TMI Blog2018 (8) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : Shri Gautam Jain, Shri Piyush K. Kamal, Advocates Shri Lalit Mohan, C.A. Shri Mayank Mohanka, C.A. For The Revenue : Shri Atiq Ahmed, Sr. D.R. ORDER PER BHAVNESH SAINI, J.M. This appeal by assessee has been directed against the Order of the Ld. CIT(A)-XXV, New Delhi, dated 13th March, 2018, for the A.Y. 2014-2015. 2. We have heard the learned Representatives of both the parties and perused the material on record. Ground No.1 is not pressed, same is dismissed as not pressed. 3. On Ground Nos. 2 and 3, assessee challenged the addition of ₹ 6 crores under section 68 of the I.T. Act as well as challenged the Order of the Ld. CIT(A) in presuming that valuation report of the shares, in justification of premium, was not given by the qualified valuer as per guidelines of ICAI, without bringing any material on record, 4. On Ground No.4, assessee challenged the addition of ₹ 12 lakhs on account of unexplained expenditure under section 69C of the I.T. Act on account of alleged commission paid towards alleged accommodation entries. 5. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged its onus to prove identity of the investor, its creditworthiness and genuineness of the transaction. The assessee produced complete details i.e., name, CIN No. PAN No and Registered Address, Master Data of the Investor Company. Its balance sheet shows that investor has sufficient funds/amount to make investment in assessee company and the master data sheet of the investor as per Ministry of Corporate Affairs website shows that it is an Active Company. The financial parametres of the investor shows their creditworthiness is proved through their audited balance sheet, ITR and return of income filed by them with the Income Tax Department. The A.O. alleged that investor company received credits in its bank account from M/s. SKPJ and Bilberry prior to the issue of cheques towards share application money to the assessee. It was submitted that in the absence of any corraborating material or evidence placed on record, nothing is proved against the company. Since the assessee has discharged the initial onus to prove conditions of Section 68 of the I.T. Act, therefore, burden shifted upon the Revenue Department to prove their case. In case Revenue Authorities have any doubt, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Delhi High Court were also relied upon to prove that it was a genuine transaction. The assessee also explained that there were justification for issue of shares at premium. The valuation of aforesaid equity shares have been done in accordance with the provisions of Explanation to Section 56(2)(viib) of the I.T. Act, read with Rules 11 UA(2)(a) of the I.T. Rules and accordingly, the fair market value of one equity share of the respondent company has been arrived at ₹ 1121/-. Copy of the valuation report was filed. It was submitted that no statement were confronted to assessee which were recorded in the cases of others, therefore, same cannot be read in evidence against the assessee. It was submitted that assessee company is owner of immovable property consisting of go-down, building and builtup area of 6091.96 Sq. Mt. built over a free hold land measuring 8.852 Sq. Mt. situated at Bakoli Tehsil, Narela, New Delhi. The said godown is rented-out to M/s. Pepsico Pvt. Ltd., and assessee company earned rental income of ₹ 1.09 crore during F.Y. 2013-2014 relevant to assessment year under appeal. Based on the valuation report of Government approved valuer, the said property h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from the A.O. of the investor or banker of the investor or Registrar of Companies. The low income of investor is irrelevant consideration and the net worth is to be seen to verify the creditworthiness of the creditor. The material relied upon by the A.O. namely Order of assessment of M/s. RKG Finvest Pvt. Ltd., and order of S.K. Jain have not been confronted to the assessee. Addition on account of Section 56(2)(viib) of the I.T. Act is misconceived. No amount came from the coffers of the assessee company. The share capital have been accepted on merit. Since investor is NBFC and registered with Reserve Bank of India, therefore, genuineness of the transaction should not be doubted. The investor has shown name of the assessee in their balance sheet (PB-155). PB 204 is the valuation report. Learned Counsel for the Assessee, therefore, submitted that the investor is fully identifiable corporate entity and assessed to tax. The entire share capital has been received through banking channel and no material was found during the course of search to prove that money came from the coffers of the assessee company. The financial statement of the investor shows that investment is made in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, no doubt should have been raised by the authorities below. The assessee received the amount earlier also from the same companies and all the documentary evidences were filed before A.O. as well as before Ld. CIT(A). There is no challenge to the admission of the additional evidences in the present appeal before the Tribunal. Opportunity was given to the A.O. to examine and rebut the evidence produced on record. But A.O. did not verify and examine the facts and the documents on record either at the assessment stage or at the appellate stage (remand proceedings). It is well settled law that no source of the source is to be proved by the assessee. he has filed chart of all the investor companies supported by confirmation, ledger account, PAN, acknowledgment of ITR, balance-sheet, annual accounts, share application form and bank statements of all the investor companies. He has submitted that since assessee company is a listed company, therefore, permission of SEBI for allotment of additional shares were also obtained. Copies of the same are filed in the paper book. Learned Counsel for the Assessee submitted that it was explained before the authorities below that assessee-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the applicant companies were not produced. 