TMI Blog2019 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... the obligation of the AO to provide copies of such statements/information and also to provide an opportunity of cross examination of the person, who gave the statement, when such opportunity has been availed by the person against whom, such statements are used. The Hon ble Supreme Court in the case of Andaman Timber Industries Ltd Vs CCE, Kolkata II [ 2015 (10) TMI 442 - SUPREME COURT] had also upheld a similar legal position and held that not allowing the assessee to cross-examine the witnesses by the adjudicating the authority, though the statements and those witnesses were made the basis of the impugned order is a serious flaw, which makes the order nullity in, as much as, it amount to violation of principle of natural justice, because of which, the assessee was adversely affected. Therefore, on this count also the additions made by the AO cannot be sustained. Additions invoking the provisions of section 56(2)(viib) - We find that the said provision has been inserted by Finance Act, 2012 w.e.f 10.04.2013, where it provides that where a closely held company issues its shares at a price which is more than its fair market value, then amount received in excess of fair marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Sankhlech u/s 131 was an credible and admissible in the eyes of law? 2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of ₹ 9,80,00,000/- made by the Assessing Officer ignoring the fact that statement made u/s 131 givers by Shri Kamal Khetan retracted after long gap of more than 2 years, making inordinate delay of 2 thus deserves to be rejected as the same was an afterthought on the part of the Assessee ? 3. The appellant prays that the order of the CIT(A) on the stove grounds be set aside and that of the Assessing Officer be restored.- 4. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary. 3. The assessee has, taken more or less common grounds, in their respective cross objections. Therefore, for the sake of brevity, grounds of cross objection filed by the assesee in C.O.No. 74/Mum/2019 is reproduced are under:- 1. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing in reopening the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds such huge premium, issued notice 133(6) of the Income Tax Act, 1961, to the Bank of Rajasthan (Now ICICI Bank Ltd.) for the purpose of ascertaining details of transactions for financial year 2008-09. The AO has also issued notices u/s 133(6) of the Act, to various other parties with whom, the assessee company has entered into transactions, during the relevant period. However, most of the notices returned un-served with a remark left or not known . Thereafter, the AO deputed Inspector of his office to examine where about of the bank address of Bank of Rajasthan and the Inspector visited the premises and noticed that Bank of Rajasthan has been taken over by the ICICI Bank Ltd. Accordingly, a letter was issued to the Principal Officer of ICICI Bank, calling for information u/s.133(6) of the Act, in respect of bank statement for the period from 01/04/2008 to 31/03/2015, for which the bank has replied that the bank statement, for the above period cannot be furnished, because the number of accounts furnished in your letter does not match with bank account number begin with ICICI bank. Thereafter, the assessee was given a show-cause to produce, the complete bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Ltd. at face value of ₹ 1 crore. He, further analyzed financial statement of the assessee company and come to the conclusion that although, the assessee has issued shares at huge premium, but on perusal of its financial statement, the financial of the company does not support such huge valuation of shares, which is evident from the fact that it has earned nil income from operations and also declared net loss of ₹ 24,676 for the year under consideration. Therefore, he opined that the assessee has failed to prove, credit found in the form of share capital and share premium received from allotment of shares by discharging its onus cast upon u/s 68 of the I.T.Act, 1961, in order to prove identity, genuineness of transactions and credit worthiness of the parties and accordingly, by relied upon various judicial precedents, including the decision of Hon ble Supreme Court in the case of Suamati Dayal vs CIT (995) 2014 ITR 801 and also decision of Hon ble Delhi High Court in the case of CIT vs Nova promoters Finlease Pvt.Ltd. (2012) 18 taxmann.com 2017 held that the assesee has failed to conclusively prove receipt of share premium as a genuine transaction in light of provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the assessment order, the appellant's submission and other materials on record. 8.1 The main thrust of the appellant's arguments is that the A.O. has not applied his mind and has mechanically reopened, the assessment for A.Y.2009-10. In this regard, it has been noted that the A.O. has received credible information from DIT (I CI),regarding the receipt of huge amount of share premium, which according to the A.O. was prima-facie not justifiable. 