TMI Blog2017 (2) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee may not be in a position to produce the directors of the 8 private limited companies. The wisdom of the said submission is left open to the assessee who is required to prove genuineness of the transactions. Accordingly, for the reason given hereinabove the impugned order is set aside and the issue is set aside back to the file of the CIT(A) with a direction to decide the same by way of a speaking order in accordance with law addressing the facts on record. - Decided in favour of revenue for statistical purposes - I.T.A .No.-4450/Del/2015 - - - Dated:- 1-11-2016 - SMT DIVA SINGH, JUDICIAL MEMBER For The Assessee : Ms. Anima Baranwal, Sr.DR For The Revenue : Sh. Adesh Kr. Jain, Adv. ORDER The present appeal has been filed by the Revenue assailing the correctness of the order dated 28.04.2015 of CIT(A)-V, New Delhi pertaining to 2009-10 assessment year on the following grounds:- 1. That on the facts and circumstances of the case in law, the Ld. C1T(A) has erred in deleting the addition of ₹ 40,80,000/- made u/s 68 of the Act, as the assessee company failed to prove the creditworthiness and genuineness of the parties from whom it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1. In the course of the assessment proceedings, the AO required the assessee to provide the details and also directly sent notice u/s 133(6) to these parties to file their confirmation alongwith ITR, balance sheets, P L Accounts and bank statement in respect of transactions amounting to ₹ 40,00,000/-. In response to the notice u/s 133(6) confirmation alongwith bank statement, ITR balance sheet were filed by these parties. Thereafter, the AO issued summons u/s 131 requiring that the directors be produced for their personal deposition and also to furnish the following information:- 1. Confirmation alongwith Confirmation alongwith nature and source of transaction with the above company. 2. Copy of your I.T.Return alongiwth computation of income, Balance sheet and P L A/c for the AY 2009-10. 3. Copy of Bank statement for the period 01.04.2008 to 31.03.2009. 4. Personal Deposition alongwith proof of identity. 2.2. However, on the said date, no one appeared and the assessee instead filed confirmation from the said parties. In order to facilitate compliance with the requirement of producing the Directors of the above companies the AO provided 5 op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the money laundering indulged into and bringing black money to books of accounts by clandestine and dubious methods. The CIT(A) it was argued has not cared to address the evidence and blindly accepted the written submissions which is contrary to the settled legal position as considered by the jurisdictional High Court in the case of CIT vs NR Portfolio Pvt.Ltd. 2014 2 ITOL 68 (Delhi). Reading from the said decision, it was her submission that when an assessee does not produce evidence it can be presumed that the assessee is trying to avoid appearance before the Assessing Officer. It was submitted it necessarily creates difficulties and prevents ascertainment of true and correct facts as has been held by the Hon ble High Court in para 14. Inviting attention to the Paras 17, 18 and 19 of the said decision, it was submitted that the assessee was a private limited company. In the facts of the present case as considered by the jurisdictional High Court in the case of NR Portfolio Private Limited also being a closely held company the Hon ble court had expressed the view that there necessarily would be a proximate relationship between the promoter directors and the shareholders as closely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is in the fashion business and in garments. The nature of business conducted by the companies who have applied for shares, he was unable to state. He was also not able to refer to any fact or reason in order to explain why these companies chose to become shareholders of the assessee. However, on query, it was his submission that the assessee may not been in a position to produce the directors and the reliance was placed upon the decision of the jurisdictional High Court in the case of CIT Ors. vs Oasis Hospitalities Pvt. Ltd. in ITA No. 514 of 2007 and 2093 of 2010 dated 31/01/2011. Relying on the said decision, it was his submission that the assessee by providing identification and the confirmations along with the necessary details has proved identity, genuineness of the transaction, creditworthiness which are the ingredients of the section. Apart from that reliance was also placed upon the decision of the Hon ble Allahabad High Court dated 11.02.2014 in the case of CIT(Central) vs Vacmet Packaging India Private Limited. Reliance was also placed upon order dated 07/08/2015 in ITA No. 333/Del/2015 in the case of Modinagar Rolls Ltd. vs CIT. Accordingly it was his prayer tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant company and his share applicants, provided confirmation, bank statement. ITR and balance sheet of all 8 share applicants. On further query about sources of investment by these share applicants, the AR provided the following table of share applicants below:- In continuation of our submission and in response to the further query raised regarding creditworthiness of the subscriber companies by Your Honor in previous hearing. I have to state as under:- That all the subscriber companies have very good financials and were having very impressive monetary status as on 31/3/2008 prior to the subscription made in, the appellant company in April 2008. I hereby present the financial picture of the companies in a very illustrated chart as on 31/3/2008 S.n. Subscriber's name paid up capital Reserve surplus Total worth 1. HumTum Marketing P.Ltd. 1,94,60,000/- 17,42,40,000/- 19,37,00,000/- 2. Lotus REalcon P. Ltd. 1,72,40,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) has not cared to address the repeated opportunities given to the assessee to produce the director s of the 8 companies for their deposition. This patent and obvious shortcoming in the face of the departmental case that these were mere paper companies and the paper trail available to the AO by itself was not sufficient and in order to verify genuineness a further enquiry was required. Opportunity was provided to the assessee. No effort was made as per record by the CIT(A) himself to examine the fact whether these companies were engaged in genuine business or were these created solely to launder black money. There is no reference in its order on the business conducted by these companies. Discussion on facts merely referring to paper trail created does not address the issue of genuineness.The facts/reasons leading these private limited allegedly dummy companies to invest in the assessee would be the crucial aspects for determining the genuineness of the transactions. There is no discussion on the said aspect by the CIT(A) to satisfactorily conclude that these were genuine transactions by the private limited companies and not a mere paper trail. The CIT(A) himself notes that money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a private limited company whose nature of activity necessarily would be known to only its close knit circle of friends, relatives and associates thus what were the facts which persuaded these 8 shareholders to make an investment in shares of the said company to the extent of ₹ 5 lakh each are necessary facts which are required to be taken into consideration and the burden which shifts back to the assessee in the facts of the present case is not be discharged. While so holding, it may not be out of place to note yet again that the assessee company is a private limited company, the shareholders are also claimed to be private limited companies and the Ld.AR has stated that the assessee may not be in a position to produce the directors of the 8 private limited companies. The wisdom of the said submission is left open to the assessee who is required to prove genuineness of the transactions. 9.1. Accordingly, for the reason given hereinabove the impugned order is set aside and the issue is set aside back to the file of the CIT(A) with a direction to decide the same by way of a speaking order in accordance with law addressing the facts on record. Needless to say that a reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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