TMI Blog2018 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and have made fresh investment during the year. In respect of remaining 6 companies we find that the assessee company has again furnished complete particulars of all these companies in terms of name, address, PAN no., copy of their confirmation, copy of their income tax returns, copy of their balance sheet and bank statements through which the cheque payment has been made. We find that these documents have been submitted before the DDIT, Kolkatta who has not examined these documents and merely forwarded these documents to the AO. Thus in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of the share transaction, these documents cannot be summarily rejected as has been done by the AO in the instant case. - Decided in favour of assessee - ITA. No. 07/JP/2015 - - - Dated:- 21-3-2018 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM Revenue by : Shri Ajay Malik (Addl.CIT) Assessee by : Shri Rajeev Sogani Shri Rohan Sogani (CA) ORDER Per : Vikram Singh Yadav, A. M. This is an appeal filed by the Revenue against the order of ld. CIT (A)-III, Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and the latter was asked to show-cause why such share capital money may not be treated to be of unexplained nature and added u/s 68 of IT Act. In response, the assessee submitted that the statement of the DDIT, Unit-3, Kolkata was totally wrong and that all the shareholders to whom notices were issued appeared before the DDIT on 05.03.2013 and that the DDIT showed his busyness and asked to submit the papers to prove their identity and genuineness. Accordingly the shareholder companies submitted their papers on 07.03.2013 which were accepted by the DDIT. The assessee also enclosed copies of receipts of these documents by the DDIT. It was also contended by the assessee that the finding of the DDIT that such companies do not exist on the given address is incorrect in as much as notices sent by post were duly received by these companies. However the AO noted that the share holder companies appeared before the DDIT on 05.03.2013 and papers were submitted before the DDIT on 07.03.2013 and that both these facts are contradictory in as much as if the share holder companies were present before the DDIT on 05.03.2013, then the documents could have been submitted on the same date. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on 07.03.2013. The appellant company has also stated the same facts before the A.O. In this connection it may be noted that if the A.O. disbelieved the submission of the appellant company in respect of attendance of the representatives of the share holder companies before the DDIT on 05.03.2013, the A.O. could have inquired the facts from the DDIT, Kolkata. Moreover, subsequently on 07.03.2013 all supporting documents in respect of share capital were furnished by the share holding companies before the DDIT, Kolkata and this fact is even not disputed by DDIT or the A.O. In this background the Inspector s report that no such companies were existing on the given address loses its authenticity and significance. Moreover, it may also be noted that out of 20 companies who have invested in share capital money, 14 companies mentioned at S. No. 1 to 14 of the list of companies (page 25-26 ) were the companies who were having existing share capital with the appellant company and in respect of these companies while completing the assessment for AY 2008-09, the AO has got conducted inquiries from the DDIT, Kolkata and the DDIT, Kolkata issued summons which were properly served and also recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the share holder companies are Pvt. Ltd. companies in respect of which the appellant has submitted confirmations, PAN No., copy of relevant Income Tax Return, bank statement of relevant period and in respect of share application money received by corporate entity, the ratio laid down by Hon ble Supreme Court in the case of CIT Vs. Lovely Exports Pvt. Ltd. [2008], 216 CTR 195 is found to be quite relevant and to be followed. The Hon ble Apex Court in this case has observed as under:- If share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. Similar issue was decided by the Hon ble Jurisdictional High Court in the case of Barkha Synthetics Ltd. Vs. ACIT, 283 ITR 377 whereas it was held as under: The principle relating to burden of proof concerning the assessee is that where the matter concerns the money receipts by way of share application from investors through banking channel, the assessee has to prove existence of perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted by the ld. CIT(A). The details of these companies are as under:- S. No. Name of the Party Shares Allotted Share capital Securities Premium Amount Received (Nos.) (Rs. In Lacs) 1 Chitrakoot Tradelink Pvt. Ltd. 15,000 1.5 13.5 15 2 