9.4. Judgment of Hon ble jurisdictional Delhi High Court in the case of CIT vs. Orbital Communication (P) Ltd., (2010) 327 ITR 560 in which it was held as under : In view of the decision of the Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195, the Tribunal was justified in upholding the order of the CIT(A) deleting addition made on account of share application money when substantial evidence was produced by the assessee to establish the identity of share applicant. 9.5. Judgment of Hon ble jurisdictional Delhi High Court in the case of CIT Ors. Vs. Five Vision Promoters Pvt. Ltd., Ors. (2016) 380 ITR 289 (Del.) in which it was held as under : Provisions of s 68 can be invoked only where assessee offers no explanation at all or explanation offered is unsatisfactory; and addition thereunder can be made only on that condition. 9.6. Judgment of Hon ble jurisdictional Delhi High Court in the case of CIT vs. Shiv Dhooti Pearls Investment Ltd., (2016) 237 Taxman 104 (Del.) in which it was held as under : In terms of section 68, assessee is liable to discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Revenue through any evidence or material on record. It is not in dispute that assessee produced sufficient documentary evidence before the authorities below to prove identity, creditworthiness of the investors and genuineness of the transaction in the matter with regard to payments like cheque no. date, confirmation copy of the ledger account with explanation for credit entries, bank statement, PAN, ITR and copy of the balance sheet of all the investor companies before A.O. The A.O. instead of making any inquiry on the documents filed before him, ignored the same and made the addition against the assessee without application of mind. When the assessee filed all the documents before the Ld. CIT(A) and requested for admission of the additional evidences, same were again referred to the A.O. for examination/verification and comments. The A.O. however, did not verify and examine the additional evidences and merely objected to the admission of the same. The Ld. CIT(A) on perusal of the same, correctly noted that these documents are relevant and essential for disposal of the matter. The Ld. CIT(A) vide impugned order admitted the additional evidences under Rule 46A of the I.T. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the investor companies, the matter should have been investigated thoroughly by referring to their concerned A.O. to investigate the source held by them. Further, no such attempt have also been made in this case. It is well settled law that no source of the source shall have to be proved by the assessee. It is, therefore, clear that A.O. did not make any inquiry on the documentary evidences filed by the assessee. The A.O. merely rejected the explanation of assessee because none of the investors have their creditworthiness and copies of the bank statement and audited accounts are not filed and that they did not have any assets for business. However, the finding of fact recorded by the Ld. CIT(A) clearly prove that the investor companies have their creditworthiness to make investment in assessee company and the copies of the bank statement and audited accounts have been filed on record. Therefore, finding of fact recorded by the Ld. CIT(A) have not been rebutted by the authorities below. The details furnished by the assessee also shows that prior to assessment year under appeal, 11 investor companies have also made investment in assessee company in earlier years which would st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 10.4. Decision of the Hon ble Supreme Court in the case of Earth Metal Electric Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP.No.21073 of 1999, in which it was held as under : We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside. 10.5. Decision of Hon ble jurisdictional High Court in the case of Divine Leasing Finance Ltd., 299 ITR 268, in which it was held as under : No adverse inference should be drawn if shareholders failed to respond to the notice by A.O. 10.6. Decision of Hon ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer found an addition of ₹ 71, 75, 000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of ₹ 35, 50, 000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified. 10.8. Decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. 6.2. Hon ble jurisdictional Delhi High Court in the case of CIT vs. Genesis Commet (P.) Ltd., (2007) 168 Taxman 482 (Del.) in which in paras 9 to 11 of the order it was held as under : 9. The Tribunal took a view that the fact that the assessee was not in a position to produce the two commission agents is not its fault and the Assessing Officer could have exercised powers available to him to summon and cross-examine these two parties if, for some reason, he did not accept the statement furnished by these two parties. The Assessing Officer could also have made independent enquiries from the customers of the assessee. However, none of this was done. 10. Therefore, we are of the opinion that the Tribunal has not committed any error in the view that it has taken. The assessee produced all the material that it could possibly produce and if the Assessing Officer was not inclined to believe the material produced, he could have used the coercive powers available to him, which he failed to exercise. 