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TMI Blog2018 (10) TMI 1661X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year. In this regard the AO sought details concerning correspondence made for share application, trade license/professional tax etc. of the applicant, address proof, board resolution & justification of issuing shares at high premium. At Para 3.4 of the assessment order the AO acknowledges that the relevant documents of the share applicants who had subscribed to the assessee's equity capital i.e. audited accounts, IT Acknowledgment, bank statement, explanation regarding source of the source of funds, Board Resolution, Form 18 filed before the ROC etc. were furnished by the assessee and were available on his record. Before the AO the assessee also furnished a detailed justification regarding the premium charged on shares. The AO thereafter had issued summons upon the Directors of the investee companies, which were served but none of the Directors attended the summons. The AO noted that although the assessee's transaction and the introduction of fresh capital may appear to be real but the apparent had to be distinguished from the real. According to AO, most of the share subscribers had petty income in form of interest or commission and that they did not declare any substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook. With regard to the identity of the share subscribers, he submitted that all the share applicants were paper companies and the fact that none of the Directors attended the summons proved their non-existence. Thereafter the Ld. DR first referred to the investment of Rs. 50,00,000/- made by M/s Coxis Finance & Investment P Ltd and invited our attention to its IT Acknowledgment for AY 2012-13 to show that it had returned a meager income and hence the source of its payment ofshare application monies to the assessee company was in doubt and hence submitted that the creditworthiness of all the share applicants were suspicious. The Ld. DR further submitted that the assessee had not justified the reasons for issuing shares at a high premium and that this particular aspect was not dealt with by the Ld. CIT(A). Therefore according to the Ld. DR, the genuineness of the transaction remained unproved. He therefore vehemently argued that the order of the Ld. CIT(A) be reversed and that the order of the AO be restored. 5. On the other hand the Ld. AR first drew our attention to the several grounds raised by the Revenue in the appeal, each of which related to alleged deletion of addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of the share applicants. He also invited our attention to the explanation furnished by each of the share applicants regarding their source of funds. It was thus submitted that the fund flow position of the share applicant and not the profitability was the decisive criteria to examine the creditworthiness of the share applicants. Referring to the Ld. CIT(A)'s order, it was submitted that these factual aspects were taken into consideration and thereafter the Ld. CIT(A) was pleased to hold that the creditworthiness of the share applicants had been established. With regard to the genuineness of the transaction, the Ld. AR pointed out that it was never the AO's case that the assessee did not substantiate the justification for high share premium. He drew our attention to Para 3.1 of the assessment order wherein the Ld. AO noted that he had called for the justification of share premium to which the assessee company had furnished a detailed explanation along with computation of premium, which is available at Page 67 of the paperbook. According to Ld. AR, being satisfied with this explanation, the AO has nowhere in the entire assessment order alleged that the assessee company had faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of Bank Statements evidencing transaction with assessee - Source of Funds for making investments in the assessee company - Trade License/P.Tax Certificate etc. towards address proof - Copy of Resolution passed by the Board authorizing investment in shares of assessee - Reasons for making payment of premium. 9. It is noted that the all the above requisitioned documents were furnished before the AO which substantiated the transaction between the assessee company and the share applicants. It is therefore not a case where the documents sought from the applicants to examine the transaction were not available before the AO. As the regards the issue of nonappearance of the share applicants, we note that in such a case the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 / [2003] 127 Taxman 523, has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under:- "4. Mode of proof of entries in bankers' books Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." 11. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of AnandPrakashAgarwal reported in 6 DTR (All-Trib) 191 held as under:- "The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transaction of gifts, which undisputedly belonging to the respective donors themselves, in their own rights. No part of the credits in the said bank' accounts was generated from the appellant and/or from its associates, in any manner. The certificates issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look 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 perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee." ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness." 13. In the case of CIT VsJalan Hard Coke Ltd (95 taxmann.com 330), the Hon'ble Rajasthan High Court noted that the assessee had furnished the details of the share applicants but expressed its inability to produce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the present case" 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. Further the jurisdictional Calcutta High Court in the case of S.K. Bothra& Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata (347 ITR 347)also held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urable 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 UdhavdasKewalram 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 the evidence and the relevant law. