TMI Blog2019 (4) TMI 1297X X X X Extracts X X X X X X X X Extracts X X X X ..... IRON STEEL PVT. LTD., [ 2019 (3) TMI 323 - SUPREME COURT] , whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 by complying with the personal appearance of directors. Hence the decision relied upon by the ld DR is factually distinguishable and does not advance the case of the revenue. In the facts of the present case, both the nature source of the share capital received with premium were 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 before the AO. Accordingly, all the three conditions as required u/s. 68 i.e. the identity, creditworthiness and genuineness of the transaction were placed before the ld AO and the onus shifted to the ld AO to disprove the materials placed before him. Without doing so, the addition made by the ld AO is based on conjectures and surmises cannot be justified. - Decided in favour of assessee. - I.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 800,000 10 Primerose Commosales Private Limited 800,000 11 Rockwell Vincom Private Limited 800,000 12 Trustworthy Viniyog Private Limited 800,000 13 Zigma Steels Private Limited 800,000 ALLOTMENT ON 30.03.2012 14 Capricon Iron steel Traders Pvt. Ltd. 1,000,000 15 Dhanlabh Techno Solutions Advisors Pvt. Ltd. 1,000,000 16 Dharmik Khad Suppliers Pvt. Ltd. 1,000,000 17 Diksha Stationery Merchants Pvt. Ltd. 1,000,000 18 Exclusive Ad consultants Pvt. Ltd. 1,000,000 19 Green Valley Financial Consultants Pvt. Ltd. 1,000,000 20 Greenview land building Advisors Pvt. Ltd. 1,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of the ld AO in making addition u/s 68 of the Act. 5. Aggrieved, the assessee is in appeal before us. 6. We have heard the rival submissions. At the outset, we find that the ld CITA had recorded factually incorrect observations contrary to the materials available on record and contrary to facts stated in the assessment order. Hence the entire observation of the ld CITA deserves to be dismissed. On this count itself, the addition confirmed by the ld CITA against which assessee is in appeal before us, deserves to be allowed. We find that the assessee had furnished the following details before the ld AO :- a) Names and addresses of share subscribing companies. b) PAN of share subscribing companies c) ITR acknowledgements of share subscribing companies for Asst Year 2012-13 d) Audited Balance Sheets for Asst Year 2012-13 e) Computation of total income for Asst Year 2012-13 f) Copy of relevant page of bank statements of share subscribing companies indicating the amount invested in assessee company together with the details of immediate source of credit thereon. g) Confirmation from share subscribing companies confirming the fact of making investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 639,804,990 - - 664,633,490 800,000 0.120 03 Bluemoon Commotrade Private Limited 300,000 31,415,278 7,500 - 31,707 ,778 800,000 2.523 04 Calvin Vanijya Private Limited 200,000 49,906,025 8,000 - 50,098,025 800,000 1.597 05 Highlife Commotrade Private Limited 300,000 50,311,293 7,500 - 50,603,793 800,000 1.581 06 Imperial Retails Private Limited 200,000 49,912,660 8,000 - 50,104,660 800,000 1.597 07 Jatadhari Commodeal Private Limited 300,000 58,614,547 7,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55,290,977 1,000,000 1.809 18 Exclusive Ad consultants Pvt. Ltd. 195,200 95,003,377 9,360 95,199,277 1,000,000 1.051 19 Green Valley Financial Consultants Pvt. Ltd. 256,530 156,275,933 10,800 156,521,663 1,000,000 0.639 20 Greenview land building Advisors Pvt. Ltd. 172,000 7 1,819,207 8,880 71,982,327 1,000,000 1.389 21 Green Valley land Advisors Pvt. Ltd. 175,400 75,224,307 8,880 75,390,927 1,000,000 1.326 22 Limelight Real Estate Consultants Pvt. Ltd. 115,600 15,460,709 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . By this, the creditworthiness of share applicants is also proved beyond doubt. With regard to genuineness of transactions, the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their respective bank accounts. We find that the assessee had even proved the source of money deposited into the respective bank accounts of share applicants, which in turn had been used by them to subscribe to the assessee company as share application. Hence the source of source of source is also proved in the instant case though the same is not required to be done by the assessee as per law. The share applicants have confirmed the fact of investment in share capital and share premium in response to 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. Summons issued u/s 131 of the act to the share applicants were also duly complied with by them by their personal appearance before the ld AO. 6.4. Undisputedly the Share Applicants in this case are the bank account holder in their respective banks in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that even the creditworthiness of the lender stands proved to the extent of credits appearing in his Bank Account and he should be held to be successful in this contention. 6.5. We find that the Hon ble Jurisdictional High Court in the case of S.K. Bothra Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata reported in 347 ITR 347(Cal) wherein the Court 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 the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmationcertificates si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 was found by the Commissioner of Income-tax (Appeals) on facts having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this -fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of source of source in the instant case. Even if the creditworthiness of the share applicants are to be doubted , then it would be the duty of the ld AO of the assessee to make enquiries through the ld AO of the concerned share applicants. Once the relevant details are filed by the assessee before the ld AO to prove the creditworthiness of share applicants, then the same cannot be questioned / disputed by the ld AO of the assessee as the same would be travelling beyond his jurisdiction. In other words, the