TMI Blog2019 (4) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity, creditworthiness and genuineness have been proved beyond doubt. All documents that is, the PAN details, bank account statements, audited financial statements, balance sheet, profit and loss account, Income Tax acknowledgments, and ROC statements etc were placed on AO's record. One of the directors of share applicant companies appeared before the AO in response to summon u/s 131 of the Act and explained the genuineness of three share applicants. Therefore, considering this factual position and precedents relied on the subject, as noted above, we delete the addition made by the assessing officer U/s 68 - Decided in favour of assessee. - ITA No. 1811/Kol/2017 - - - Dated:- 3-4-2019 - Shri A. T. Varkey, J.M. And Dr. A. L. Saini, A.M. For The Appellant : Shri J.P. Khaitan, Sr. Counsel And Shri V.N Purohit, ld. AR For The Respondent : Shri A.K. Singh, CIT, ld. DR ORDER Per Dr. A.L.Saini, A.M.: The captioned appeal filed by the Assessee, pertaining to assessment year 2013-14, is directed against the order passed by the Commissioner of Income-tax (Appeals)-, in Appeal No.58/CIT(A)/DGP/2016-17, dated 06.07.2017, which in turn arises out of an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00012. AACCH2225F 6530000 3265000 32650000 32650000 65300000 30.3.2013 Prism Vintrade Pvt. Ltd AE-183, Rabindra Pally Bazar, Kestopur, Kolkata700 101. AAFCP0762J 5960000 2980000 29800000 29800000 59600000 30.3.2013 Sushma Chawla 84500 42250 422500 422500 845000 30.3.2013 Total 17499500 8749750 174995000 In order to verify the identity of the shareholder, genuineness of transaction and the creditworthiness of the shareholder, notice under section 131 was issued by assessing officer through registered post, to Sri Mohan Chawla, the Directors of the Companies at the Companies given address. In response to the summon, Sri Kumar Chand Chawla another Director of the aforesaid three companies appear and his deposition was recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. M/s Gourav Enterprises Pvt. Ltd. M/s C P Steel Pvt. Ltd. M/s Gannet Vintrade Pvt. Ltd. M/s HavenVimcom Pvt. Ltd. M/s Prism Vintrade Pvt.Lt.d. 6. Please produces audited account of M/s Gannet Vintrade Pvt. Ltd. Ans: The same are furnish to you. 7. Please state in details about investment of M/s Gannet Vintrade Pvt. Ltd. in shares of M/s C P. Re-Rollers Ltd. Ans. During the year ended on 31-03-2013 M/s Gannet Vintrade Pvt. Ltd. paid ₹ 4,92,50,000/- for 24,62,500 Equity Shares of C P Re-Rollers Ltd. at ₹ 10/- per share face value and ₹ 10/- per share as share premium. 8. Please explain why M/s Gannet Vintrade Pvt. Ltd. invested in shares of M/s C P Re-Rollers Ltd.? Ans: As the M/s C. P. RE-Rollers Ltd. is our group and family companies and we decided to invest in Group Company where money will be in safe condition within our own monitoring system. 9. Please explain the source of such investments? Ans: The Company had assets in the form of shares of various companies which it sold at cost price during FY 12-13 and the funds were invested in C P Re-Rollers Ltd. A d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium money raised from paper companies were disallowed u/s 263/147/143(3) in the A.Y. 2010-11 by the respective assessing officer, ITO, Ward-2(3) and 2(2), Durgapur, the details of which are given below: Names of share applicant companies Particulars for the A.Y 2010-11 Investment in unquoted shares at cost price in the A.Y 2010-11 M/s. Prism Vintrade Private Limited Issued, subscribed paid up equity share:Rs.12,55,000/-. Share Premium: ₹ 6,27,50,000/-. Treated as Income from other source by the AO. Rs.6,27,50,000/-( including b/f amount of the A.Y 2009-10 as break up of two years not furnished) M/s. Gannet-Vintrade Private Limited Issued, subscribed paid up equity share:Rs.12,29,000/-. Share Premium: ₹ 6,14,50,000/-. Treated as Income from other source by the AO. Rs.6,04,50,000/- (including b/f amount of the A.Y 2009-10 as break up of two years not furnished) M/s. Haven Vincom Pvt. Ltd Issued, subscribed paid up equity share:Rs.14,31,000/-. Share Premium: ₹ 6,52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d were treated as its own money and disallowed u/s 68 resulting in huge demand (as already discussed). This had been used to purchase unquoted shares of paper companies at huge price which again sold to paper companies and sale proceeds invested in assessee company. (b). i) No agreement of such sales of unquoted shares, ii) No contract note/ no other corroborative evidence for such sale of unquoted share at cost price to companies which have no business relation either with the assessee company or with the three share applicant companies could be produced by Sri Kumar Chand Chawla, common Director of aforesaid three share applicant companies and assessee company. Therefore, creditworthiness of the three share applicant companies in which, Sri Mohan Chawla and Sri Kumar Chand Chawla (Directors of assessee company) are common directors, could not be substantiated. (c ). These three share applicant companies (M/s. Prism Vintrade Private Limited, M/s. Gannet- Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd ), do not have business activities, no Fixed assets as evident from the Audited Statement of accounts of these companies, which are enumerated below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants as per the provisions of section 68 of the Act, and noted that the amount of ₹ 17,49,95,000/- claimed to have been received as share application money and share premium is treated as Assessee s own unaccounted income introduced in its business in the disguise of share application and share premium money, hence he made addition to the tune of ₹ 17,49,95,000/-. 