TMI Blog2014 (8) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... ined credit – Share capital issued – Identity and creditworthiness of shareholders – Held that:- CIT(A) was rightly of the view that in respect of all the six shareholders, the assessee has been able to furnish on record substantial evidences to establish the identity, creditworthiness of the shareholders and genuineness of the transactions – CIT(A) rightly relied upon CIT vs. Orissa Corporation [1986 (3) TMI 3 - SUPREME Court] - the assessee has provided evidence in the form of PAN, ROC details, copy of ITR filed and copy of confirmation, explained source of sources also and even in the post search inquiries, the shareholders have confirmed the investment before the ADIT – thus, CIT(A) has passed a comprehensive and reasoned order on the issue after examining evidence relating to each of the share applicant companies to arrive at a conclusion that the assessee was able to establish the identity, creditworthiness and genuineness of the transaction – Decided against Revenue. - ITA No. 4981/Del/2013, Cross-objection No.2/Del/2014 - - - Dated:- 7-8-2014 - Shri I. C. Sudhir And Shri T. S. Kapoor,JJ. For the Petitioner : Shri Sunil Bajpai, CIT(DR) For the Respondent : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee before the Learned CIT(Appeals) for the admission of above stated additional evidence, the Learned CIT(Appeals) being satisfied with the reasons shown by the assessee for not filing these documents before the Assessing Officer, had admitted the additional evidence. 4. On having gone through the orders of the authorities below in this regard, we find that the Learned CIT(Appeals) has dealt with the issue in detail and after discussing the case of the assessee in support of the application for admission of the additional evidence, and calling the remand report of the Assessing Officer thereupon the Learned CIT(Appeals) has allowed the application of the assessee with the following findings: 9.3.2 After going through the A.O s report dated 27.08.2012 and also having perused the facts and evidence on record, I find that the A.O. gave the show-cause notice in respect of the issue of share capital for the first time on 14.12.2011 and he gave just 2 days to the appellant to give detailed submission/evidence to prove the genuineness, creditworthiness and identity of the shareholders who have given ₹ 4.03 crores. In my humble view, the time of 2 days given to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Royal Traders Ltd. 1,05,00,000 Total 4,03,00,000 7. The Assessing Officer noted that after conducting inquiry in respect of above entities, he comes to the conclusion that these entities were showing negligible profit and were not in any real business during the years but engaged in providing accommodation entries. The Assessing Officer accordingly came to the conclusion that share capital issued to them was bogus and it represents assessee s own money and made the addition of the entire amount of ₹ 4.03,00,000 under sec. 68 of the Income-tax Act, 1961. Learned CIT(Appeals), however, after discussing the respective cases of the parties has deleted the addition agreeing with the arguments and evidence provided by the assessee to substantiate that the transaction regarding share application money received by it was genuine transaction and the same was not accommodation entries as alleged. This action of the Learned CIT(Appeals) has been impugned by the revenue . 8. In support of the grounds, learned CIT(DR) has basically placed reliance on the assessment order. He submitted that the assessee has throughout failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all ₹ 4.03 crores share capital, the assessee had furnished following documents before the Assessing Officer in support of the identity, creditworthiness and genuineness of the investor company: Sr. No. Particulars 1. Share application form with name 2. ITR of shareholder, address, bank details/PAN 3. Bank account with name, account number debit in the name of assessee company. 13. The Assessing Officer was not satisfied with the submission of the assessee and the evidence filed in support thereof and made addition basically on the ground that shareholders companies were not in any real business during the year and were engaged in the business of providing accommodation entries and that there was negligible profit shown by shareholder companies. 14. Before the Learned CIT(Appeals), the assessee also filed following documents with application to allow the same as additional evidence to support the genuineness of the claimed transactions since Assessing Officer had given just two days to the assessee to give d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order. Further, the AD in his report dated 27.08.2012 has also not controverted any of the above facts. In the assessment order passed under Section 153C/143(3), I find that there is no specific adverse finding by the AD on the basis of which the amount received from Royal Traders limited is being considered as unexplained credit. The AD in the assessment order has referred to the enquiries conducted in the case of a few companies but the assessment order- is totally silent as to what enquiries have been made on the strength of which he came to the conclusion that the investment made by Royal Traders is not a genuine transaction. On the contrary, I find that the appellant has placed evidences (paper book page 130) that ~his company has confirmed to ADIT regarding its investment with the appellant company when the summons under Section 131 were issued during the post search investigation. As the appellant company has explained its source as well as the source of its shareholder, therefore, in view of the above discussion the appellant company has established the identity, creditworthiness and genuineness of the transaction. 