8.2 It is pertinent to note that no scrutiny assessment was done in the case of the appellant company and the case was just processed u/s 143(1) of the Act. In view of this, there was hardly any information on record, which could have explained the huge quantum of share premium introduced during the year under consideration. The A.O, has also noted that the appellant is a new company and barely had the financial strength to support the quantum of share premium, as has been received. 8.3 It is a matter of record that the copy of [he reasons recorded for reopening the assessment u/s 147 of the Act were duly provided 10 the appellant company. During the course of the appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe that income has escaped assessment. So much so that it was held by the Hon ble Supreme Court in Claggett Brachi Co.Ltd. vs CIT 177 ITR 409 (SC) that an information obtained during assessment proceedings of a subsequent year can also validate the proceedings initiated u/s 147 for earlier year. Similarly, Hon ble Bombay High Court in the case of Anusandhan Investments Ltd. vs. M.R.Singh, DCIT, 287 ITR 482 held that a notice issued u/s. 148 based on assessment of subsequent assessment year is valid even if the appeal is pending for such assessment. 8.8 Further, it is the duty of the assesse to disclose full and true materials to the A.O. but for which the AO, could initiate the reassessment proceedings. It has been held by the Hon ble Supreme Court in Shri Krishna P. Ltd. 221 ITR 538, 549 that every disclosure is not and cannot be Treated to be a true and full disclosure. A disclosure may be a false one or a true one. It may be a full disclosure or it may not be. The Hon ble Supreme Court held that a partial disclosure may very often be a misleading one. Therefore, what is required is a full and true disclosure of all material facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 011) 52 DTR (Del) 353 - Ed.), it was held as under:- 10 The term 'failure' on the pan of the assessee is not restricted only to the IT return and the columns of the IT return or the tax audit report. This is the first stage. The said expression 'failure to fully and truly disclose material facts' also relate to the stage of the assessment proceeding, the second stage. There can be omission and failure on the part, of the assessee to disclose fully and truly material facts during- the course of the assessment proceedings. This can happen when the assessee does not disclose or furnish to the AO complete and correct information and details it is required and under an obligation to disclose. Burden is on the. assesses to make full and the true disclosure . 8.14 Further, in the case of Piaggio Vehicles P. ltd. YS. DCIT 290 ITR 377 (Bom), the Hon ble jurisdictional High Court held that in a case of reopening after 4 years subsequent 10 scrutiny assessments, contradiction was discovered between Tax Audit report and Return of income, it was a case of omission and /or failure on the part of its income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inly have nexus for reaching the conclusion that income has been incorrectly assessed or has escaped assessment. In the present case, the said material came to the notice of the AO subsequent to the assessment. There is no grievance that provisions of ss. 148 to 153 have not been followed. In such a situation, it cannot be held that the notice proposing reassessment is vitiated merely because one of the reasons. referred to order of TPO- Raymond Woollen Mills Ltd, vs. ITO Ors. (1999) 152 CTR (SC) 418 ; (1999) 236 ITR 34 (SC) and Phool Chand Bajrang Lal vs. ITO (1993) 203 ITR 456 (SC): AIR 1993 SC 2390 relied upon. (Paras 46, 47, 50 51) 8.16 In view of the above binding precedents of the Hon'ble Supreme Court, 1 am of the view that t he AO had valid reasons to initiate reassessment proceedings which were duly recorded and communicated to the appellant. 8.17 Thus, there is no denying of the fact that the A.O had in his possession, credible information, which prima facie led to the formation of a belief that income has escaped assessment in the case of the appellant company. Therefore, in my considered opinion, reopening of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p m the A.Y. 2012-13. On the contrary, the entire addition u/s 68 of the Act for the share premium has been made by the A.O. in A.Y. 2009- 10 based on the above narrated Placements of Shri Kamal Khetan Shri Vikas Sankhlecha, which are with reference to subsequent events falling in A.Y. 2012-13. 12.18 It is pertinent to note that in relation to the current A.Y, 2009-10, Shri Kamal Khetan was in no way connected with any of the 5 companies viz. M/s Pali Fabrics Pvt Ltd., M/s Acro Exports Trade Pvt.Ltd. M/s Amazon Metal Pvt. Ltd., M/s Bell Fabrics Pvl. Ltd. M/s Gandhar Yarn Pvt. Ltd, It is also a fact that in the A.Y. 2009-10, Shri Kainal Khetan was nm connected / related even with the holding company namely, M/s Akshunya Energy Private Limited, Shri Kamal Khetan was neither a shareholder nor a director in the 5 companies or it's holding company in the A.Y. 2009-10. It was only in A.Y. 2012-13 that Shri Kamal Khetan of Sunteck Group has taken over M/s AkshunyaEnergy Private limited through M/s Eskay Infrastructure Private Ltd ( a concern of Sunteck Group) 12.19 In view of these circumstances, it is factually incorrect to adversely interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the appellant has filed various details such as share application form, copy of declaration, Board resolution, Hank statement of investor company, PAN card, Acknowledgement of Return of income, Financial statement of investor company, Form No 2 for Allotment, Rank Statement reflecting the amount received through banking channel, etc in order to prove the identity, genuineness and creditworthiness of the investor. Such details were also filed before the undersigned, during the course of the appellate proceedings, it is a fact that the AO has not raised any doubt on any of the voluminous' documentary evidence placed on record, by the Appellant, No further verification or enquiries were done by the A.O. on the documentation of shareholders / investors provided by the Appellant. Thus, the Appellant Company has duly discharged the onus for proving the identity, genuineness and creditworthiness of the various investors. 