10. Aggrieved by the addition made by the assessing officer, the assessee carried the matter in appeal before the ld CIT(A), who has confirmed the addition made by the assessing officer. Aggrieved, the assessee is in appeal before us. 11. Ld Counsel, Shri J.P.khaitan, begins by pointing out that assessee furnished before the assessing officer the copy of Balance Sheet, profit and loss account, final accounts, Copy of Income Tax return acknowledgement and bank statement for the relevant period evidencing the amount received from share applicants on account of Share capital and share premium through banking channel. In order to verify the identity of the shareholder, the genuineness of transaction and the creditworthiness of the shareholder, notice under section 131 was issued by assessing officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract notes do not apply in case of these three share applicant companies also, that is, M/s. Prism Vintrade Private Limited, M/s. Gannet-Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd. Therefore, the argument of the AO during the assessment stage that assessee company failed to furnish the contract notes is baseless. 13. On the other hand, Ld DR for the Revenue submitted before us that it is well settled principal of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs CIT, (214 ITR 801) that the true nature of transactions have to be ascertained in the light of the Surroundings circumstances. The findings emanating from the investigation carried out reveal that the circumstances surroundings the transaction of alleged share capital proves the transactions as not genuine. Undisputedly, the onus of proving of credits in its books of accounts lies with the assessee and the settled position of law is that the assessee is required to prove all the three criteria, that is identity, genuineness and creditworthiness. But in the instant case, the assessee company failed to discharge this onus. The Assessing Officer was justified in adding share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory, the sums so credited could be charged to income-tax as income of the assessee of the relevant assessment year. We note that with effect from assessment year 2013-14, section 68 of the Income Tax Act has been amended to provide that if a closely held company fails to explain the source of share capital, share premium or share application money received by it to the satisfaction of the assessing officer, the same shall be deemed to be the income of the company under section 68 of the Act. With this background, now we shall proceed to examine in the assessee s case under consideration, whether assessee has discharged his onus to prove, prima facie, the identity, creditworthiness and genuineness of the share capital and share premium received by it from three share subscribers companies viz: M/s. Prism Vintrade Private Limited, M/s. Gannet- Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd. 15. We note that these three share applicant companies Viz: M/s. Prism Vintrade Private Limited, M/s. Gannet Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd, raised share capital and share premium by issuing their own shares to other companies. Out of the money so recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of the Bank Statement of Share applicant companies where from the amount was debited. 11) Copies of Bank statement of the assessee company where the share application money and premium were credited. 12). Cheque Number, the amounts subscribed by shareholders along with the name of bank its branch address and the number of shares allotted to them with face value on the date of allotment. 13) Common Director of these three share applicant companies ( who is director in assessee company as well as director in share applicant companies) appeared before the assessing officer in response to notice u/s 131 of the Income Tax Act and submitted documents and evidences before the AO. With help of these plethora documents, evidences and personal appearance before the AO in response to notice U/s 131, during the assessment proceedings, the ld Counsel claimed that the assessee company has proved the identity, genuineness and creditworthiness of all these three share applicant companies in the following manner. Identity of all the share applicants have been proved by the assessee with help of PAN Number, ROC details and bank statements. We note that before issuing PAN, the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies and assessee company. Therefore, creditworthiness of the three share applicant companies in which, Sri Mohan Chawla and Sri Kumar Chand Chawla (Directors of assessee company) are common directors, could not be substantiated. (3). These three share applicant companies (M/s. Prism Vintrade Private Limited, M/s. Gannet- Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd ), do not have business activities, no Fixed assets as evident from the Audited Statement of accounts of these companies. 