creditworthiness of the share applicant companies would have to be examined by the Assessing Officer of those companies and not by the Assessing Officer of the assessee herein. However, it would be incumbent on the part of the ld AO of the assessee herein , to trigger the said verification process on the side of the department. It would be interesting to note in this regard that the Hon ble Jurisdictional High Court in the case of CIT Kolkata III vs M/s Dataware Private Limited in ITAT No. 263 of 2011 dated 21.9.2011 had held as under:- In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law. 6.10. We also find that the co-ordinate bench of this tribunal in the case of VSP Steel P Ltd (formerly M/s Tikmani Metal P Ltd) in ITA No. 741/Kol/2014 for Asst Year 2010-11 had held as under:- We have heard the rival submissions. We find that the ld DR argued that the assessee had not proved the source of source of share applicants who had invested share application monies in the assessee company and accordingly prayed that the addition has been rightly made u/s 68 of the Act. He also placed reliance on the decision of this tribunal in the case of Subhlakshmi Vanijya (P) Ltd vs CIT reported in (2015) 60 taxmann.com 60 (Kolkata Trib.) dated 30.7.2015. In response to this, the ld AR argued that there is no mandate in law that the assessee has to prove the source of source of share applicants. He argued that in the instant case, the assessee had duly discharged its complete onus by furnishing the requisite details. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the merits of the addition proposed to be made towards share capital in the facts and circumstances of that case and no decision was rendered thereon on merits of the issue. Hence the reliance placed thereon by the ld DR does not advance the case of the revenue. In the instant case, we find that the share applicants have not denied the fact of making investment in share application monies in assessee company, which is evident from the fact that they had confirmed in writing in response to notice issued u/s 133(6) of the Act which was admittedly done behind the back of the assessee. There is no whisper in the entire assessment order to doubt the veracity of the transactions and genuineness of share applicants and the transactions herein. In the instant case, the assessee had indeed proved the identity of the share applicants, creditworthiness of share applicants and genuineness of transactions beyond doubt. We find that the entire addition has been made by the ld AO based upon suspicion, surmises and conjectures and not upon proper evaluation and appraisal of the evidences and documents filed before him. We place reliance on the decision of the Hon ble Apex Court in this regard in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment made in the appellant company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon ble jurisdictional High Court in CIT vs DATAWARE (supra) which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the department. As such entries of ₹ 5~50/000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income/ penalty proceedings under Section 271(1)(c) are being initiated separately. The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn to be present in the case of Nova Promoters Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under Section the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. 34. In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. 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 these case laws to the facts of this case, we are inclined to uphold the order of the Ld. Commissioner of Income Tax (Appeals) 35. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant case. 6.13. We would like to add that receipt of share capital for a company is not a prohibited transaction, as that is one of the main source of raising funds for a company to run its intended activities. Once the replies to notices issued u/s 133(6) of the Act were received from the share subscribing companies, which were later strengthened by compliance to summons u/s 131 of the Act by the directors of the share subscribing companies, there is absolutely no reason to draw an adverse inference on the impugned transactions. 6.14. We 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. 6.15. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee . In view of the fact of the case and findings of the AO during the course of assessment the so called receipt of share capital was considered by the AO as unexplained credit . Ld CIT (A) upheld the observation of the Assessing Officer. For accepting the share applicant as genuine it is necessary to prove the capacity and creditworthiness of the share applicants along with the genuineness of these transactions. Share capital with high Premium being the issue and considering the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company and in view with the observation of the judiciaries on that issue AO was within his jurisdiction in treating such share capital and share premium as unaccounted cash credit of the assessee company and adding the same u/s 68 of the Act. The fact and circumstances of this case should be judged in the light of preponderance of probability and normal human behaviour it may easily be inferred that the entire transactions lack substance and nothing but an arranged transactions. A company without any proven business track record and earning capacity does not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the case before us. Source of funds were never established by the investor companies in the case before the Hon ble Apex Court, whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 of the Act by complying with the personal appearance of directors. Hence the decision relied upon by the ld DR is factually distinguishable and does not advance the case of the revenue. 6.18. 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 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 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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