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TMI Blog2013 (7) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... sident Indian- Director of Foreign Company and share holder of Assessee Company and genuineness of transaction was not beyond doubt? (ii) Whether the Tribunal was justified in not extending and dealing with the additional grounds urged by the Revenue, though the same were germane to the lis?" Thereafter on 03.11.2011 question No.1 was re-framed which reads as under:- "(i) Whether the Income-tax Appellate Tribunal was correct in law in deleting the addition made by the Assessing Officer in respect of Non-resident Company, which admittedly has contributed share capital, even on the assumption that the assessee has failed to discharge the financial capacity of the NRI Company?" 3. I.T.A. No.89/2011 was admitted on 03.11.2011 on the following substantial questions of law:- "(i) Whether the Income-tax Appellate Tribunal was correct in law in deleting the addition made by the Assessing Officer in respect of Non-resident Company, which admittedly has contributed share capital, even on the assumption that the assessee has failed to discharge the financial capacity of the NRI Company? (ii) Whether the Tribunal was justified in not extending and dealing with the additional grounds urge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for addition of the amount of share subscription provided by M/s Alliance Industries Limited, Sharjah in the income of the respondent. The Assessing Officer had given cogent reasons but in the appeal the said order was wrongly set aside by the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal. It was submitted that once it was established by the Assessing Officer that the creditworthiness of the Company providing share subscription amount was doubtful, then the aforesaid finding could not have been reversed in appeals. It is also submitted that the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal have not considered the matter in its proper perspective. He has placed reliance on the following judgments of the different High Courts:- (i) Commissioner of Income Tax vs. Divine Leasing & Finance Ltd. decided by Delhi High Court reported as (2008) 299 ITR 268 (Del); (ii) Bhav Shakti Steel Mines (P) Ltd. vs. Commissioner of Income Tax decided by Delhi High Court reported as (2010) 320 ITR 619; (iii) Amines Plasticizers Ltd. vs. Commissioner of Income Tax decided by Gauhati High Court reported as (1997) 223 ITR 173 (Gau); (iv) Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action, which takes place by way of cheque, is invariably sacrosanct. Furthermore, the permission received from the RBI by the assessee also does not prove the financial capacity of the assessee. Despite repeated and sufficient opportunities allowed to the assessee as mentioned supra, it has not proved the financial capacity of the aforesaid NRI Company with regard to the above investment of Rs.21,27,50,403/- in share capital/premium during the year. As such, the above investment of Rs.21,27,50,403/- remained to be proved and established as from a genuine source. Under the facts and in the circumstances of the assessee's case, provisions of section 68 of the I.T. Act, 1961 are found clearly attracted and the ratio of the decision in the case of CIT Vs. Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal) is found applicable." 6. Considering the totality of facts of the case of the assessee and relying on the above case laws, it is found that the genuineness of claimed investment of Rs.21,27,50,403/- towards share capital/premium, from M/s Alliance Industries 13Ltd., Sharjah, UAE, an NRI Company, in the assessee-company during the year has not been proved as the financial capac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Sharjah through proper banking channel and it is the money of M/s Alliance Industries Limited that has come to the appellant and M/s Alliance Industries Limited had the capacity to invest this much of amount with the appellant during the F.Y. 2002-2003. Thus, creditworthiness of M/s Alliance Industries Limited, also stands established. Since all the ingredients as are required to be satisfied for accepting the deposit as genuine u/s 68 are fulfilled in respect of this investment of Rs.21,27,50,403/- by M/s Alliance Industries Limited, with the appellant company, in my considered view Assessing Officer was not justified in drawing adverse inference in respect of this amount under reference. Moreover, Assessing Officer had not brought on record any evidence. Otherwise that is to say that Assessing Officer had not established by making inquiry that it was appellant's own money which it had received in the shape of Dollars from the NRI company. Assessing Officer himself has accepted the identity of the share applicant company and also genuineness of transactions in respect of this deposit. I find that Assessing Officer himself had accepted the similar deposits in the earlier A.Yrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The aforesaid judgment has been followed by all the Courts and the judgments relied on by the appellants relates to the period prior to the judgment in Lovely Exports. As the Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment of the identi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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