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 CIT Vs Dataware Pvt Ltd (ITAT No. 263 of 2011) dated 21.09.2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. 24. In the light of the aforesaid decisions of the Hon'ble Apex Court and jurisdiction High court and other High Courts, let us now examine the present case in hand. We will examine each share subscribers totaling fifteen (15). The Ld. AR has extensively brought out the relevant facts in respect of each share subscribers which will throw light as to the identity, creditworthiness and genuineness of the share subscribers. We note from pages 68 to 99 of the paper book the details of M/s. Coxis Finance & Investment Pvt. Ltd. is given. We note that this company invested a sum of Rs. 50,00,000/- in the assessee company. The share application was made by account payee cheque. This company is a registered Non-Banking Financial Company with the Reserve Bank of India. Copy of the Certificate of Enrolment issued by the Professional Tax authorities identifying the said applicant has also been placed in the paperbook. For the relevant year the company had turnover from trading in shares & securities and interest income which aggregated to Rs. 4,20,03,297/-. This company duly filed its return of income before ITO Ward 6(1), Kolkata and was having PAN AABCC4057B. This company was having a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book wherein we note that this company invested a sum of Rs. 25,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 30/12/1994 and was having company identification number U63090WB1994PTC066993. This company is also a registered Non-Banking Financial Company with the Reserve Bank of India. This company duly filed its return of income before ITO Ward 9(3), Kolkata declaring income of Rs. 1,05,605/- and was having PAN AABCR3645N. This company was having a paid up capital with free reserves and surplus of Rs. 64,35,05,315/- 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. It is noted that the incometax assessment of this company was completed u/s 143(1) and the order passed by the CPC, Bengaluru is also available in the paper book. 27. Coming to M/s. Aachman Marketing Pvt. Ltd., Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney received by this company from M/s Fastspeed Agencies Pvt Ltd; which is evident from a perusal of the bank statement and other documents filed in the paper book. It is noted that the income-tax assessment of this company was framed by the ITO, Ward 9(4), Kolkata and the copy of the order passed u/s 143(3) is also available in the paper book. The AO of the share applicant has categorically mentioned that he has examined and accepted the source of funds i.e. the share capital raised by the applicant during the year. 29. Coming to M/s. Minolta Finance Ltd., our attention was drawn by the ld. AR to pages 205 to 228A of the paper book wherein we note that this company invested a sum of Rs. 40,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 15/01/1993 and was having company identification number L65921WB1993PLC057502. This company is a public limited company which had duly filed its return of income before ITO Ward 4(2), Kolkata and was having PAN AABCM7439F. This company was having a paid up capital with free reserves and surplus of Rs. 8,65,99,740/- as on 31/03/2012 and Rs. 8,91,21,950/- as on 31/03/2011 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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. It is noted that the income-tax assessment of this company was completed u/s 143(1) and the order passed by the CPC, Bengaluru is also available in the paper book. 32. In respect of M/s. Fasttrack Tie-up Private Limited, the Ld. AR drew our attention to pages 275 to 304 of the paper book wherein we note that this company invested a sum of Rs. 20,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 20/06/2005 and was having company identification number U51109WB2005PTC103828. This company duly filed its return of income before ITO Ward 9(2), Kolkata and was having PAN AAACFS9038L. This company was having a paid up capital with free reserves and surplus of Rs. 7,80,30,246/- as on 31/03/2012 and Rs. 4,80,16,365/- as on 31/03/2011 respectively. The company also had tangible asset base comprising of computer & office equipment. The copy of the bank statement of the Company is also duly available in the paper book. On examination of the bank statement it is taken note ..... 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 details filed in the paper book. It is noted that the income-tax assessment of this company was framed by the ITO, Ward 1(4), Kolkata and the copy of the order passed u/s 143(3) is also available in the paper book.The Ld. AR also drew our attention to the fact that apart from investing in shares of the assessee company, the share applicant had also advanced loan of Rs. 10,86,000/- to the assessee which was repaid during the year; details of which were available in the tax audit report filed in the paper book. It is noted that that the genuineness of this loan transaction with this applicant, M/s Agasyta Plastics Pvt Ltd has not been doubted by the AO. 35. In respect of M/s Meghna Saree Emporium Pvt Ltd, we note that the details are available at Pages 360 to 383 of the Paper book. This company invested a sum of Rs. 60,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 22/06/1993 and was ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds 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. It is noted that the income-tax assessment of this company was framed by the ITO, Ward 9(3), Kolkata and the copy of the order passed u/s 143(3) is also available in the paper book. 37. Coming to M/s. JiwanjyotiVinimayPvt Ltd, our attention was drawn by the Ld. AR to pages 415 to 443 of the paper book wherein we note that this Company invested a sum of Rs. 50,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 19/12/2008 and was having company identification number U51909WB2008PTC131379. This company duly filed its return of income before ITO Ward 6(2), Kolkata and was having PAN AACCJ1128K. This company was having a paid up capital with free reserves and surplus of Rs. 10,00,10,279/- as on 31/03/2012 and Rs. 6,01,04,669/- as on 31/03/2011 respectively. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital and reserve as noted above. 40. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, as we noted supra, these Companies are having capital in several crores of rupees and the investment made in the assessee company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's case that the addition made by the AO u/s 68 was based on mere suspicion and conjecture, lacking any cogent basis. 43. In the instant case before us, we also note that the share subscribing companies are duly assessed to income tax. The Ld AR had placed on record the copies of the assessment orders framed in the cases of several of the share subscribing companies, as noted above. It therefore cannot be disputed that the share subscribing companies are not in existence. From the assessment orders, it is noted that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record. We also find that the Ld. CIT(A) had categorically stated that the scrutiny assessments were framed on the share subscribing companies for the Asst Year 2012-13 which shows their existence is genuine and transactions carried out by them were the subject matter of examination by the income tax department in scrutiny proceedings. This fact has not been controverted by the Revenue before us. 44. We may gainfully refer to the judgment in the case of Pr. CIT Vs Paradise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 260A of the Income Tax Act cannot reappreciate the evidence to come to any contrary evidence. Considering that the authorities have rendered the findings of facts based on documents which have not been disputed, we find that there are no substantial question of law which arises in the present Appeal for consideration. 45. We also find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96 taxmann.com 469 (SC) wherein the SLP of the Revenue has been dismissed by the Hon'ble Apex Court. The brief facts of that case were that the addition u/s 68 of the Act was made by the Assessing Officer in respect of capital contributed by the partner of the firm. The Hon'ble Gujarat High Court noted that when the concerned partner had confirmed before the Assessing Officer about his fact of making capital contribution in the firm and that the said investment is also reflected in his individual books of accounts, then no addition could be made u/s 68 of the Act. The decision of Hon'ble Gujarat High Court is reported in (2018) 89 taxmann.com 80 (Guj HC). The SLP of the revenue against this judgment was dismissed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispute about the receipt of funds through banking channel nor there is any dispute about the identity, creditworthiness and genuineness of the investors and, therefore, the same has been established beyond any doubt and there should not have been any question or dispute about premium paid by the investors; therefore, unless there is a limitation put by the law on the amount of premium, the transaction should not be questioned merely because the assessing authority thinks that the investor could have managed by paying a lesser amount as Share Premium as a prudent businessman. The test of prudence by substituting its own view in place of the businessman's has not been approved by the Supreme Court. [Para 54]" (b) In the case of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 the Revenue contended that the fact that the shares were issued at high premium raised suspicion on the genuineness of the transactions. While dismissing this plea raised by the Revenue, the Hon'ble Bombay High Court held as under: (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue, by observing as under: "Whether the assessee-company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed, the investigation report which was specifically called from the concerned department was available but not discussed by the Assessing Officer. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants' particulars were available with the Assessing Officer in the form of balance sheets income-tax returns, PAN details etc. While arriving at the conclusion that he did, the Assessing Officer did not consider it worthwhile to make any further enquiry but based his order on the high nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the due process of law.In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in the above mentioned case laws to the facts of this case, we are inclined to uphold the order of the Ld. Commissioner of Income Tax (Appeals). 49. We also find that the reliance placed by the Ld DR on the decision of Hon'ble Calcutta High Court in the case of Rajmandir Estates supra was distinguishable on facts as the said decision was rendered in the context of validity of revisionary jurisdiction u/s 263 of the Act by the Learned Administrative Commissioner. This fact has already been addressed by this tribunal in the case of VSP Steel P Ltd supra. No decision whatsoever was rendered by the Hon'ble Jurisdictional High Court in the case of Raj mandir Estates P ltd on merits of the addition and hence does not come to the rescue of the revenue in the facts of the instant case. 50. Instead, we find that the decision of the Hon'bleDelhi High Court in the case of CIT Vs Gangeshwari Metal (P) Ltd (ITA No. 597 of 2012) dated 21.01.