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TMI Blog2019 (3) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and also to produce the details on 27.02.2015. 1. Proof of photo identity / PAN CARD 2. List of companies where you were Director/shareholders from the A.Y. 2008-09 till date with dates of appointments thereto with your DIN. 3. Proof of acknowledgment of filing your personal IT Return, copies of accounts. 4. Proof of your address. 5. Copy of bank statement of your company reflecting the all transaction during the period 01.04.2011 to 31.03.2012 with complete narration & source of fund. 6. Produce the Director of investors' company alongwith their proof of photo identity and copy of bank statement of their company reflecting the all transaction during the period 01.04.2011 to 31.03.2012 with complete narration & source of fund. 7. A write - up on justification of large share premium. 3 According to the AO, none responded to the summons so and also the assessee failed to produce investors / share subscribers before him so he made an addition of Rs. 12,01,00,000/-. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved the Revenue is before us. 4. We have heard both the parties and perused the records along with heavy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of s. 68 of the Act or not. I find from record that during the year the assessee company raised Share Capital of Rs. 1,05,40,000/- as well as share premium of Rs. 10,95,60,000/- from various share subscribers who are corporate entities. The AO has discussed this issue at page 1,2 & 3 of the assessment order. For the sake of brevity section 68 of the Act is reproduced as follows: - "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 4.3 According to this section, if identity, creditworthiness of the creditor and genuineness of the transaction is not proved or the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as income of the assessee of that previous year. In the instant case, the appellant had disclosed receipt of share capital money including share p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, clearly prove the genuineness of the transactions also. 4.5 The evidences furnished on record by the appellant, in my opinion, clearly prove their source of funds, and their capacity for making such payments and accordingly, the criteria of their creditworthiness is also proved. It is also observed that the appellant has filed for all the share subscriber copies of their income tax acknowledgments evidencing filing of income tax returns by each of them, copies of their audited accounts including Balance Sheets wherein such investments made by each of them in the subscription of share capital issued by the appellant are duly reflected as also copies of their bank statements for the relevant period from which such subscription monies were paid by them respectively and copy of the allotment advise received by them from the appellant in respect of shares allotted to them. The return of allotment as well as the annual return for the assessment year 2012-13 filed by the appellant with the Registrar of Companies, Ministry of Corporate Affairs, further categorically proves the fact of allotment of shares to the share applicants. It is further observed that the net worth of the each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed income under section 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the 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." In other words, it is observed that if share capital is received by an assessee from subscribers, whose names are given to the AO, are allegedly bogus, then the revenue is free to proceed to reopen their individual assessments in accordance with law. The facts of the present are on a better footing to the one as decided above. In the instant case, all the share applicants had confirmed their investment with the appellant and as such, there was no basis for the AO to come to any adverse conclusion and accordingly, the entire amount received by the appellant on account of share application as well as share premium monies cannot be regarded as undisclosed income u/s 68 of the Act. 4.9 Therefore, considering the totality of the facts and circumstances of the case, I find substance in the argument of the AR that the appellant has made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results / finances, therefore, the action of Ld. CIT(A) in accepting the documents produced by the assessee as gospel truth is erroneous and he referred to the following decisions to bolster his contention: i) CIT Vs. Nova Promoters and Finlease Pvt. Ltd., ITA No. 342 of 2001 dated 15.02.2012 (Delhi High court) ii) CIT Vs. M/s. Orchid Industries Pvt. Ltd. ITA No. 1433 of 2014 (SC), iii) Gopal Iron & Steel Co. (Gujrat) Ltd. Vs. ITO dated 12.09.2017 (Guj. High Court. iv) Pragati Financial Management Pvt. Ltd. Vs. CIT dated 07.02.2017 (Kolkata High Court. v) Bishakha Sales Pvt. Ltd. ITA No. 1493, assesses appeals against the order u/s. 263, were dismissed. vi) A bunch of 1+ 18 cases, Subhalakshmi vanijya Pvt. Ltd. -V s.- CIT ITA No.1104/Kol/2014. The Hon'ble ITAT Kolkata upheld the order u/s. 263 confirmed by the Apex Court dismissing the substantial question of law of general importance raised by the assessee company. vii) M/s. Sukannya Merchantiles Pvt. Ltd. - Vs.- ITA, ITA No. 291/Ko1/2016. The assessee appeals dismissed upholding the order u/s. 263. viii) ITO -Vs.