12.24 As regards the valuation of the shares of the appellant company is concerned, it has been submitted that valuation is a consideration for the investor and not for the Revenue, especially in the light of the fact that the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer was not justified in adding amount of share capital subscription as unexplained credit. Where revenue urged that assesses had received share application money from bogus shareholders, it was for Income-tax Officers to proceed by reopening assessment of such shareholders and assessing them to tax in accordance with law and it did not entitle revenue to add same to assessee s income as unexplained cash credit. 12. 27 The Appellant company has also relied upon the decision of Apex Court in the case of Lovely Exports Pvt. Ltd, , 216 CTR 195, wherein it was held as under:- The assessee had received certain amounts from various persons as share application money. No addition on account unexplained cash credits could be made to its income in the absence of any evidence to suggest that the subscribers were benamidars or any part of the share capital represented the assessee s own income from undisclosed sources, as the assessee had furnished relevant details of the subscribers and the shares were allotted as per the rules of stock exchange. 12.28 Apart from the above two decisions, the Appellant Company has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the actual shareholders, who have paid the share premium to the appellant company and instead erroneously relied on a subsequent change in shareholding in A.Y. 2012-13, of a holding company, namely M/s Akshunya Energy Private limited. 12.32 I have also taken note of the fact that on similar facts and circumstances, my Id. Predecessor CIT(A)-50, Mumbai has in a connected case of M/s Prime Developers for A,Y. 201 2-1 3 in Appeal No. CIT(A) 50/1T-186/2015-16, vide order dated 24.02.2017 deleted the addition made on the basis of statement of Shri Paras Porwal Shn Vikas Sanklecha. In the present appeal at hand, instead of Shri Paras Porwal of ''Om Shanti Group , Shri Kamal Khetan of Sunteck Group is involved. My Ld. Predecessor CIT(A)-50, Mumbai has deleted the addition in the case of M/s Prime Developers for AT. 2012-13 by holding as under;- 6. 1 In the course of the appeal proceedings, the AR of the appellant submitted that the addition is not sustainable for the following reasons: Ld. A.O. made addition without bringing material on records which is bad in taw. Mr Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 In view of the facts and circumstances, discussed in details in the above paras in the light of various judicial pronouncements and following the order of my Id Predecessor CIT(A)-50, this ground of appeal of the appellant company is allowed. In the result, the Ground of Appeal No. 2 of the present appeal is allowed. 10. Aggrieved, by the CIT(A) order, the Revenue is in appeal b efore us and the assessee has filed cross objection. 11. The learned DR, submitted that the Assessing Officer has brought out clear fact to the effect that although the assessee has filed number of documents to prove identity of the creditors, remaining two aspects of the issue i.e. genuineness of the transaction and creditworthiness of the subscribers are in doubt. The DR further submitted that mere furnishing of documents to prove identity is not sufficient enough to come out of the shadow of provisions of section 68 of the I.T.Act, 1961, but, what is relevant is to discharge the onus by filing necessary evidence to prove true identity of the creditors, genuineness of the transactions and creditworthiness of the parties. In this case, although the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions. Once, the assessee discharges initial burden placed upon him, then the onus shifts to the assessing officer to prove otherwise. In this case, the Assessing Officer neither carried out any further enquiries, nor called upon the assessee to explain the credit with further evidences. The Assessing Officer came to the conclusion that the transaction between the parties are not genuine merely on the basis of survey conducted in the case of Sunteck Group and statement recorded from certain persons where they had admitted that share capital in not genuine transaction and also on the basis of financial statements of the assessee, more particularly on the basis of income declared for the year under consideration without appreciating the correct legal position of law that in order to bring any credit within the ambit of section 68 of the Act, the