Fairdeal Dealcom Pvt. Ltd. 5,000 0.5 4.5 5 3 Gangotri Sales Pvt. Ltd. 5,000 0.5 4.5 5 4 Lagan Suppliers Pvt. Ltd. 10,000 1 9 10 5 Natraj Mercantile Pvt. Ltd. 5,000 0.5 4.5 5 6 Octac Vinimay Pvt. Ltd. 5,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 V.K. Mercantile Pvt. Ltd. 20,000 2 18 20 Sub Total (C) (15 to 20) 75,000 8 68 75 Total (A + B + C) 170,000 17 153 170 7. It was further submitted that the assessee Company produced all the required documents before the ld. AO to prove the identity, creditworthiness and genuineness of the companies investing money as well as genuineness of the transactions. All the investing entities are private limited companies duly regulated by the stringent provisions of the Companies Act, 2013 and their complete details could be verified from MCA Website (official website of Ministry of Company Affairs). The department has also issued them PAN and these investing companies are regularly assessed to tax. Thus the onus, on the part of the assessee company, stood fully discharged. As against the above, action of the Id. AO was solely based on the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the share applicants is established the assessee company need not establish the source of the money infused by them:- Kanhaialal Jangid vs. Asst. CIT (2008) 217 CTR (Raj) 354 Aravali Trading Co v. ITO (2008) 220 CTR (Raj) 622 Labh Chand Bohra v ITO (2010) 189 Taxman 141 (Raj) CIT vs. Jay Dee Securities Finance Ltd. (2013) 350 ITR 220 (ALL.) 13. Further reliance was placed on the decision of Hon ble Madhya Pradesh High Court in the case of Peoples General Hospital Ltd. [2013] 356 ITR 65 (MP) held that ....from the Heads Notes - Section 68 of the Income-tax Act, 1961 - Cash credit [Share application money] - Whether, where assessee had established identity of person providing share application money, burden of proving creditworthiness of said person was not on assessee, and, therefore, addition could not be made as cash credit under section 68-Held, yes.... 14. It was further submitted that the case of the assessee company, on facts, is completely distinguishable from those cases where on account or search/survey, incriminating documents have been unearthed by the department to establish non genuineness of the transaction or cases where compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 14.12.2010 whereas assessment was completed on 30.12.2010. In interim report, as per Assessing Officer in 9 cases, notices were returned back but it was not informed to the assessee about the conclusion of the enquiry by the ADIT, Kolkata or Assessing Officer of the assessee. The ld. Assessing Officer heavily relied on the Inspector s report in confirming the addition but result of the enquiry of the Inspector has not been communicated to the assessee, which is against the principles of natural justice. As per Assessing Officer, in case of 5 companies, the source of fund was not found explained. The ld. Assessing Officer again gave show cause notice on 23.12.2010. The assessee filed reply on 27.12.2010 and it was claimed before the Assessing Officer that no enquiry has been made by the Assessing Officer on changed addresses. The ld. Assessing Officer had not considered the evidence filed by the assessee during the course of assessment proceedings i.e. affidavits confirming the transaction, PAN number, complete addresses of creditors, copy of balance sheet, ITR for AY 2008-09, bank statement and form No. 18. The assessee had discharged its onus by providing the requisite evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the year under consideration, the assessee company has received share application money along with share premium from 20 companies totaling to ₹ 17 crores. Out of these 20 companies, first 14 companies as detailed in list of these companies as per Para 6 above are existing shareholder companies which have invested and hold shares in the assessee company. The Revenue has accepted the identity of these companies and genuineness of the share transaction while framing the assessment under 143(3) for AY 2008-09 after conducting the detailed enquiry. Where the same set of existing shareholders invest further sum of money by way of share application and the assessee company issues shares to them, it would not be appropriate for the Revenue to challenge the identity and genuineness of the share transaction which has occurred during the year. More so, when the assessee company has again furnished complete particulars of all these companies in terms of name, address, PAN no., copy of their confirmation, copy of their income tax returns, copy of their balance sheet and bank statements through which the cheque payment has been made. Further, the ld CIT(A) has returned a finding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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