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent documentary evidences to establish the identity and creditworthiness 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. The relevant extracts of the judgment is 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 other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, the question is answered in the negative. The decision of the Tribunal is correct in law" 51. Further, in the decision of the Hon'ble Delhi High Court in the case of CIT v. Kamdhenu Steel & Alloys Ltd. [2012] 19 taxmann.com 26/206 Taxman 254/[2014] 361 ITR 220 is also relevant, wherein it was held as under : "Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; A.O. failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable." 52. The SLP filed against the above decision has been dismissed by the Hon'ble Supreme Court. 53. In the case of FinleasePvt 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 submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition on account of share application in similar circumstances. The relevant portion of the decisions, are as follows: (a) In the case of DCIT Vs Global Mercantiles Pvt. Ltd in ITA No. 1669/Kol/2009 dated 13-01-2016, this Tribunal held as follows: "3.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed are not reiterated herein for the sake of brevity. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned Ld. CIT(1) on the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ud reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 balance sheets of all the shareholders. The Learned AO on analyzing all the balance sheets observed that the shareholders have paltry income and small savings and none of them have any bank account and huge cash balances were shown in their hands out of which Pay orders were obtained. Based on this, the Learned AO concluded that these shareholders do not have creditworthiness to invest in the assessee company and brought the entire sum of Rs. 57,00,000/- to tax as unexplained cash credit u/s 68 of the Act. 4.2. On first appeal, the Learned CIT(A) observed that entire share application monies of Rs. 57,00,000/- we received during the previous year 2004-05 relevant to Asst Year 2005-06 from 20 persons and the shares were allotted to them during the asst year under appeal. He observed that the assessee had furnished details of the share applicants giving the date wise receipts, mode of payment, amount, name, address, income tax returns, PA No. of share applicants along with their balance she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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. "6. We have heard the Learned DR and when the case was called on for hearing, none was present on behalf of the assessee. However, we find from the file that the assessee had filed a detailed paper book and written submissions. Hence the case is disposed off based on the arguments of the Learned DR and written submissions and paper book already available on record. The facts stated in the Learned CIT(A) were not controverted by the Learned DR before us. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 burden was on the department to show that even if the share applicants did 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. " 6.3. We find that the argument of the Learned DR to set aside this issue to the file of the Learned AO for verification of share subscribers would not serve any purpose as the ratio decided in the above cases is that in any case, no addition could be made in the hands of the recipient assessee. In view of the aforesaid findings and respectfully following the decision of the apex court (supra), Jurisdictional High Court (supra) and Delhi High Court (supra), we find no infirmity in the order of the Learned CIT(A) and accordingly, the grounds raised by the Revenue are dismissed." (c) In the case of ITO Wd.3(2) Kol, vs. M/s. Steel Emporium Ltdin ITA No.1061/Ko1/2012 dated 05-02-2016, this Tribunal held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished before him. The AO has not asked the respective Company applicants also to explain the alleged discrepancy in the address. The AO has not brought any material on account of record to disbelief the evidences furnished with him and treat the transaction as not genuine. The assessee submitted the following material at the time of assessment. a) Copy of share applications from the share applicants (copies enclosed) b) Copy of Form 2 filed with Registrar of Companies, West Bengal (copy enclosed) c) Copy of Form 18 about the Registered Office of the applicants for change of address subsequent to the date of allotment, i.e. 31.03.2009 (copies enclosed) d) Members register e) Share application & Allotment Register f) Copy of board resolution. g) Replies from Share applicants to the notice u/s. 133(6) issued to them by the AO seeking information and documents about the sources and to examine their identity, genuineness of the transaction and their creditworthiness. (copy enclosed). h) Copy of audited accounts. i) Copy of bank statements. j) Copy of Income tax acknowledgment of return filed for AY 2009- k) Copy of PAN Card. l) Details of sources of funds. m) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as copy of their assessment order u/s. 143(3) of the I. T Act for AY 2005-06. In the case of M/s. JewellockTrexim Pvt. Ltd. the assessment for AY 2005-06 was completed by the ITO Ward 9(3), Kolkata and the assessments in the case of M/s. Navalco Commodities Pvt. Ltd. and M/s. Shree ShyamTrexim Pvt. Ltd. for A. Y.2005-06 and AY.2004-05 respectively were completed by the I TO, Ward 9(4), Kolkata. Under the circumstances, I am of the opinion that the AO was not justified in holding that the share applicant companies were not in existence. The assessment orders were completed on the address as provided by the appellant company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies were not in existence at the given address. Since the appellant company had provided sufficient documentary evidences in support of its claim of receipt of share application money, I am of the opinion that the no addition u/s.68 could be made in the hands of appellant company. On going through the various judicial pronouncements relied upon by the appellant, it is observed that the view taken as above is also supported by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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