9.5 Hunt Commercial Ltd. (Rs. 1.00 crore} ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tech Distributors (P) ltd. shows total assets of ₹ 5.00 crore and sales and purchases of ₹ 97.14 lacs and ₹ 1.60 crore respectively and a sum of ₹ 93,OO,000 has been shown as investment in the name of -the appellant company. The AO (n the assessment order has referred to the enquiries conducted in the case of a few companies but the assessment order is totally silent as to what enquiries have: been made on the strength of which he came to the conclusion that the investment made by Innotech Distributors is not a genuine transaction. On the contrary, I find that the appellant has placed evidences (paper book page 155) that this company has confirmed to ADIT regarding its investment with the appellant company when the summons under Section 131 were issued during the post search investigation. All these issues were raised by the appellant in the written submissions and the AO in the remand report dated 27.08.2012 has not been able to rebut or controvert any of these facts. As the appellant company has explained its source as well as the source of its shareholder, therefore, in view of the above discussion the appellant company has established the identity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying for shares in appellant s company but the same is made out of the money which Roop Yarn (P) Ltd. has received from its various entities, the details of which have also been placed on record by the appellant. Further, the Balance Sheet and Profit and Loss Account of the Roop Yarn (P) Ltd. for the year under consideration shows assets of ₹ 30.04 crore and sales and purchase of ₹ 39.81 lacs and ₹ 23.05 lacs respectively. The AO in the assessment order has referred to the enquiries conducted in the case of a few companies but the assessment order is totally silent as to what enquiries have been made on the strength of which he came to the conclusion that the investment made by Roop Yarn is not a genuine transaction. All these issues were raised by the appellant in the written submissions and the AD in the remand report dated 27.08.2012 has not been able to rebut or controvert any of these facts. As the appellant company has explained its source as well as the source of its shareholder, therefore, in. view of the above discussion appellant company has established the Identity, creditworthiness and genuineness of the transaction. 9.9 Scholars Steel (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders are trading in unlisted companies etc. We also find that the Learned CIT(Appeals) while giving relief to the assessee has placed reliance on the following decisions: i) CIT vs. Orissa Corporation 159 ITR 78 (S.C); ii) CIT vs. Divine Leasing Finance Ltd. 299 ITR 268 (S.C); iii) CIT vs. Dwarkadish Investment P. Ltd., ITA No.911 of 2010 dated 02.08.2010 (Delhi H.C.); iv) CIT vs. Lovely Exports 299 ITR 268 (S.C); v) CIT vs. Gangour Investment Ltd., ITA No. 34 of 2007 dated 30.1.2009 (Delhi H.C.); vi) Value Capital P. Ltd. (2008) 307 ITR 334 (Del.); vii) CIT vs. Pondy Metal Rolling Mills P. Ltd. ITA No. 788 of 2006 dated 19.2.2007 (Delhi); viii) CIT vs. Goyal Sons Golden State P. Ltd. ITA No. 212 of 2012 dated 11.4.2012 (Delhi); ix) CIT vs. Frostair Pvt. Ltd. ITA No. 183 of 2002 dated 24.8.2012 (Delhi); 17. Hon'ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. (supra) has been pleased to hold as under: That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions; c) The creditworthiness of the shareholders. It was held that if the creditor/subscriber is a company, the registered address or PAN identity, and other relevant details are to be furnished. Genuineness can also be proved by disclosing materials pointing to receipt of the share application money from the applicants. Copies of shareholders registered address, share application form, transfer register etc. can be furnished. So far as the share applicants , creditworthiness is concerned, the Hon ble High Court held that the assessee can prove it by producing bank statement. It was held that prima facie these may satisfy the requirement of law. The Assessing Officer has to then examine the materials to prove the matter further. He can reject these documents and hold for valid reasons, that the transaction is not genuine. The reasons should be based on material and not the product of conclusions based on suspicion, held the High Court. Hon'ble Supreme Court in the case of CIT vs. Divine Leasing Finance Ltd. (supra) has been pleased to hold as follows: We find no merit in this Special Leave Petition for the simple reason that if the share application money is re ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
