TMI Blog2020 (3) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration are same, respectfully following the order of the Tribunal in the group case, we do not find any merit for the addition made u/s.14A of the IT Act. Appeal of the assessee is allowed. - ITA No.2562/Mum/2018 - - - Dated:- 2-3-2020 - Shri R.C. Sharma, Accountant Member For the Assessee : Ms. Ritu Kamal Kishor (AR) For the Revenue : Shri Akhtar H Ansari (DR) ORDER PER: R.C. SHARMA, A.M. This appeal by the assessee is directed against the order dated 07/03/2018 of ld. CIT(A)-53, Mumbai for the A.Y. 2010-11 in the matter of order passed u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short, the Act). Following grounds have been taken by the assessee: 1. The ld. CIT(A) has erred in law and on facts in upholding the additions made by the A.O. u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 which is invalid and bad in law. 2. The ld. CIT(A) has erred in upholding the addition of ₹ 22,10,000/- made by the A.O. U/s 68 of the Act. 3. The ld. CIT(A) has erred in upholding the addition of ₹ 16,575/- made by the A.O. being alleged unexplained expenditure @ 0.75% on aforesaid alleged capital introduced of ₹ 22,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal in group cases wherein exactly similar addition so made by the AO and confirmed by CIT(A) was deleted by the Tribunal after threadbare dealing with all the judicial pronouncements referred by lower authorities in their respective orders as well as cited by ld. AR and DR during the course of hearing. Precise observation of the Tribunal was as under:- 12. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. The Ld. AO has made additions towards share capital and share premium, on the ground that although, the assessee has filed various details to prove identity, genuineness of transactions and creditworthiness of the parties but, on perusal of details filed by the assessee, it was noticed that the assessee has failed to establish transactions between the parties are genuine in nature and also the subscriber to the share capital are having capacity to explain huge investments in assessee company. According to the AO, mere furnishing confirmation letters from the parties along with their PAN Number and ITR acknowledgement is not sufficient enough to discharge ,the onus cast upon u/s 68 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, board resolution, bank statement of Investor Company, PAN card, acknowledgment of return of income, financial statement of Investor Company, form No. 2 for allotment of equity shares and bank statement reflecting, the amount received through banking channels. Once, the assessee has discharged its initial onus by filing various details, then the onus shift to the AO to carry out further verification, in the light of evidences filed by the assessee to ascertain true nature of transactions between the parties before, he come to the conclusion that the transactions between the parties are genuine or not. In this case although, the AO has issued 133(6) notices to the parties, no further enquiry has been conducted, including issue of summons u/s 131. No doubt, none of the investors companies have responded to 133(6) notices issued by the AO, but fact of the matter is when, assessee has filed complete set of documents, including name and address of the parties, it is for the AO to carry out further investigation by exercising all possible options available to him, but non attendance of parties in response to 133(6) cannot be attributed to the assessee, because due to time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch opportunity is availed by the assessee. The Hon ble Supreme Court in the case of Andaman Timber Industries Ltd Vs CCE, Kolkata II in Appeal No 4228 of 2006 has vide order dated 02.09.2015 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. 14. Coming to the other aspect of the issue, the AO has invoked the provisions of section 56(2)(viib) of the I.T. Act, 1961. 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 market value will be charged to tax in the hands of the company as income from other sources. We, further noted that the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares at premium. In this case, from the facts on record, it is clear that the assessee has proved identity and genuineness of the transactions by filing necessary evidences. The assessee has filed valuation report from registered valuer as per which the share price of the company is over and above premium charged by the assessee. Therefore, we are of the considered view that provisions of section 56(2)(viib) has no application. 15. Coming to the case laws relied upon by the assessee. The assessee has relied upon plethora of judgements, including the decision of Hon ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (2008) 216 CTR 195 (SC). In the case laws relied upon by the assessee, the issue has been dealt as under:- CIT vs. Goa Sponge and Power Ltd (13/02/2012) Tax Appeal No. 16 of 2012 (High Court-Bombay) Once the authorities have got all the details, including the name and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as bogus . The controversy is covered by the judgements rendered b y the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that, even if it be assumed that the subscribers to the increased capital were not genuine, tinder no circumstances could the amount of share capital be regarded as un disclosed income, an appeal was taken by the Department to th e Supreme Court. The Supreme Court dismissed the appeal holding that the Tribunal had come to a conclusion on facts and no interference was called for. CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com289 (All- High Court) We have considered the arguments of the counsel for the parties. CIT(A) found that five companies subscribing the equity shares amounting to ₹ 25,00.000/- were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity of the share applicant companies and purchase of share had been proved by the assessee. Supreme Court in the cases of CIT v. Steller Investments Ltd. [2001] 251 ITR 263 and Lovely Exports case (supra), has held that the identity of the shareholder alone is required to be proved, in case of the capital contributed by the shareholders. Accordingly CIT(A) and the Tribunal has not committed any illegality in allowing the appeal of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The Tribunal without adverting to the principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this it construed the intentions of the assessee as being mala fide. The Tribunal ought to have analysed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the Assessing Officer. If the Assessing Officer had any doubt about the material placed on record, which was largely bank statements of the creditors and their income-tax returns, it could gather the necessary information from the sources to which the information was attributable......If it had any doubts with regard to their creditworthiness, the Revenue could always bring the sum in question to tax in the hands of the creditors or sub- creditors. CIT vs. Al Anam Agro Foods (P.) Ltd (2013) 38 Taxmann.corn 375 (All-Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription an d that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted. CIT vs. Shree Rama Multi Tech Ltd (2013) 34 Taxmann.com177 (Guj-HC) It is noted that Commissioner (Appeals) as well as the Tribunal have duly considered issue and having found complete details of the receipts of share application money, along with the form names and addresses, PAN and other requisite details, they found complete absence of the grounds noted for invoking the provision of section 68. Moreover, both rightly had applied the decision of CIT vs. Lovely Exports (P) Ltd to the case of the assessee. Therefore, no reason was found in absence of any illegality much less any perversity too to interfere with the order of the both these authorities, who had concurrently held the due details having been proved. The assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate benches have considered all those case laws and held that most of cases are not applicable to facts of present case. Therefore, we do not wish to discuss those case laws. But when it comes to Hon ble Supreme Court decision in case of PCIT vs. NRA IRON STEEL PVT LTD, we find that coordinate Bench of ITAT vide its order dated 03.05.2019 in the case of Shree Laxmi Estate Pvt. Ltd. in ITA No. 6557/Mum2017 for A.Y. 2013-14 had considered the decision of Hon ble Supreme Court in the case of NRA Iron Steel P. Ltd. and held that the facts of the case before the Hon ble Supreme Court are entirely different, where on the basis of facts of that case Hon ble Supreme Court came to the conclusion that mere furnishing of certain documents is not sufficient enough and what is relevant is all three ingredients, i.e. identity, genuineness of transactions and creditworthiness of the parties should be proved beyond doubt. We find that in the case before the Hon ble Supreme Court the parties never responded to 133(6) notices. The AO has carried out inquiries by issuing notices u/s. 133(6), for which none of the companies have replied. None of the companies produced bank statements to establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details called for by the ld AO in the notice u/s 133(6) of the Act. In case if the ld AO had any doubt on the veracity of the documents submitted by the loan creditors, the same could have been confronted on the said loan creditors by issuing summons u/s 131 of the Act and examine them on oath or correspondingly verify the same through the Assessing Offficers of the concerned loan creditors through the internal source of the department. The ld AO did not do either of these in the instant case and merely disregarded the evidences submitted on record before him both by the assessee as well as by the loan creditors directly to him. The written submissions filed by the ld DR in this regard is repetition of various contentions already available on record by the lower authorities, apart from placing reliance on certain decisions. We find that both the aforesaid loan additions were confirmed by the ld CITA by placing reliance on the decision taken by his predecessor in Asst Year 2012-13. We find that this tribunal in assessee s own case for the Asst Year 2012-13 in ITA No. 5954/Mum/2016 dated 29.12.2017 in respect of loan transactions of entities controlled by Shri Pravin Kumar Jain and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that previous year. A plain reading M/s Shree Laxmi Developers of section 68 makes it clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden todis prove the said claim shifts upon the AO. In this case, the assessee has discharged his onus cast u/s 68 by filing identity of the creditors, genuineness of transactions and creditworthiness of the parties which is evident from the fact that the assessee has furnished financial statements of the creditors wherein the said transaction has been disclosed in the relevant financial years. We further notice that the assessee also filed financial statements of the creditors which are enclosed in paper book filed. On perusal of the financial statements filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t