11. Therefore, we are of the view that in this case, no substantial question of law arises for our consideration. 6 .3. Hon ble jurisdictional Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below and commission was also correctly disallowed. 8. We have considered the rival submissions. The A.O. noted that assessee has received share application money/ share premium of ₹ 6 crores from the Investor Company M/s. MekastarFinlease in assessment year under appeal. For verification of the share application money, the A.O. issued notice under section 133(6) of the I.T. Act, to the investor company who have replied the same directly to the A.O, copy of which is filed at page-185 of the paper book in which the investor has confirmed the transaction with the assessee company and to make the aforesaid investment. The reply is supported by copy of the confirmation of accounts, copy of acknowledgment of filing of ITR, balance sheet ending on 31.03.2014, copy of bank statement, copy of NBFC Registered Company with source to make investment in assessee company. Thus, the investor has duly confirmed that it has made investment of ₹ 6 crores in assessee company. The assessee filed copy of their CIN No and details of their Directors and Auditors. The balance sheet of the Investor (PB- 149) shows that as on 31.03.2014, it has total availability of funds of ₹ 300, 36, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee cannot be disputed and as such, no adverse view could be taken against the assessee because the same cannot be read in evidence against the assessee. Further, assessee has not taken any amount directly from Shri S.K. Jain and others. The contention of assessee has also not been disputed through any evidence or material on record that the assessee company has owned immovable property which has given on rent and assessee received rental income of ₹ 1.09 crores in assessment year under appeal. Therefore, the valuation report of the Government approved valuer was based on the material on record to show that assessee has rightly re-valued the property at its fair market value. Thus, there was no basis to take any adverse view against the assessee. Share Valuation report is filed at page-201 of paper book which is not rebutted through any evidence by Ld. D.R. 9. The Hon ble jurisdictional Delhi High Court in the case of MOD Creations Pvt. Ltd., vs. ITO (2013) 354 ITR 282 (Del.) (HC) held as under : Section 68 of the Income-tax Act, 1961, only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue still had a doubt with regard to the genuineness of the transactions in issue or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, could be of no avail. The Revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The Tribunal without adverting to the principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this it construed the intentions of the assessee asbeing mala fide. The Tribunal ought to have analysed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the Assessing Officer. If the Assessing Officer had any doubt about the material placed on record, which was largely bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further appeal to the Tribunal the Tribunal held that the phraseology of section 68 of the Income-tax Act, 1961, was clear, that the Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year, that the legislative mandate is not in terms of the words shall be charged to income-tax as the income of the assessee of that previous year , that the unsatisfactiriness of the explanation does not and need not automatically result in deeming the amount credited in the books as income of the assessee. The Tribunal found that the assessee had discharged the initial onus which lay on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/ permanent account numbers and the copies of assessment orders wherever readily available, that it had also proved the capacity of the creditors by showing that the amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors and the assessee was not expected to prove the genuineness of the cash deposited in the bank accounts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under : The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon ble High Court. 9.6. Decision of jurisdictional High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd., ITA.No.169 of 2017 dated 14th March, 2017, in which it was held as under : The CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon ble High Court in view of the above fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source . The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. 10. Considering the facts of the case, in the light of material on record and the above decisions, it is clear that assessee produced sufficient documentary evidence before A.O. at the assessment as well as appellate stage to prove ingredients of Section 68 of the I.T. Act. The A.O. however, did not make any further enquiry on the documents filed by the assessee. Thus, the A.O. failed to conduct scrutiny of the documents at assessment stage and merely suspected the transactions in question on the irrelevant reasons. The A.O. did not make any enquiry from the Banker of the Investor and Income Tax record of the Investor Company. The valuation report filed by the assessee support explanation of assessee that shares were issued at premium which were below the fair market value per share of ₹ 1221/- (PB 204 and 205). The assessee, thus, proved the identity of the Investor, its creditworthiness and genuineness of the transaction in the matter. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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