TMI Blog2019 (10) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of examination by the income tax department in scrutiny proceedings. This fact has not been controverted by the Revenue before us. We may gainfully refer to the judgment in the case of Pr. CIT Vs Paradise Inland Shipping (P) Ltd [ 2017 (11) TMI 1554 - BOMBAY HIGH COURT] wherein deleted similar addition on similar set of facts made on account of unexplained cash credits and the SLP filed by the Revenue against the judgment has been dismissed by the Hon ble Supreme Court. Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified - no addition was warranted u/s 68 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Instead of appearing in person and producing the Directors of the subscriber companies, the assessee company submitted details at the office of the Assessing Officer. The Assessing Officer noted that whenever a sum is credited in the books of the assessee company, the onus lies on the assessee company to prove three criteria; namely, (i) Identity of the investors, (ii) Creditworthiness of the investors and (iii) Genuineness of the transactions. In this instant case, the assessee company failed to discharge its onus, therefore the identity, creditworthiness and genuineness of the subscriber companies remain unexplained. The Assessing Officer also noticed that the share capital, reserve and surplus, net worth, turnover of the assessee company, remained unexplained which are necessary for an investor to consider before an investment is made. It leads to conclusion that if there was investment, it was done without minimum business prudence and therefore is not usual, as it lacks the motive of profit or gain. Here, since the Directors failed to appear before the undersigned and at the same time failed to produce the Directors of the share subscriber companies, hence, Assessing Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the assessing officer, the sum so credited may be charged to income tax as the income of the assessee of that assessment year. The assessing officer may consider such sum as cash credit due to lack of sufficient explanation. It is well known that provisions of section 68 have been introduced into the taxing enactments step by step in order to plug loopholes. Even long prior to the introduction of section 68 of the Act, in the statute book, courts had held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered was, in the opinion of the assessing officer, is not satisfactory, 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Baba Basuki Distributors Pvt. Ltd 560000 56,00,000/- 84,00,000/- 1,40,00,000/- 4. Regard Fin Cap Pvt. Ltd 200000 20,00,000/- 30,00,000/- 50,00,000/- Total 1191000 1,19,10,000/- 1,78,65,000/- 2,97,75,000/- The above sum of ₹ 2,97,75,000/- was added to the total income of the assessee considering it as unexplained cash credit u/s 68 of the Act by the Ld. AO and the same was sustained by the Ld. CIT (A). We note that in the instant case the details of amount received during the assessment year under consideration and earlier assessment years are as follows: Sl.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd about which there is no dispute that the amount added in the income of the assessee as unexplained investment or cash credit in the assessment year 1993-94 was the same amount which was credited in the books of account of the assessee for the previous year ending on March 31, 1992. The Tribunal has categorically come to a finding, and that finding is not under challenge, that this is not a case of cash credit entered in the books of account of the assessee during the year but it is a case in which the assessee has invested the capital in the business and this amount was shown as a closing capital as on March 31, 1992, and on April 1, 1992, it was an opening balance. Considering this aspect, the Tribunal has come to the conclusion that what was already credited in the books of account ending on March 31, 1992, for the financial year 1991-92 relevant to the assessment year 1992-93 cannot be an unexplained cash credit or investment in the books of account maintained for the financial year 1992-93, the accounting period of which ends on March 31, 1993, so as to warrant its consideration as unexplained investment or cash credit for its relevant assessment year 1993-94. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into with them. Before addressing the legal issue involved in this case, we would like to bring on record the various documents relating to the share subscribers, which are available in the paper book. (i). Startrade Vyapaar Ltd: During the year 55,000 equity shares were allotted to M/s Startrade Vyapaar Ltd. Entire Share Application money amounting to ₹ 13,75,000/- was received in the immediately preceding year. M/s Startrade Vyapaar Ltd is an associate company of the assessee. Both the directors of the assessee company namely Lalit Kr Kothari and Giriraj Ratan Bagri were also the Directors in this company. The assessee company was also holding shares of this company. M/s.Startrade Vyapaar Ltd is engaged in the business of hiring machinery and equipments. Further, as would be evident from ITR Acknowledgment for AY 2011-12, the company reported gross income of ₹ 2,03,92,591/-. M/s Startrade Vvapaar Ltd is also an associate concern of M/s. Simplex Infrastructure Ltd, a listed company with BSE. The same is also mentioned in the 'Related Party Disclosure' of the company. Almost the entire source of funds for investment in the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FC Company and is primarily engaged in the business of granting loans and advances and investment in shares. It is an associate concern of the assessee having common shareholders. The said fact is also mentioned in the Schedule 'Related Party Disclosure' in the Audited Accounts