TMI Blog2020 (6) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... Without doing so, the addition made by the AO and confirmed by Ld CIT(A) are based on conjectures and surmises, so their impugned action cannot be justified - no addition was warranted under Section 68 of the Act. Therefore, we do allow the appeal of assessee and direct deletion of addition under section 68 - Decided in favour of assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - I.T.A. No. 2445/Kol/2019 - - - Dated:- 29-5-2020 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For the Appellant : Shri A. K. Tulsyan, FCA For the Respondent : Shri Vijay Shankar, CIT, DR ORDER PER SHRI A.T.VARKEY, JM This is an appeal filed by the assessee against the order of Ld. CIT(A)-5, Kolkata dated 23.09.2019 for AY 2012-13. 2. The only ground of appeal of the assessee is against the action of the Ld. CIT(A) in confirming the addition of ₹ 16 cr. u/s. 68 of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee u/s. 68 of the Act as undisclosed cash credit. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the action of the Ld. CIT(A) and dismissed the assessee s appeal. Aggrieved, the assessee is before us. 4. The Ld. AR assailing the decision of the Ld. CIT(A) contended that the assessee company is a genuine company which has returned an income of more than ₹ 2.18 cr. in its return of income. According to Ld. AR, turnover of the assessee company is more than ₹ 73 cr. and it is into the manufacturing and sale of iron and steel. According to Ld. AR, investments in the shares of assessee are made by group concerns only wherein the directors of the assessee company and relatives are the directors. According to Ld. AR, M/s. Highlight which had invested ₹ 11 cr. has undergone scrutiny assessment u/s 143(3) of the Act for AY 2012-13 and AY 2017-18 and drew our attention to the assessment orders passed for AY 2012-13 dated 15.12.20-19 placed at pages 6 and 7 of the paper book and copy of the assessment order u/s. 143(3) for AY 2017-18 found placed at pages 8 and 9 of the paper book. According to ld. AR, M/s. SSHPL wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if the assessee is a bogus company and unfortunately, the Ld. CIT(A) also towed the same line. According to Ld. AR, the Ld. CIT(A) has termed the assessee company to be not having any business without looking into the balance sheet and P L Account of the assessee. According to the Ld. AR if the Ld. CIT(A) would have looked into the balance sheet and P L Account of assessee, then it would have revealed that assessee company is a full-fledged company which had turnover of more than ₹ 73 cr. and profit of more than ₹ 2 cr. which enabled the assessee to return an income of ₹ 2.18 cr. The share subscribers, according to Ld. AR., were investment companies and, therefore, investments are made with an intention to recap long term return and their profit and loss in the initial years cannot be the yardstick to cast negative aspersions on its credibility. Therefore, according to Ld. AR, since the assessee company is a genuine manufacturing company, the decision of the group companies to invest in the assessee company for boosting further growth of the assessee company should be allowed and addition made should be deleted. 5. Per contra, the Ld. CIT, DR contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses, finance cost, depreciation and amortization expenses and other expenses total comes to ₹ 70,30,38,654/- this year as on 31.03.2012 and in last year it was ₹ 71,96,83,183/- and the profit before taxation as on 31.03.2012 with the assessee company is ₹ 33,38,76,510/- from earlier year it is ₹ 2,78,27,382/-. 7. We note that the assessee company in this year under consideration has taken share capital of ₹ 16 cr. from the following two companies: Sl. Name PAN Address No. of shares Amount (Rs.) 1. M/s. Set Square Holdings Pvt. Ltd. AADCS4693P 20B, Abdul Hamid Street, 7th floor, Block 7A, Kol-700 069 10,00,000 5,00,00,000/- 2. M/s. Highlight Goods Pvt. Ltd. AACCH1378M 20B, Abdul Hamid Street, 7th floor, Block 7A, Kol-700069 22,00,000 11,00,00,000/- 8. The main plea of the assessee is that both the share applicants are group companies and the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so they function as a group concerns and, therefore, the entire money received by the assessee company is from its own group companies and individuals who are relatives only. 11. In order to show the creditworthiness of the share applicant companies, we note that M/s. Set Square Holdings Pvt. Ltd. had net own fund of ₹ 48,89,51,014/- and had invested ₹ 5 cr. in the assessee company and M/s. Highlight Goods Pvt. Ltd. had net owned fund of ₹ 16,69,60,353/- and invested ₹ 11 cr. in the assessee company. 12. In order to prove the identity of the share applicants the assessee company had filed the copy of the audited accounts, Income Tax Acknowledgment, computation of income for AY 2011-12 to 2013-14 of both the companies and also drew our attention to the fact that both the company s assessments have been scrutinized u/s. 143(3) of the Act by their respective AOs. We note that M/s. Set Square Holdings Pvt. Ltd. [CINU01134WB1987PTCO 41856, PAN AADCS4639P] has been incorporated on 09.02.1987 and had its own CIN and PAN. Likewise, M/s. Highlight Goods Pvt. Ltd. [CIN-U51101WB2008PTC127695, PAN- AACCH1378M] had been incorporated on 21.07.2008 and was having C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation number U51101WB2008PTC127695. This company duly filed its return of income before ITO Ward 1(1), Kolkata and was having PAN AACCH1378M. This company was having a paid up capital with free reserves and surplus of ₹ 16,69,60,353/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. The details of source of funds from which this company had made the share application are also shown in documents filed in the paper book. 16. Moreover we note that the AO after issuing one notice has made the adverse inference against the assessee wherein the assessee had replied that it is ready to produce the directors of the share applicant companies before the AO which is evident from the letter dated 26.02.2015 found placed at page 23 of the paper book. In order to justify the premium of ₹ 40/- per share the Ld. AR submitted that the assessee has issued 32,00,000 shares at ₹ 50/- per share with Face value of ₹ 10 and premium of ₹ 40/- per share. The company was incorporated on 19.08.2004 with a vision to become a leading manufacturer of Iron Steel and has raised funds time and again as per the growing requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all . Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. We note that against the said decision of Hon'ble Gujarat High Court the special leave petition filed by the Revenue has also been dismissed by the Hon'ble Apex Court. 