Assessing Officer should prove that the credit is, in fact, the income of the assessee from undisclosed sources. In this case, nothing has been pointed out by the Assessing Officer. The learned AR further referring to various judicial precedents including the decision of Hon ble Bombay High Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.2009-10, the assesee had issued 2,00,000 equity shares at a premium of ₹ 490/- per share, amounting to ₹ 9,80,00,000/-. The holding company namely M/s Akshunya Energy Pvt.Ltd. was later on taken over by M/s Eskay infrastructure Development Pvt.Ltd., a Sunteck group company. On 15/10/2013 a survey u/s 133A of the I.T.Act, 1961 was conducted in Sunteck group of companies. During the course of survey, statement u/s 131 of the I.T.Act, 1961 was recorded from shri Kamal khetan, the main promoter of Sunteck group of company. In the statement, shri Kamal khetan, while replying to question No. 18 he had offered an amount of ₹ 46.6 crores as unaccounted income, in the name of five companies towards share capital and share premium received for the year under consideration. In the above statement, he further stated that his group concern M/s Eskay Infrastructure Development Pvt.Ltd. had acquired a controlling interest in M/s Akshunya Energy Pvt.Ltd. by investing a sum of ₹ 1 crore, as additional capital in the company, which has made him 99% owner of the company. Another statement of Shri Kamal Khetan was recorded on 16/10/2013. In response to question No.10, he co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded, during the course of survey and statement recorded from certain persons, including shri Kamal Khetan and shri Vikas Sanklecha to come to the conclusion that the assessee has entered into an arranged transactions with certain companies, in order to convert its own unaccounted income in the form of share capital, which is evident from the fact that the assessee has issued share capital with a huge premium of ₹ 480 per share, even though, the financial of those companies is not supporting such a huge valuation. Further, the AO has taken support from the admission of shri Kamal Khetan, during the course of survey where, he had admitted that share capital, including premium received for the year under consideration is an unexplained credit and accordingly, the same has been offered to tax. 15. The provision of section 68 of the Income Tax Act, 1961 deals with a cases, where any sum found credited in the books of accounts of an assesee, in any previous year, for which the assesee offered no explanation about the nature and source, thereof or the explanations offered by the assessee, in the opinion of the AO is not satisfactory, then sum so found credited may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices nothing has been done to find out, the nature of transactions between the parties. Therefore, we are of the considered view that when, assessee has filed complete details to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for the AO to came to the conclusion that share capital and share premium is unexplained only for the reason that during the survey proceedings, the director of the company had admitted that those five companies are shell companies ignoring the fact that such admission has been retracted by filing affidavit along with letter explaining reasons fro such admission during survey proceedings. Further, additions made by the AO cannot be sustained even on this count ,because the AO has relied upon statement of shri Vikas Sankhlecha, the erstwhile director of those five companies to make additions towards share capital, but when ,shri Kamal Khetan, the present director of the assessee company asked for copies of statement of shri Vikas Sankhlecha and also opportunity for cross examination of shri Vikas Sankhlecha, the AO has denied, the opportunity of cross examination and also not furnished c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation money, share capital , share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless the person being, a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited and such explanation in the opinion of the AO aforesaid has been found to be satisfactory. On perusal of amendments brought out by Finance Act 2012, w.e.f. 01.04.2013 to the provisions of section 56(2)(viib) and section 68 of the Act, it is very clear that where the assessee has issued shares at premium and also received share capital and if such company do not offer any explanation about the nature and source, then sum so received may be regarded as income of the assessee from undisclosed sources. In other words, the purpose of insertion of proviso is to examine the source of investment by subscriber to the share capital. This amendment has been examined by the Hon ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure (P) Ltd. (2017) 394 ITR 680, where the court observed that proviso inserted to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 68 of the Income Tax Act,, 1961 neither suffers from any perversity nor gives rise to any substantial question of law. CIT vs. Creative World Tele films Ltd (2011) 333 ITR 100 (Born- High Court) The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195. wherein the apex Court observed that if the share application money is received by the assessee-company from alleged bogus shareholders, w