introduced to proviso of section 68, with retrospective effect nor does the proviso to 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 the basis that the addition of the proviso to section 68is M/s Shree Laxmi Developers immaterial and does not change the interpretation of section 68 both before and after the adding of the proviso. In view of the matter the three essential tests while confirming the section 68 laid down by the Court 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 fact 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 a case in this context to the preamended section 68 has held that where the revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income-tax Officer to proceed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have gone through the case law relied by the Ld.DR in the light of facts of the present case and find that the facts of case before Hon'ble Delhi High Court are entirely different from facts of the present case. The Hon'ble Delhi High Court, has considered the fact that the individuals, who advanced loans had no financial strength to lend such huge sum of money to the assessee, that too, without any collateral security without interest and without a lender agreement. Under these facts, the Hon'ble Court held that mere establishing of their identity and the fact that the amounts have been transferred through cheque payment does not by itself mean that the transactions are genuine. In this case, the assessee has furnished all evidences and also the parties personally responded to the notices M/s Shree Laxmi Developers issued by the AO u/s 133(6) by filing various details, therefore, case law relied upon by the Ld.DR cannot be applicable to the facts of the present case. 11. In this view of the matter and considering the ratio of the case laws discussed above, we are of the considered view that the assessee has discharged identity, genuineness of transactions and cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in share application money in NRA Iron Steel Pvt Ltd but had limited income as per their income tax returns which in turn resulted in doubting of creditworthiness ; e) Most of the investor companies though confirmed the fact of having made investment in share application money in NRA Iron Steel Pvt Ltd , but had not filed their bank statements to prove the immediate source of credit available to them for making the said investment. 8.1.1. In the instant case before us, the ld AO did not issue any summons u/s 131 of the Act or make further enquiries to examine the veracity of the evidences filed on record before him by the assessee as well as by the loan creditors in response to notice u/s 133(6) of the Act. Moreover, all the loan creditors had duly furnished their respective bank statements proving the immediate source of credit for them to justify that they had sufficient creditworthiness to advance loan to the assessee company. From the perusal of the balance sheet of all investor companies, all the loan creditors had sufficient own funds in their kitty which prove their creditworthiness to advance loan to the assessee company. As has been stated hereinabove, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the ld CIT(A) had merely placed reliance on the decision taken by his predecessor in Asst Year 2012-13 in assessee s own case in similar set of facts. We find that this decision for Asst Year 2012-13 in assessee s own case has been reversed by this tribunal vide its order dated 29.12.2017 referred to supra. In view of our aforesaid findings in the facts and circumstances of the case and respectfully following the decision of this tribunal in assessee s own case for Asst Year 2012-13, we hold that the assessee company had duly proved the nature and source of credit in the form of unsecured loan and had duly satisfied the three necessary ingredients of section 68 of the Act viz, the identity of the loan creditors , creditworthiness of loan creditors and genuineness of loan transactions. Hence we direct the ld AO to delete the addition made in the sums of ₹ 50 lacs and ₹ 25 lacs towards unsecured loan u/s 68 of the Act. Accordingly, the Grounds 1 to 6 raised by the assessee are allowed. 17. In the case of PCIT vs. Hi-Tech Residency Pvt. Ltd. (2018) 257 Taxman 335, Hon ble Supreme Court has considered identical issue and held that where an assessee company had dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame modus operandi as alleged by the AO, additions so made was deleted by the Tribunal. As the facts and circumstances in the case of present assessee with same A.Y.2010-11 are same, respectfully following the order of the Co-ordinate Bench, we do not find any merit for the addition so made on account of share capital and the alleged commission paid for obtaining the same. 6. An addition u/s.14A was also made by the A.O. in the group cases, and the same has been deleted by the Tribunal after observing as under:- 20. The next issue that came up for our consideration from ground No.4 of assessee s appeal is additions towards disallowances of expenditure incurred in relation to exempt income. We find that the AO has made additions towards disallowances of expenditure in the assessment framed u/s 143(3) r.w.s. 153A of the I.T.Act, 1961, without reference to any incriminating material found as a result of search. It is settled position of law that in order to make any additions in the assessments, which are framed u/s 153A, the additions qua incriminating material is a must. Unless, the AO has incriminating material in his possession to prove that any item of addition is support ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