19. The main plank on which the AO made the addition was because the directors of the share subscribers did not turn up before him. In such a case the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 /[2003] 127 Taxman 523 , has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income Tax (Appeals) being the First Appellate Authority and contended that the Assessing Officer had no material to show that the share capital was the income of the assessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of ₹ 52, 03,500/- to the income of the assessee company during the Assessment Year in question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed. The Commissioner of Income Tax Appeals, further found that the Assessee Company received the applications through bankers to the issue, who had been appointed under the guidelines of the Stock Exchange and the Assessee Company had been allotted shares on the basis of allotment approved by the Stock Exchange. The Assessee Company had duly filed the return of allotment with the Registrar of Companies, giving complete particulars of the allottees. The Commissioner of Income Tax (Appeals) found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bscribing to about 900 shares out of 6, 12,000 shares were not found available at their addresses, and that too, in course of assessment proceedings in the year 1994, i.e., almost 3 years after the allotment. By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of ₹ 52, 03, 500/- to the income of the assessee as made by the Assessing Officer. We are of the view that there is no question of law involved in this appeal far less any substantial question of law. The learned Tribunal has concurred with the learned Commissioner on facts and found that there were materials to show that the assessee had disclosed the particulars of the shareholders. The factual findings cannot be interfered with, in appeal. We are of the view that once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds. 21. Further, our attention was drawn to the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law. 22. Our attention was also drawn to the decision of the Hon'ble Supreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295: Can the amount of share money be regarded as undisclosed income under section 68 of the Income tax Act, 1961? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee- company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 23. Our attention was also drawn to the decision of the Hon'ble Calcutta High Court while relying on the case of Lovely Exports, in the appeal of COMISSIONER OF INCOME TAX, KOLKATA-IV Vs ROSEBERRY MERCANTILE (P) LTD., ITAT No. 241 of 2010 dated 10- 01-2011 has held: On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in respect of each share subscribers which will throw light as to the identity, creditworthiness and genuineness of the share subscribers. We note from pages 36 to 62A of the paper book wherein the details of M/s. Set Square Holding Pvt. Ltd. are furnished. This company invested a sum of ₹ 5,00,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 09.02.1987 and was having company identification number UO 1134WB1987PTCQ41856. This company duly has filed its return of income before ITO Ward 5(4), Kolkata and was having PAN AADCS4693P. This company which had invested ₹ 5 cr. in the assessee company has also undergone scrutiny assessment u/s. 143(3) of the Act for AY 2011-12 and which fact is discernable from a perusal of pages 1 and 2 of the paper book and also for AY 2017-18 the assessment order u/s. 143(3) of the Act is found placed at pages 3 to 5 of the paper book. Thus, this investing company s assessments have undergone scrutiny proceedings under section 143(3) of the Act, and then the question of identity of this investor company cannot be doubted. This company was having a paid up capital wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above.(viii) And all the directors and share holders are relatives and regular income tax assessee s (ix) Both companies are group entities having common relatives are share holders. (x) Cannot be termed as jamma karchi companies 27. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal 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 the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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 applicants giving the date wise receipts, mode of payment, amount, name, address, income tax returns, PA No. of share applicants along with their balance sheet. The Learned CITA also observed that the assessee in its reply to show cause notice before the Learned AO had requested him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. Accordingly the ground no. 3 raised by the Revenue is dismissed. (b) The ITAT Kolkata in R.B Horticulture Animal Projects Co. Ltd, ITA No. 632/Koll2011 dated 13-01-2016. In this the decision the Ld. Tribunal held as follows: 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 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 CITA on the decision of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 respectfully following the decision of the apex court (supra), Jurisdictional High Court (supra) and Delhi High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the grounds raised by the Revenue are dismissed. (c) The Ld. ITAT Kolkata in ITA No.1061/Ko1/2012 in the case of ITO Wd.3(2) Kol, vs. M/s. Steel Emporium Ltd dated 05-02-2016. In this the decision the Ld. Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Register f) Copy of board resolution. g) Replies from Share applicants to the notice u/s. 133(6) issued to them by the AO seeking information and documents about the sources and to examine their identity, genuineness of the transaction and their creditworthiness. (copy enclosed). h) Copy of audited accounts. i) Copy of bank statements. j) Copy of Income tax acknowledgment of return filed for AY 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Jewellock Trexim 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 Shyam Trexim 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 existence. The assessment orders were completed on the address as provided by the appellant company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies were not in existence at the given address. Since the appellant company had provided sufficient documentary evidences in support of its claim of receipt of share application money, I am of the opinion that the no addition u/s.68 could be made in the hands of appellant company. On going through the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of CIT(A) and dismiss the appeal of the Revenue. 29. In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee and the documents produced by the assessee cannot be brushed aside by the AO to draw adverse view, which action of AO cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we are of the considered view that addition cannot be sustained merely based on inferences drawn by circumstance. Applying the law laid down in these case laws to the facts of this case, we are inclined to interfere with the order of the Ld. Commissioner of Income Tax (Appeals) and give relief to the assessee. 30. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source, it 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 dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