hose names are given to the AO, then the Department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the AO to make proper investigation and reach the shareholders. The AO did nothing except issuing summons which were ultimately returned back with an endorsement not traceable In our considered view, the AO ought to have found o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal recorded findings that the assessee had produced the return of income filed by the relevant shareholders who had paid share application money. The assessee had also produced the confirmation of share holders indicating the details of addresses, PAN and particulars of cheques through which the amount was paid towards the share application money. The Tribunal thereafter relied upon the judgment of the Supreme Court in CIT V. Lovely Exports (P.) Ltd wherein it was held that if the assessee produces the names, addresses, PAN details of the share holders then the onus on the assessee to prove the source of share application money stands discharged. If the Assessing Authority was not satisfied with the creditworthiness of the shareholders, it was open to the Assessing Authority to verify the same in the hands of the shareholders concerned, The Tribunal has relied upon an order of the Supreme Court in case of CIT v. Divine Leasing Finance Ltd. In view of the decision 'of the Supreme Court, we dismiss the appeals with observations that the department is free to proceed to reopen their individual assessments of the shareholders whose names and details were giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, amount of share application money could not be added to income of assessee. According to Tribunal, in such a case amount could be taxed in hands of persons who had invested CIT vs. Dwarkadhish Investment (P) Ltd (2011) 330 ITR 298 (Del- High Court) Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68- Revenue has all the power and wherewithal to trace any person-Moreover, it is settled law that the assessee need not to prove the 'source of source'- In the instant case, the Tribunal has confirmed the order of the CIT(A) deleting the impugned addition holding that the assessee has been able to prove the identity of the share applicants and the share application money has been received by way of account payee cheques. CIT vs. Namastey Chemicals Pvt Ltd (2013) 33 Taxmann.com271 (Guj-High Court) In the present case also, the respondent assessee has received share application money from different sub scribers. It was found that large number of subscribers had responded to the letters issued by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving been proved. The assessee company had presented the necessary worth proof bef ore both the authorities and it was not expected by the assesseecompany to further prove the source of the deceased. CIT vs. Nikunj Eximp Enterprises (P.) Ltd (2013) 35 Taxmann.com384 (Bom) Whether merely because suppliers had not appeared before Assessing Officer or Commissioner (Appeals), it could not be concluded that purchases were not made by assessee - Held, Yes.... Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent- assessee CIT vs. Samir Bio- Tech Pvt Ltd (2010) 325 ITR 294 (Del-High Court) Identities of the subscribers are not in doubt. The transactions have also been undertaken through banking channels inasmuch as the application money for the shares was given through account payee cheques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ascertain true nature of transactions, he cannot come to the conclusion merely on the basis of documents submitted by the assessee. Therefore, after considering relevant facts, the co-ordinate Bench came to the conclusion that decision rendered by Hon ble Supreme Court in the case of NRA Iron Steel Pvt. Ltd. (supra) has no application, where the AO has not carried out any inquiries. The relevant findings of the Tribunal re as under: 8. We have heard the rival submissions and perused the materials available on record. It is not in dispute that the assessee had borrowed loans from the aforesaid loan creditors and had duly repaid the same in subsequent years by account payee cheques, for which evidences are already on record before us. It is also not in dispute that the assessee had paid interest on the aforesaid loans which had been allowed as a deduction by the lower authorities. We are unable to persuade ourselves as to how the interest portion on loan alone could be treated as genuine transactions after treating the principal portion of loan as ingenuine. We also find that the interest paid on such unsecured loans to aforesaid loan creditors have been duly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has made additions u/s 68 of the Income-tax Act, 1961 on the ground that though the assessee has furnished necessary evidences to prove identity of the parties, but failed to establish genuineness of transactions and creditworthiness of parties in the backdrop of clear findings of Investigation Wing that those companies are hawala companies involved in providing M/s Shree Laxmi Developers accommodation entries. The AO has brought out facts in the light of statement of Shri Pravinkumar Jain deposed before the Investigation Wing to make addition. Except this, there is no contrary evidence in the possession of the AO to disprove the loan transactions