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TMI Blog2024 (7) TMI 1608X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax-15, Kolkata [hereinafter referred to as 'CIT(A)'] passed u/s 250 of the Income Tax Act (hereinafter referred to as the 'Act'). 2. The assessee through its grounds of appeal has agitated the addition of Rs.89,65,000/- made by the Assessing Officer treating share capital and share premium received by the assessee as unexplained income of the assessee u/s 68 of the Act. 3. At the outset, the ld. counsel for the assessee has invited our attention to the impugned assessment order to submit that the only observation made by the Assessing Officer in the impugned order is that the assessee during the year had received share capital/share premium of Rs.89,65,500/- That the Assessing Officer treated the said amount as unexplained income of the assessee by way of a nonspeaking order and in a mechanical manner. That the assessee had duly furnished all the relevant details in respect of assessee company such as ITRs, PANs, copies of audited financial statement, copy of Form 5 along with receipt filed with ROC, details of source of funds relating to the identity and creditworthiness of the creditors and genuineness of the transaction. However, the Ld. Assessing Officer, without examini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequate reserves and surplus to invest in the assessee company. Further that all the investor companies were duly incorporated with the Registrar of Companies and were active compliant companies. That there were no paper companies involved in the transaction. All the share-subscribers had duly responded to the notice issued by the Assessing Officer u/s 133(6) of the Act and furnished the required details independently also. That the Assessing Officer did not point out any defect or discrepancy in the same. 4.3. The ld. DR has, however, strongly relied upon the orders of the lower authorities. He has also filed written submissions also. 5. We have considered the rival submissions and gone through the record. We find force in the contentions raised by the Ld. Counsel for the assessee. We also note that the assessment order is short and cryptic order. There is even no mention of the name of the share subscribers in the assessment order, what to say of any details and evidences furnished by the assessee. Though, the Assessing Officer has observed in the assessment order that the addresses of the registered offices of some companies were same with common directors and further that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity of the subscribers to its share capital". The aforesaid observation of the CIT(A) is not coming out from the records of the case. The Assessing Officer alleges that all the share-subscriber companies have common directors and that they are hand in glove with each other, whereas the ld. CIT(A) alleges that the assessee has stated that he has clue about the identity of the subscriber. This finding of the CIT(A) is factually wrong. The ld. CIT(A) has further mentioned in the impugned order that when summons were issued to the directors of the assessee company u/s 131 of the Act, neither all the directors of the assessee company nor all the investor company appeared, however, this observation of the CIT(A) is again factually wrong. There is no mention in the assessment order that any summons u/s 131 of the Act were ever issued to the assessee company either to the director of the assessee company or to the director of the investor companies. The ld. CIT(A) has not discussed any of the documents furnished by the assessee to prove their identity and even the financials of the share subscriber companies. There is no rebuttal to th4e contention that the share subscribers were having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of premium loses the importance as the investment is made in the fully known companies having common directors. The low income of the companies is not a criteria to determine their creditworthiness/net worth. There is no rebuttal to the fact that the subscriber companies were having substantial net worth to invest in the group companies. There is no evidence brought on record that the investor companies have received funds in cash from third parties and which have been further transferred to unknown beneficiaries. Neither there is any such allegation made nor the same has been substantiated in assessment order or the appellate order of the CIT(A). Even the reliance placed by the ld. DR on the decision of Hon'ble Jurisdictional High Court in the case of 'PCIT vs. Swati Bajaj & Ors' reported in [2022] 139 taxmann.com 352 (Calcutta), in our view, is misplaced as there is no reference in the case in hand as to any report of Investigation Wing. In this case, there is no record or observation of any authority that the investor companies are shell companies. In fact, nothing has been discussed specifically about any of the individual investor companies either in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act." 5.4. The Hon'ble Supreme Court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted above, the Assessing Officer in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before the Assessing Officer and the Assessing Officer has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. " c) Further the co-ordinate bench in the case of ITO vs. Forceful Estates Pvt. Ltd. in ITA No. 2558/Kol/2018; Assessment Year 2012-13, order dt. 08/02/2023, and for necessary reference, the facts and findings of the Tribunal read as follows:- "5. The ld. counsel has further invited our attention to the impugned order of the CIT(A) to submit that the ld. CIT(A) has categorically n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely, 1) M/s. Dhanamrit Commercial Private Limited, 2) M/s Jealous Commercial Private Limited, 3) M/s Mutual Merchants Private Limited, 4) Winsom Vanijya Private Limited were also passed u/s.143(3) where additions u/s 68 & u/s.14A of the Act were made. Therefore, the entire capital of all the above mentioned share holders had been added in its hands u/s 68 of the I.T. Act Thus, once an amount is already taxed, whatever investment is being made out of it in the assessee company can be treated as explained and the Same cannot be taxed again. Further, it is apparent from the records that the notices u/s.133 (6) issued to the shareholders were served on the their respective address by the postal authorities and in response, they confirmed the transactions and also submitted the details of the source of funds for making investment. Hence, the identity & creditworthiness of the shareholders are not in doubt. Further, all the share application money was received through banking channels. Therefore, the issue for my consideration now is -whether the share capital of Rs.7,60,00,000/- raised during the year by the appellant can be treated as unexplained cash credit u/s. 68 of the I.T Act or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision has been further relied upon by the coordinate Kolkata bench of the Tribunal in the case of "Steelex India (P) Ltd vs. ITO, Ward-3(2), Kolkata"I.T.A. No.2666/Kol/2019 decided vide order dated 09.09. 2022. 7. Further, a perusal of the Assessment order would reveal that the AO has duly acknowledged the receipt of the relevant documents/evidences not only from the assessee, but also from the subscriber companies. However, he insisted for personal appearance of the directors of the subscriber companies without even going through and discussing about the discrepancies, if any, in the documents furnished by the assessee as well as by the share subscriber companies to prove the identity and creditworthiness of the subscribers and the genuineness of the transaction. The AO has not pointed out in the Assessment Order as to what further enquiries he wanted to make from the directors of the subscribers to insist for their personal presence. The Assessee in this case, as noted above, explained about the identity, creditworthiness and financials etc. of each of the share subscriber company individually. However, we note that in the assessment order that the AO has not even men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors have been established the Tribunal should not have ignored this fact finding." 8. As the ld. CIT(A), in this case, has not only duly examined the facts and explanation as furnished by the assessee but also has given a categorical finding that the identity and creditworthiness of the share subscribers and genuineness of the transaction stood established. 9. The ld. DR could not point out any distinct facts warranting our interference in the order of the CIT(A). 10. In view of the above, we accordingly upheld the order of the CIT(A). The appeal of the revenue is, therefore, dismissed." d) Our view is further fortified by the judgment of the Jurisdictional Calcutta High Court in the case of Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) has held as follows: "Section 68 of the Income-tax Act, of 1961, deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h he failed to do. In more than one place the Assessing Officer used the expression "money laundering". Such usage was uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly set aside by the Commissioner (Appeals). The Tribunal had rightly deleted the additions under section 68." 6. Respectfully following the above decisions, which, in our view, are squarely applicable on the facts of the instant case, we find that the assessee has successfully discharged the burden of proof primarily casted upon it to explain the identity and creditworthiness of all the 9 share applicants and genuineness of the share transactions and correctness of such details has not been disputed by the Revenue Authorities except making general observations. In view of the above discussion, we do not find justification on the part of the lower authorities in making the impugned addition and the same is accordingly ordered to be deleted. 7. In the result, the appeal of the assessee stands allowed. Kolkata, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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