18. Sr. Counsel Mr. J.P. Khaitan, submitted before us about the first reason of assessing officer for making the disallowance under section 68 of the Act. He stated that the share applicant company, M/s Gannet Vintrade Private Limited has share capital and reserve and surplus to the tune of ₹ 6,15,24,186/-. Out of these share capital and free reserve, M/s Gannet Vintrade Private Limited, purchased shares of other companies at ₹ 6,09,00,000/- (vide pb-7). During the assessment year 2013-14, M/s Gannet Vintrade Private Limited, sold its investment and purchased share capital with premium at ₹ 4,92,50,000/- in assesee company (M/s C.P.Re Rollers Ltd). The share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of ITAT in the case of M/s Maa Amba Towers, ITA No.1381/Kol/2015, for A.Y.2012-13, order dated 12.10.2018, wherein it was held as follows: 3.Mr. Choudhury vehemently contends during the course of hearing that the Assessing Officer had rightly made the impugned addition since the taxpayer had failed to prove identity, genuineness and creditworthiness of the share premium money. He terms the impugned share subscription premium ₹690/- per share having face value of ₹10/- each as highly exorbitant. Case laws Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) is further quoted during the course of hearing that the relevant evidence submitted during the course of assessment has to be considered as per the human probabilities by removing all blinkers. Our attention is thereafter invited to the relevant nuances of such share subscription routing involving multiple layers to plough back unaccounted monies back to the books. We find no merit in the Revenue s instant grievance in the light of relevant facts on record. There is no dispute about the assessee s having declared its share subscription premium from M/s Agrani Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessing officer in the assessment of M/s Haven Vincom Pvt. Ltd ( vide assessment order-paper book pg.173) . We note that M/s Haven Vincom Pvt. Ltd has utilized the same money ( which it received by raising share capital/premium and not disallowed by AO U/s 68) to purchase the share capital and share premium in the assessee company (M/s C.P. RE Rollers Ltd) therefore it should not be disallowed under section 68 of the Act, in the hands of the assessee company, as the Department itself accepted genuine money. Hence, in the case of M/s Haven Vincom Pvt. Ltd, the identity, creditworthiness and genuineness have been proved beyond doubt about ₹ 6,53,00,000/-. 21.In case of Sushma Chawala for share application of ₹ 4,22,500/- and share premium of Rs. ₹ 4,22,500/-, the ld Counsel explained the identity, creditworthiness and genuineness therefore no disallowance can be made. Therefore, we are of the view that based on the factual position narrated above and the fact that in case of two companies, Viz Gannet Vintrade Pvt Ltd and Prism Vintrade Pvt Ltd, the amount of their share capital and share premium have already been disallowed by assessing officer under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments in the assessee company ( C.P.Re-Rollers Ltd) therefore, in the hands of assessee company ( C.P.Re-Rollers Ltd), the genuineness, identity and creditworthiness of the amount should be treated to be explained. We also note that these companies did not have any source to invest the money in the assessee company C.P. Re Rollers Ltd, except, the money which had been disallowed by the Assessing Officer u/s 68 of the Act. Therefore, since the money has been disallowed u/s 68 and the Assessing Officer has imposed the tax, hence it becomes the investors money. In the case of M/s Haven Vintrade Pvt. Ltd., we note that the Assessing Officer has not disallowed the amount u/s 68 of the Act, it is accepted by the Department as a genuine and hence the identity, creditworthiness and genuineness has been proved beyond doubt. Hence, once taxed money should not be taxed again, considering the fact that there is no movement in the cash flow in the assessee company except the amount disallowed u/s 68 of the Act therefore, considering this aspect, we delete the addition made in the hands of the assessee ( C.P.Re-Rollers Ltd). 23. Now we deal with other grievances of the assessing officer. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was having paid up capital with free reserve to the tune of ₹ 6,15,24,186/- (Rs.13,29,000 + ₹ 6,01,95,186). The copy of the bank statement of the company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash prior to issue of cheque to the assessee company (C.P. Re-Rollers Pvt. Ltd.). The copy of the assessment order u/s 263 / 147 / 143(3) of the Act, for assessment year 2010-11 is available in the paper book page 134. The assessing officer made disallowance U/s 68 at ₹ 6,01,21,000/-. The details of source of funds from which this company had made the share application are also available in the paper book. One of the common directors of the assessee company himself presented before the Assessing Officer in response to the summons u/s 131 of the Act. ( vide PB-107) and the director has submitted the required documents before the Assessing Officer through letter dated 11.03.2016 which is being reproduced below: 11th March, 2016 To Mr. S K Roy Deputy Commissioner of Income Tax Circle-I, Durgapur City Centre Durgapur - 713216 Subject: Submission of Docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book