from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd. On the other hand, the assessee has furished various details including confirmation letters from the parties, their bank statements alongwith their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various details. The assessee also filed bank statements to prove that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove otherwise. In this case, the AO made addition only on the basis M/s Shree Laxmi Developers of information received from Investigation Wing, but not based on any evidence to disprove the loan transaction from above companies are ingenuine. Therefore, we are of the view that there is no reason for the AO to treat loans from above 2 companies as unexplained credits u/s 68 of the Act. 7. Coming to the case laws relied upon by the assessee, the assessee has relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd (2017) 394 ITR 680 (Bom). We have gone through the case laws relied upon by the assessee in the light of the facts of the present case and find that the Hon'ble High Court categorically observed that the Proviso to section 68 has been inserted by the Finance Act, 2012 wef 01-04- 2013 is applicable from AY 2013-14 onwards. The Court further observed that the Parliament did not introduce the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court, after considering relevant facts and also by following judgement in the case of CIT vs Gagandeep Infrastructure Pvt Ltd (supra) held as under:_ 6] The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of share i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P) Ltd (supra) would M/s Shree Laxmi Developers be applicable in the facts and circumstances of the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of PCIT vs NRA Iron Steel Pvt Ltd arising out of SLP(Civil) No. 29855 of 2018 dated 5.3.2019 in support of contentions of the revenue on the impugned issue. In this regard, we find that the facts before the Hon ble Supreme Court are clearly distinguishable on the following grounds:- a) In Para 3.6. of the said judgement of Hon ble Supreme Court, it was mentioned that the entire share capital had been received by the assessee through normal banking channels by account payee cheques / demand drafts, and produced documents such as income tax return acknowledgements to establish identity and genuineness of the transaction. It was submitted that, there was no cause to take recourse to section 68 of the Act, and that the onus on the Assessee Company stood fully discharged. b) In Para 3.7. of the said judgement of Hon ble Supreme Court, it was mentioned that the AO had issued summons to the representatives of the investor companies. Despite the summons having been served, nobody appeared on behalf of any of the investor companies. The Department only received submissions through dak, which created a doubt about the identity of the investor compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their immediate source of credit for making investment in share application monies of NRA Iron Steel Pvt Ltd. From the bank statements furnished by the loan creditors in the case of the assessee herein, we find that there were no cash deposits in the bank accounts of the lenders prior to issuance of loan to the assessee company. In the case before the Hon ble Supreme Court, the AO in that case had made field enquiries at Mumbai, Kolkata and Guwahati where those investor companies were stated to be situated to examine their identity and credentials and the result of such enquiry had been summarized hereinabove. Whereas in the instant case before us, no such enquiries were conducted by the ld AO to doubt the veracity of the details and evidences filed by the loan creditors in response to notice u/s 133(6) of the Act directly before him. In the instant case before us, all the notices u/s 133(6) of the Act were duly served on all the aforesaid loan creditors and all of them had independently filed their replies directly before the ld AO. The bank statements were also duly furnished by the loan creditors to prove that they had sufficient creditworthiness to advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the I.T. Act, 1961. We, further, noted that although the Apex Court has not expressed any opinion, because of dismissal of SLP filed by the assessee, the fact of the matter is that this issue has been considered by the Hon ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd (supra), where the issue has been thoroughly examined in the light of provisions of section 68 of the Act, and held that if the share application money is received by the assessee company from alleged bogus share holders, whose names are given to the AO, then the department is free to proceed to reopen their assessment in accordance with law, but sum received from share holders cannot be regarded as undisclosed income of the assessee. 20. In this view of the matter and considering the facts and circumstances of this case and also taking into consideration various case laws as discussed hereinabove, we are of the considered view that the assessee has discharged its initial onus to prove identity, genuineness of transactions and creditworthiness of the parties by filing various documents. The AO, without carrying out further inquiries in order to ascertain the claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