- M/s. Blessings Commercial Pvt. Ltd. ITA No. 271/Ko1/2014. The Hon'ble ITAT reversed the findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the investigation wing of the department that the subscribers to share capital had availed accommodation from bogus entry operators creditworthiness must be proved and these factual aspects and circumstances as proved before investigation wing cannot be simple to ignore. * Source of funding is important ingredient of the onus of the assessee. * It is not sufficient that the identity of the share application or creditors should be established for the assessee to discharge the initial onus which is upon the/under the requirement of section 68, the assessee has to further satisfy the Revenue as to the genuineness of the transaction and creditworthiness of the share application or the individual who is advancing amounts. 6. We note that the main reason for not accepting the claim made by the assessee was that AO wondered as to how the assessee has raised share capital of Rs. 1,05,40,000/- along with share premium of Rs. 10,95,60,000/- which fact was disbelieved by the AO because assessee could not discharge the onus on him to prove the identity and creditworthiness of the transaction. We note that the assessee had filed 299 pages paper book before the AO as well as before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation of the company, (except Brijbhumi Merchants Pvt. Ltd. have filed its copy of PAN whereas PAN number is available from ITR of this company). We note that all the share subscribers have filed their declaration of source of fund towards payment of share application money to assessee company. Thus, the identity cannot be disbelieved. The share subscribers have filed their relevant page of bank statements evidencing the share application money paid through cheque and the bank statement have also been filed which we find placed in pages 42, 80,122, 164, 208, 252 and 299 of the paper book which tallies with the copy of application for equity shares wherein the cheque numbers and amounts have also been stated. Therefore, the genuineness cannot be disbelieved unless the papers filed before the AO/Ld. CIT(A) or before us is found to be false or fabricated. 9. Coming to the creditworthiness, we note that from the aforesaid figures which emanate from the Balance Sheet placed along with the paper book of each subscriber shown that the share subscribers had enough money to subscribe in the share capital. We note that all of them have filed their income tax acknowledgement which shows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad confirmed the transaction with the assessee company. The evidence which were filed before the AO included the following details. (a) Income Tax Return of the share holders (b) Audited Accounts of the share holders (c) Share Application Forms (d) Share Allotment Letters (e) Copy of the bank account of the share holders (f) Transaction with the appellant was duly highlighted in the bank statement (g) Copy of assessment orders of the shareholders (h) Evidences of source of source of the share holders 11. Taking note of the aforesaid documents, the Ld. CIT(A) was of the opinion that assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share subscribers and deleted the addition made u/s. 68 of the act. Before we adjudicate as to whether the Ld. CIT(A)'s action is right or erroneous, let us look at section 68 of the Act and the judicial precedents on the issue at hand. 12. Section 68 under which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: "Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him. " ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor... " ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant from. undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness." 15. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- "4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order." 16. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income-tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Income-tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 18. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. " It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought Rs. 4, 00, 000/- and Rs. 20,00,000/- towards share capital and share premium respectively amounting to Rs. 24,00, 000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the guidelines of the Stock Exchange and the Assessee Company had been allotted shares on the basis of allotment approved by the Stock Exchange. The Assessee Company had duly filed the return of allotment with the Registrar of Companies, giving complete particulars of the allottees. The Commissioner of Income Tax (Appeals) found that inquires had confirmed the existence of most of the shareholders at the addresses intimated to the Assessing Officer, but the Assessing Officer took the view that their investment in the Assessee Company was not genuine, on the basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds." 22. Further, our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner of Income Tax vs M/s. Leonard Commercial (P) Ltd on 13 June, 2011 in ITAT NO 114 of 2011 wherein the Court held as follows: "The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs. 8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts. Firstly, 50,000 shares were purchased at the time of incorporation of the assessee company i.e. the applicant is the promoter of the assessee. Subsequently 50,00,000 shares were also acquired by the applicant through allotment at Rs. 1/ share. It was also brought to our notice that the present shareholder is holding 47.91% shares out of the total shares. The same are also present share holders of the assessee company holding the same number of shares. Thus, the applicant is an associate of the assessee company holding major number of shares. The share application was made by account payee cheque. This company was incorporated on 19.07.2011 and was having company identification number U51909WB2011PTC165056. This company duly filed its return of income before ITO Ward 8(1), Kolkata and was having PAN AAECB6243M. This company was having a paid up capital with free reserves and surplus of Rs. 51,82,293/- as on 31.03.2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the share application are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s holding 47.91% as on 31.03.2018. 25. In respect of M/s. Recon Agencies Ltd., our attention was drawn by the Ld. AR to pages 81-122 of the paper book wherein we note that this company invested a sum of Rs. 2,00,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 11.08.2011 and was having company identification number U51909WB2011PLC166320. This company duly filed its return of income before ITO Ward 12(l), Kolkata and was having PAN AAFCR4184A. This company was having a paid up capital with free reserves and surplus of Rs. 51,01,02,258/- as on 31.03.2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available from a perusal of the bank statement and other documents filed in the paper book. 26. In respect of M/s. Paridhi Dealer Ltd., Ld. AR drew our attention to pages 123- 164 of the paper book wherein we note that this Company invested a sum of Rs. 2,00,00,000/- in the appellant company. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available from a perusal of the bank statement and other documents filed in the paper book. 29. In respect of M/s. Fairlink Mercantile Pvt. Ltd., Ld. AR drew our attention to pages 253-299 of the paper book wherein we note that this Company invested a sum of Rs. 4,00,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 01.08.2011 and was having company identification number U51909WB2011PTC165688. This company duly filed its return of income before ITO Circle 2(1), Kolkata and was having PAN AABCF7790E. This company was having a paid up capital with free reserves and surplus of Rs. 49,99,21,78U- as on 31/03/20L2. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available from a perusal of the bank statement and other documents filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. Hence the source of source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/ applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. 32. We also note that recently the ITAT Kolkata in several cases has deleted the addition on account of share application in similar circumstances. The relevant portion of the decisions are as follows: (a) The Ld ITAT Kolkata. in DC IT Vs Global Mercantiles Pvt.Ltd in ITA No. 1669/Kol/2009 dated 13-01-2016. In this the decision the Ld. Tribunal held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the decision of the apex court (supra) and Jurisdictional High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the ground no.2 raised by the Revenue is dismissed. 4. The last ground to be decided in this appeal of the Revenue is as to whether the Learned CIT(A) is justified in deleting the addition u/s 68 of the Act made in respect of allotment of shares to 20 individuals for an amount of Rs. 57,00,000/- in the facts and circumstances of the case. 4. 1. The brief fact of this issue is that the assessee had received share application monies from 20 individuals in the earlier year which were kept in share application money account. During the asst year under appeal, the assessee allotted shares to these 20 individuals out of transferring the monies from share application money account to share capital account. The details of 20 individuals are reflected in page 6 & 7 of the Learned CIT(A) order. The Learned AO asked the assessee to produce the shareholders before him. He found that the assessee did not do so but furnished copies of pay orders used for payments to the assessee company and also furnished income tax particulars and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable on record including the detailed paper book filed by the assessee. We find that the additional ground raised by the assessee separately before us vide its covering letter dated 9. 12.2011 is admitted as it appears to be a genuine and bonafide error of omission on the part of the Revenue from not raising this ground in the original grounds of appeal filed along with the memorandum of appeal. Moreover, it does not require any fresh examination of facts. Hence the same is admitted herein for the sake of adjudication. 4.4. 