from the cases mentioned by him. In the case of NR Portfolio Pvt. Ltd, supra, the share applicant did not respond to Summons but in the present case the director of the applicant company attended and gave the details. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of assessment and deleted in the lower appellate proceedings. The Revenue's case is that the Assessing Officer had rightly disputed the genuineness / creditworthiness element in the said sum which is contested at the assessee's behest. We proceed in this backdrop of facts to notice first of all that the identity of the investor entity M/s. General Capital and Holding Company Pvt. Ltd. (supra) is not in dispute. And also that both the assessee and the said investor entity are group concerns having common Directors. The first component of identity therefore vis-à-vis Section 68 of the Act duly stands satisfied. It is evident thereafter that the assessee's relevant paper books forming part of record before us contain all necessary details of its copy of certificate of incorporation alongwith listing notification/circular of National Stock Exchange and Bombay Stock Exchange, its return and computation for the impugned assessment year with tax audit report, Auditor's report, audited accounts, its replies to the Assessing Officer during the course of assessment proceedings, copy of ledger account of the investor entity in its books alongwith bank statement indicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's directions to the Assessing Officer to pass the relevant information to assessee's group concerns Assessing Officer sufficiently protect Revenue's interest so far as the impugned addition is concerned. Learned CIT.D.R's. further reliance on all the case laws discussed in assessment order is also without any significance since there is no instance therein dealing with a group entity having invested in concerned assessee's stake holding. The said case law is therefore held to be not relevant to the issue in hand. We conclude in light of all these facts and circumstances that the assessee has been able to prove all three components of identity, genuineness and creditworthiness of impugned share ITA No. 102/Ahd/14 [DCIT vs. Gyscoal Alloys Ltd.] A.Y. 2010-11 - 11 - application/premium amount of Rs. 9,99,99,900/- to have come from its group company M/s. General Capital and Holding Company Pvt. Ltd. Coupled with this, we must also observe that it has successfully produced its common Director Mr. Shah (supra) before the Assessing Officer alongwith all necessary details and confirmation despite the fact that such a personal appearance is required as per Section 68 (First proviso) inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its identity, genuineness and creditworthiness regarding the impugned share application/ premium. We find no substance in Revenue's instant arguments. We have made it clear that the Assessing Officer's assessment findings nowhere indicate as to whether he had ever concluded that the said holding company had not turned up to explain all the three ingredients of its share capital. The CIT(A)'s findings extracted hereinabove make it clear that the common director of these two entities had duly put in appearance before the Assessing Officer who never pin-pointed any specific discrepancy in the corresponding details filed. Coupled with this, it has come on record that the assessee had not credited / received the entire share application money in the relevant financial year (supra). Be that as it may, we conclude that CIT(A) has rightly deleted the impugned unexplained cash credit addition in the nature of share application money / premium money coming from assessee's holding company M/s Lakshmiraman Investment & Finance Ltd. in view detailed supportive evidence forming part of records. The Revenue fails in its sole substantive ground therefore. 8. This Revenue's appeal accordingly di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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