of Kamayani Commotrade Pvt Ltd, refer page 93 of the paper Book. The entire source of funds for investment in the assessee company was from refund of loan from different parties as would be clearly evident from the detailed chart showing the date-wise inflow of funds and the subsequent investment in the assessee company enclosed at Page 80 of the Paper Book. A copy of the chart of source of funds, 1TR acknowledgment, Annual Accounts for the FY 201112 and the relevant Bank Statement are attached at Page 80-108 of the Paper Book. On a perusal of the Balance Sheet, it can be seen that the own funds of the company is ₹ 9,83,20,364/-. This very clearly shows the high creditworthiness of the company to make investment in the assessee company. Further, the entire inflow and outflow of funds was made through regular banking channels as supported by Bank Statements of both the companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Paper Book. On a perusal of the Balance Sheet, it can be seen that the own funds of the company is ₹ 14,39,85,793/-. This very clearly shows the high creditworthiness of the company to make investment in the assessee company. Further, the entire inflow and outflow of funds was made through regular banking channels as supported by Bank Statements of both the companies. In addition to above, it is also submitted that the company being NBFC company engaged in lending and investing activities, had total revenue from operation of ₹ 45,58,266/- which mainly comprised of interest income and dividend income. The company also earned profit before taxes of ₹ 39,65,867/- during F.Y. 201112. Further, the company had also earned profit before taxes of ₹ 33,91 369/- in the F.Y. 2010-11. This very clearly shows that the company had maintained net profit ratio ranging between 70%-90%. This show that the capacity of the company is financially strong. Copy of the Financial Statement enclosed at page 119-142 of Paper book. Further, it is obvious that the company being investment company will make investment in one company and will either earn income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is also evident from the balance sheet of the investors that they had made investment in the assessee company. Further the share capital and reserves of the aforesaid investors are in several crores of rupees whereas the investment is only a small part of their capital. This very clearly shows the high creditworthiness of the company to make investment in the assessee company. The bank statement submitted clearly substantiates that the transaction was made through banking channels and no cash element is involved in the share application money received. Further the source of the fund from where the investment was made by the investors was also duly furnished. This very clearly shows that the transaction incurred was through genuine sources. Thus, the Source of Fund, Bank Statements, Balance Sheet, ITR of all the investors and the assessee company clearly substantiate the identity and creditworthiness of the share applicant and genuineness of the transactions. The source of source has also been established, which is not required for AY 2012-13. Therefore, the assessee company had duly discharged its onus to prove the identity, creditworthiness and genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the decisive criteria to examine the creditworthiness of the share applicants. 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 interpreting similar phraseology used in section 69 has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Court has further stressed the presence of word may in section 68. Relevant observations at pages 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 non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that such book was in the custody of the bank, it was held admissible in evidence. Radheshyam v. Safiyabai Ibrahim AIR 1988 Bom.361 : 1987 Mah. 725: 1987 Bank J 552. In view of the position of law as discussed above, it is always open for a borrower to contend, 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. 14. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Gauhati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of thesource(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 subcreditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor... ********** In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icants but expressed its inability to produce the share applicants before the AO for examination. The Hon ble High Court held that mere nonappearance 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: 6.2 Taking into consideration the aforesaid decision we are of the considered opinion that company cannot be assessed for the income tax to find out the person who has applied as share holder. The view of taken by the Tribunal is just and proper, therefore, the issue is answered in favour of the assessee and against the department. 16. Further, in the case of CIT v. Orchid Industries (P.) Ltd. [2017] 88 taxmann.com 502/397 ITR 136, the Hon ble Bombay High Court on the issue of non-appearance of share applicants had held as under: [5] The Assessing Officer added ₹ 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 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 assessee 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 assessee by producing the loan-confirmationcertificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: The Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation 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 creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. 21. Our attention was also drawn to the decision of the Hon'ble Supreme Court while dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the assessee company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the assessee 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. 