1. We find from the details available on record that the share application monies from 20 individuals in the sum of Rs. 57,00,000/- has been received by the assessee during the financial year 2004-05 relevant to Asst Year 2005-06 and only the shares were allotted to them during the asst year under appeal. Admittedly no monies were received during the asst year under appeal and hence there is no scope for invoking the provisions of section 68 of the Act. Hence we hold that the order passed by the Learned CITA in this regard does not require any interference. Accordingly the ground no. 3 raised by the Revenue is dismissed. (b) The ITAT Kolkata in R.B Horticult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed." 6.2. We find that the issue is also covered by the decision of Hon'ble Delhi High Court in the case of CIT vs Value Capital Services P Ltd reported in (2008) 307 ITR 334 (Del) , wherein it was held that: "In respect of amounts shown as received by the assessee towards share application money from 33 persons, the Assessing Officer required the assessee to produce all these persons. While accepting the explanation and ITA No. 632/KoI12011--C-AM M/s. R.B Horticulture 6 & Animal Proj. Co. Ltd the statements given by three persons the Assessing Officer found that the response from the others was either not available or was inadequate and added an amount of Rs. 46 lakhs pertaining to 30 persons to the income of the assessee. The Commissioner (Appeals) upheld the decision of the Assessing Officer. On appeal, the Tribunal set aside the order of the Commissioner (Appeals) and deleted the additions. On further appeal: Held, dismissing the appeal, that the additional burde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s none of the business of the assessee to question the addresses of the applicants as long as they affirm the address. The applicants were duly incorporated bodies under the Companies Act. 1956 since long. They have been regularly filing their returns of income under the Income Tax Act and are being assessed by the Revenue since long. Some of them are even registered as Non-Banking Financial Companies with Reserve bank of India. They have been filing returns regularly with Registrar of Companies and RBI since long. The letters might have been received at their old addresses because in case of change in the address, people instruct the incumbents at old addresses not to refuse the receipt of letters and receive the same. Just because, a letter was received at the old address instead of present address, it cannot be said that the identity of the applicant has not been verified. All of these companies had duly replied to notice u/s. 133(6) and confirmed the transaction with all the evidences. The AO has not raised any objection on any of the information furnished before him. The AO has not asked the respective Company applicants also to explain the alleged discrepancy in the address. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) I have considered the submission of the appellant and perused the assessment order. I have also gone through the details and documents filed by the appellant company in the course of assessment: proceedings vide letter dt. 3-10-2007. On careful consideration of the facts and in law I am of the opinion that the AO was not justified in making, the addition aggregating to Rs. 54,00,000/- u/s.68 of the Act being the amount of share application money by holding that the appellant company has failed to prove the identity, and creditworthiness of The creditors as well as the genuineness of transactions. It is observed that all the three share applicant companies i.e. M/s. Shree Shyam Trexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. Jewellock Trexim Pvt. Ltd. had filed their confirmations wherein each of them confirmed that they had applied for shares of the appellant -company. All the three companies provided- the cheque number, copy of bank statements and their PAN. It is observed that these companies also filed, copies of their return of income and financial statements for as well as copy of their assessment order u/s. 143(3) of the I. T Act for AY 2005-06. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y.2005- 06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. " 33. Reliance in this regard is also placed on the decision of the Delhi High Court in the case of CIT Vs Gangeshwari Metal (P) Ltd (ITA No. 597 of 2012) dated 21.01.2012. In this case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the share applicant and the genuineness of the transaction. The AO however chose to sit back with folded hands till the assessee exhausted all the evidence in his possession and then merely reject the same without conducting any inquiry or verification whatsoever. The Court thus held that the decision of CIT Vs Novo Promoters & Finlease (P) Ltd (342 ITR 169) was not applicable to the facts of the case. Instead it was held that the issue in hands was on the lines of the decision of the Supreme Court in the case of CIT Vs Lovely Exports Pvt Ltd (319 ITR 5). Accordingly the addition made under Section 68 on account of share application was deleted. 34. We would like to reproduce the Hon'ble High Court order in CIT vs. Gangeshwari Metal P. Ltd. in ITA no. 597/2012 judgement dated 21.1.2013, the Hon'ble High Court after considering the decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgement in the case of CIT vs. Lovely Exports 319 ITR (Sat 5)(S.C) held as follows:- "As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under Section 68 of the Income Tax Act 1961. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law" 35. The case on hand clearly falls in the category where there is lack of enquiry on the part of the A. O. as in the case of Ganjeshwari Metals (supra). b) In the case of Finlease Pvt Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8/ it was held as follows. "6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application affidavits of the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold the order of the Ld. Commissioner of Income Tax (Appeals) 37. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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