page 149. The details of source of funds from which this company had made the share application are also available in the paper book. The deposition dated 09.03.2016 of Shri Kumar chand Chawla, director is available in the paper book (PB-137 to 139). Reasons for investment sold vide letter dated 11.03.2016 as required by the Assessing Officer is available in the paper book ( vide PB-140) which is given below: 11th March, 2016 To Mr. S K Roy Deputy Commissioner of Income Tax Circle-I, Durgapur City Centre Durgapur - 713216 Subject: Brief of details towards share sold on Cost Price during F.Y. 2012-13 Against Notice: U/s 131 of the IT Act 1961. Dear Sir, As per proceeding of notice u/s 131 of the Income Tax Act, 1961, you had required to know why we are sold our current assets share at cost price to unknown or out of Group Company. So we hereby confirm you that our management and board director decided to sale our all investment in share of ₹ 6,14,03,750 for 5,28,600 shares to our known reliable business houses and friends circles. And we were spared our requirement to closest friends and knows bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment as asked by the Assessing Officer is available in the paper book (vide PB-172) which is given below : 11th March, 2016 To Mr. S KRoy Deputy Commissioner of Income Tax Circle-I, Durgapur City Centre Durgapur - 713216 Subject: Brief of details towards share sold on Cost Price during F.Y. 2012-13 Against Notice: U/s 131 of the IT Act. 1961. Dear Sir, As per proceeding of notice u/s 131 of the Income Tax Act, 1961, you had required to know why we are sold our current assets share at cost price to unknown or out of Group Company. So we hereby confirm you that our management and board director decided to sale our all investment in share of ₹ 6,39,96,000 for 10,91,541 shares to our known reliable business houses and friends circles. And we were spared our requirement to closest friends and knows business house, and any how after so many exercise we got various companies/persons are ready to buy our existing invested share at cost price only. After this big exercise we were sold our existing share to (List enclosed) in F.Y. 2012-13, and after that the company management again decide to invest all collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, in respect of these two share applicant companies, as it would tantamount to double addition. And even otherwise the source of the investor stands proved to be their income by their Assessing Officer (A.O) 26. To make it more clear, it can be said that the money of these two companies Viz: M/s. Prism Vintrade Private Limited, M/s. Gannet Vintrade Private Limited, had already been taxed as an accounted money under section 68 of the Act in their respective income tax assessments under section 263/147/143(3) of the Act. The assessing officer has himself admitted, this fact, in his assessment order. Thus, we note that all the share application money and share premium money which were received by the assessee company from the aforesaid two share applicant companies ( Viz: M/s. Prism Vintrade Private Limited, M/s. Gannet Vintrade Private Limited,), during the period December, 2012 to March, 2013 had already been taxed by the Department in hands of two companies in assessment under section 68 of the Act, treating as cash credit. The said money which was taxed under section 68 of the Act in the hands of these two companies were utilized by these two companies to purchase sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies and the fact that only one of the Directors of these three share applicant companies attended would not prove the identity. We do not agree with ld DR for the Revenue that all the share applicants were paper companies. We find that stand of the ld DR is contrary to the assessment order of the Investor companies. We already noted in this order that the AO of these Investor companies have, in fact, assessed the share capital and share premium as their income under section 68 of the Act. Therefore, once taxed money can not be taxed again in the hands of assessee company. If this is so, how could these Investor companies be said to be paper companies. 28. On the other hand the Ld Counsel first drew our attention to the grounds raised by the assessee in the appeal. The evidences which were filed before the AO, included the following details. 1) Return of ROC, that is, form No. 2 submitted before R.O.C. 2) PAN Number copies of each share subscriber. 3) Copy of Balance Sheet, Profit and loss account of all share applicant companies. 4) Details of investments sold by all share applicant companies. 5).Transaction with the assessee was duly highli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction, the Ld Counsel pointed out that it was never the AO s case that the assessee did not substantiate the justification for high share premium. 29. 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. Section 68 under which, the addition has been made by the AO 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 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. The phraseology of section 68 is clear. 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. In this case 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 . The Supreme Court while i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 369 and 370 of this report are reproduced hereunder:- Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee 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 noncompliance 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or otherwise. 27. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of Anand PrakashAgarwal 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 by the banks are construable as evidence about the ownership of the transferors or their respective bank accounts, as per s.4 of the Bankers' Books evidence Act 1891, which read as under: 4. Where an extract of account was duly signed by the agent of the bank and implicit in its was a certificate that it was a true copy of an entry contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 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 subcreditor, 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing 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 subcreditors to prove their creditworthiness. 33. In the case of CIT Vs. Jalan 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 share applicants before the AO for examination. The Hon ble High Court held that mere non-appearance of share applicants could not be reason enough to assess the share application monies received by way of unexplained cash credit. The SLP filed by the Revenue against this judgment has been dismissed by the Hon ble Supreme Court. The relevant extracts of the judgment are as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 36. 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 transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Data ware 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 into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of ₹ 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 ₹ 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 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. 41. Our attention was also drawn to the decision of the Hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is vivid that all the share applicants are (i) regular income tax assessees, (ii) they are filing their return of income, (iii) the board resolutions approving the investment in the assessee company is available on record, (iv) the share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the share applicants have furnished declaration explaining the source of funds out of which the cheques were issued to the assessee company, (viii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above. 45. 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 respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appeal is allowed accordingly. No order as to costs. 47. 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 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 2010-11 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. 48. We may gainfully refer to the judgment in the case of Pr. CIT Vs Paradise Inland Shipping (P) Ltd (84 taxmann.com 58) wherein the Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 49. 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 Hon ble Supreme Court. 50. We may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions. 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, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that it is declaratory . Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing 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 premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the Commissioner (Appeals) and the Tribunal, these conclusions were clearly baseless and false. This Court is constrained to observe that the Assessing Officer utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. 51. We also rely on the following judgments of the Coordinate Bench of ITAT Kolkata, where based on same facts, and identical and common grounds and coordinate Bench deleted the addition: (1) M/s Jagannath Banwarilal Texofabs Pvt Ltd, in ITA No. 1762/Kol/2016, For A.Y. 2012- 13, order dated 26.10.2018. (2) M/s Wiz-Tech Solutions Pvt Ltd, in ITA No.1162/kol/2015,for A.Y. 2012-13, order dated 14.06.2018. 52. To conclude, Section 68 of the Act p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h share subscriber. 3) Copy of Balance Sheet, Profit and loss account of all share applicant companies. 4) Details of investments sold by all share applicant companies. 5).Transaction with the assessee was duly highlighted in the bank statement 6). Explanation along with evidence of source of source of the funds of the share applicant Companies. 7). Audited Accounts of the share holders. 8) Relevant address proofs / Form filed by the share applicants with ROC. 9). Income Tax Return of share applicant companies. 10) Copy of the Bank Statement of Share applicant companies where from the amount was debited. 11) Copies of Bank statement of the assessee company where the share application money and premium were credited. 12). Cheque Number, the amounts subscribed by shareholders along with the name of bank its branch address and the number of shares allotted to them with face value on the date of allotment. 13) Common Director of the share applicant companies ( who is director in assessee company as well as share applicant companies) appeared before the assessing officer in response to notice u/s 131 of the Income Tax Act and submitted documents and evid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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