23. Our attention was also drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of Income Tax vs M/s. Nishan Indo Commerce Ltd in ITA No. 52 of 2011 dated 2 December, 2013 wherein the Court held as follows: The Assessing Officer was of the view that the increase in share capital by ₹ 52,03,500/- was nothing but the introduction of the assessee's own undisclosed funds/income into the books of accounts of the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain 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 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness of the transaction. The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite sev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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 either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, as we noted supra, these Companies are having capital in several crores of rupees and the investment made in the assessee company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the 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 in the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share subscribing companies for the Asst Year 2012-13 which shows their existence is genuine and transactions carried out by them were the subject matter of examination by the income tax department in scrutiny proceedings. This fact has not been controverted by the Revenue before us. 29. 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 Court had deleted similar addition on similar set of facts made on account of unexplained cash credits and the SLP filed by the Revenue against the judgment has been dismissed by the Hon ble Supreme Court. The relevant extracts of the judgment is as follows: 5. We have given our thoughtful considerations to the rival contentions of the learned Counsel and we have also gone through the records. The basic contention of the learned Counsel appearing for the Assessees revolves upon the stand taken by the Assessees whether the shareholders who have invested in the shares of the Respondents are fictitious or not. In this connection, the Respondents in support of their stand about the genuineness of the transaction entered into wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 31. We may gainfully refer to the following decisions of the Hon ble High Court in the cases as under : (a) In the case of Pr. CIT Vs Chain House International (P) Ltd [2018] (98 taxmann.com 47)the AO had added the share application by way of unexplained cash credits was that the assessee was unable to give any justifiable reason for issuing shares at a premium. The Hon ble Madhya Pradesh High Court did not agree with this reasoning given by the AO for making addition u/s 68, holding as under: Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 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 preproviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd.(supra) in the context to the preamended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 32. We also find that the reliance placed by the Ld DR on the decision of Hon ble Calcutta High Court in the case of Rajmandir Estates supra was distinguishable on facts as the said decision was rendered in the context of validity of revisionary jurisdiction u/s 263 of the Act by the Learned Administrative Commissioner. This fact has already been addressed by this tribunal in the case of VSP Steel P Ltd (Supra). No decision whatsoever was rendered by the Hon ble Jurisdictional High Court in the case of Raj mandir Estates P. ltd on merits of the addition and hence does not come to the rescue of the revenue in the facts of the instant case. 33. Instead, we find that the decision of the Hon ble Delhi High Court in the case of CIT Vs Gangeshwari Metal (P) Ltd (ITA No. 597 of 2012) dated 21.01.2012 is of much relevance in the facts of the assessee s case. In this case the assessee had received share application money of ₹ 55.50 lacs during the year in question. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds till the assessee exhausted all the evidence in his possession and then merely reject the same without conducting any inquiry or verification whatsoever. The Court thus held that the decision of CIT Vs Novo Promoters Finlease (P) Ltd (342 ITR 169) was not applicable to the facts of the case. Instead it was held that the issue in hands was on the lines of the decision of the Supreme Court in the case of CIT Vs Lovely Exports Pvt Ltd (319 ITR 5). Accordingly, the addition made under Section 68 on account of share application was deleted. The relevant extracts of the judgment is as follows:- As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. Further, in the decision of the Hon'ble Delhi High Court in the case of CIT v. Kamdhenu Steel Alloys Ltd. [2012] 19 taxmann.com 26/206 Taxman 254/[2014] 361 ITR 220 is also relevant, wherein it was held as under : Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has created evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; A.O. failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable. 35. The SLP filed against the above decision has been dismissed by the Hon ble Supreme Court. 36. In the case of FinleasePvt Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8/ it was held as follows. 6. This Court has considered the submissions of the parties. In this case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition on account of share application in similar circumstances. The relevant portion of the decisions, are as follows: (a) In the case of DCIT Vs Global MercantilesPvt.Ltd in ITA No. 1669/Kol/2009 dated 13-01-2016, this Tribunal held as follows: 3.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed are not reiterated herein for the sake of brevity. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned Ld. CIT(1) on the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ud reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of 20 individuals are reflected in page 6 7 of the Learned CIT(A) order. The Learned AO asked the assessee to produce the shareholders before him. He found that the assessee did not do so but furnished copies of pay orders used for payments to the assessee company and also furnished income tax particulars and balance sheets of all the shareholders. The Learned AO on analyzing all the balance sheets observed that the shareholders have paltry income and small savings and none of them have any bank account and huge cash balances were shown in their hands out of which Pay orders were obtained. Based on this, the Learned AO concluded that these shareholders do not have creditworthiness to invest in the assessee company and brought the entire sum of ₹ 57,00,000/- to tax as unexplained cash credit u/s 68 of the Act. 4.2. On first appeal, the Learned CIT(A) observed that entire share application monies of ₹ 57,00,000/- we received during the previous year 2004-05 relevant to Asst Year 2005-06 from 20 persons and the shares were allotted to them during the asst year under appeal. He observed that the assessee had furnished details of the share applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividuals in the sum of ₹ 57,00,000/- has been received by the assessee during the financial year 2004-05 relevant to Asst Year 2005-06 and only the shares were allotted to them during the asst year under appeal. Admittedly no monies were received during the asst year under appeal and hence there is no scope for invoking the provisions of section 68 of the Act. Hence we hold that the order passed by the Learned CITA in this regard does not require any interference. Accordingly the ground no. 3 raised by the Revenue is dismissed. 6. We have heard the Learned DR and when the case was called on for hearing , none was present on behalf of the assessee. However, we find from the file that the assessee had filed a detailed paper book and written submissions. Hence the case is disposed off based on the arguments of the Learned DR and written submissions and paper book already available on record. The facts stated in the Learned CIT(A) were not controverted by the Learned DR before us. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd the statements given by three persons the Assessing Officer found that the response from the others was either not available or was inadequate and added an amount of ₹ 46 lakhs pertaining to 30 persons to the income of the assessee. The Commissioner (Appeals) upheld the decision of the Assessing Officer. On appeal, the Tribunal set aside the order of the Commissioner (Appeals) and deleted the additions. On further appeal: Held, dismissing the appeal, that the additional burden was on the department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. 6.3. We find that the argument of the Learned DR to set aside this issue to the file of the Learned AO for verification of share subscribers would not serve any purpose as the ratio decided in the above cases is that in any case, no addition could be made in the hands of the recipient assessee. In view of the aforesaid findings and respectfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dresses not to refuse the receipt of letters and receive the same. Just because, a letter was received at the old address instead of present address, it cannot be said that the identity of the applicant has not been verified. All of these companies had duly replied to notice u/s. 133(6) and confirmed the transaction with all the evidences. The AO has not raised any objection on any of the information furnished before him. The AO has not asked the respective Company applicants also to explain the alleged discrepancy in the address. The AO has not brought any material on account of record to disbelief the evidences furnished with him and treat the transaction as not genuine. The assessee submitted the following material at the time of assessment. a) Copy of share applications from the share applicants (copies enclosed) b) Copy of Form 2 filed with Registrar of Companies, West Bengal (copy enclosed) c) Copy of Form 18 about the Registered Office of the applicants for change of address subsequent to the date of allotment, i.e. 31.03.2009 (copies enclosed) d) Members register e) Share application Allotment Registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation money by holding that the assessee company has failed to prove the identity, and creditworthiness of The creditors as well as the genuineness of transactions. It is observed that all the three share applicant companies i.e. M/s. Shree ShyamTrexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. JewellockTrexim Pvt. Ltd. had filed their confirmations wherein each of them confirmed that they had applied for shares of the assessee -company. All the three companies provided- the cheque number, copy of bank statements and their PAN. It is observed that these companies also filed, copies of their return of income and financial statements for as well as copy of their assessment order u/s. 143(3) of the I. T Act for AY 2005-06. In the case of M/s. JewellockTrexim Pvt. Ltd. the assessment for AY 2005-06 was completed by the ITO Ward 9(3), Kolkata and the assessments in the case of M/s. Navalco Commodities Pvt. Ltd. and M/s. Shree ShyamTrexim Pvt. Ltd. for A. Y.2005-06 and AY.2004-05 respectively were completed by the I TO, Ward 9(4), Kolkata. Under the circumstances, I am of the opinion that the AO was not justified in holding that the share applicant companies were not in existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. 38. To conclude, section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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