TMI Blog2018 (5) TMI 2034X X X X Extracts X X X X X X X X Extracts X X X X ..... count number, financial statements, bank statements and income tax return copies and confirmations given. The Income Tax Inspector has also given in affirmative his report regarding the address of some of the shareholders inspected by him. The requisitions given by assessing officer in the remand proceedings have been duly complied with by all parties except for one party namely M/s. Empower Industries India Ltd. Addition deleted by the ld. Commissioner of Income Tax (Appeals) are in accordance with the above precedent's except for one share applicant namely Jagdamba Coplex Private Limited. In the case of this company according to the submissions of the Ld counsel of the assessee himself the name of the company has been struck off from the website of Ministry of Corporate Affairs. The Ministry of Corporate Affairs has struck off some of the shell companies/companies which are inactive with no activity for a long time. However, we also note that in a number of such cases where names have been struck off, fresh applications have been made by the CBDT with the Company Law Tribunal for restoration of those companies whose name has been struck of so that Department can pursue app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m whom the assessee has received monies . The appellant prays that the order of the CIT(A) on tjie above grounds be set aside and that of the AO be restored. 3. The grounds of appeal in assessee s appeal read as under: 1. On the facts and circumstances of the case and in law, the learned CIT(A) 16 has erred in confirming disallowance u/s. 68 of the Act, of Preference Share Capital amounting to ₹ 5,40,00,000/- received from M/s. Empower Industries India Limited. 2. The order under appeal is not only bad in law and invalid, but also against the natural law of equity and justice. 4. Brief facts of the case are as under: The assessee company is engaged in the business of buying and running infrastructure facility and property development. The Assessing Officer observed that the assessee has introduced share capital of ₹ 38,12,79,600/- by way of Issued, Subscribed a Paid-up Share Capital for 3,17,733 non-cumulative preference shares, details of which are as under :- Sr. No. Name of the shareholders No. of equity shares Amount (Rs.) 1 Sonal Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove. The assessee failed to comply. Thereafter, the assessee submitted the pass book and bank statements. The Assessing Officer issued summons u/s. 131(1) of the Act to the above different shareholders. Majority of the notices were returned unserved. The Assessing Officer also issued requisition u/s. 133 to the said shareholders asking for details. The Assessing Officer noted that in the course of hearing on 18.03.2013, the ld. Counsel of the assessee was finally asked to produce all the shareholders on 22.03.2013 as the enquiries reveal non-existence of the shareholders at the addresses provided by the assessee. In the background of the aforesaid, the Assessing Officer held that identities of the shareholders have not been proved. He noted that the assessee has merely furnished photo copies of share application forms, balance sheets, relevant bank statements entries of the shareholders. However, the Assessing Officer noted that even by doing so, the assessee has not established the identity of the said shareholders as neither the concerned persons have been produced nor their books of accounts been furnished. The Assessing Officer further noted that as per the information avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oti Foodstuff Limited Ealdor Retails Private Limited Prabhav Industries Limited Empower Industries India Limited d. Valuation report of Chartered Accountant justifying issue of shares at premium, the rate of ₹ 1251/- per share Vide letter dt. 01.02.2013 c. Copy of acknowledgement of return of income Balance sheet as on 31.03.2010 of 4 preference shareholders Sonal Cosmetic (Exports) Limited Sonal International Limited SonalSil - Chem Limited Dynachem Pharmaceuticals (Exports) Limited d. Statement showing details of Bank Accounts of preference shareholders (Name and address of Bank alongwith respective bank account numbers) The appellant company has also submitted bank statement of its own reflecting payment received from above shareholders. 7. Thereafter, the ld. Commissioner of Income Tax (Appeals) noted that the Assessing Officer has issued summons u/s. 131. He also noted that the Inspector has been deputed to find out some of the shareholders. The assessee made elaborate submissions before the ld. Commissioner of Income Tax (Appeals). The ld. Commissioner of Income Tax (Appeals) noted that the assessee has submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f repeated opportunities were given to the appellant to produce evidence and if the appellant does not suomotu produce any additional evidence, in the spirit of justice and fair play, it is incumbent on the first appellate authority, being quasi-judicial authority, to require the appellant to produce requisite evidence or to make necessary inquiry and admit any such fresh and additional evidence, by virtue of section 250 (4) and (5) read with sub-rule (4) of Rule 46 A. 4.2.4 In the present case, the details submitted by the appellant are relevant to the grounds raised in appeal as the major reasons for addition made in the assessment. The appellant has clearly stated that the appellant was not provided with enough time of submitting other evidences. There was no intentional failure on the part of the appellant and evidences being material and supportive, and in the interest of justice the evidences produced by the applicant are admitted and taken on record after considering the principles laid down by the jurisdictional High Court in the case of Smt Prabhavati S. Shah. Further, the appellant had submitted most of the details during the assessment: proceedings itself as can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It was brought to my notice that the said party refused to cooperate and submit their details due to certain differences with the appellant company. However the appellant company submitted the details with respect to the said company. 4.2.6 Further, the Inspector was deputed to visit the premises of the following shareholders and to verify whether they actually exist in the given addresses. After visiting the premises, the Inspector has stated in his report that the following parties actually existed at the given addresses. Inspector's report is attached herewith; i) Aarika Steel and Metal Private Limited ii) Safford Mercantile Private Limited iii) Benchmark Buildcon Private Limited iv) Jagdamba Complex Private Limited v) Proficient Merchandise Private Limited vi) Nihal Mercantile Private Limited vii)Pasupati Enclave Private Limited 4.2.7 The appellant company had filed the copies of the replies received in response to notice u/ s. 133(6) notices in its submission and stated that the shareholders not only furnished the documentary evidences but also provided the explanation asked for by AO. Thus, AO is not correct in stating that they have fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, documentary evidences and also judicial pronouncements proves that addition u/s. 68 is not correct since, the identity and creditworthiness of the shareholders and genuineness of the transaction is proved beyond doubt. The appellant place reliance on following case laws in support that in the circumstances of the facts of the case of the appellant no addition under section 68 can be made on account of unexplained cash credit: i. ACIT v. Kisco Casting (P.) Ltd (2013) 34 taxmann.com 37 ii. CIT v. Creative World Telefilms Ltd. (2011) 15 taxmann.com 183 (Bom)(HC) iii. CIT v. Orbital Communication (P) Ltd (2010) 327 ITR 560 (Delhi) iv. CIT v. Shree Rama Multi Tech Ltd. (2013) 34 taxmann.com 177 (Gujarat) v. CIT v. Orissa Corpn. (P.) Ltd. (1986) 25 TAXMAN 80F (SC) vi. CIT v. Apex Therm Packaging (P.) Ltd (2014) 42 taxmann.com 473 (Guj) vii. CIT vs. MoraniAutomotives (P.) Ltd (2014) 45 taxmann.com 473 (Rajasthan) viii. CIT v. Nipuan Auto (P.) Ltd (2014) 49 taxmann.com 13 (Delhi) ix. CIT v. Vacmet Packaging (India) (P.) Ltd (2014) 45 taxmann.com 204 (Allahabad) x. CIT v. Misra Preservers (P.) Ltd. (2013) 31 taxmann.com 214 (Allahabad) xi. CIT v. Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and failed to furnish any evidence to prove the identity of the said preference shareholders. AO also relied on the report of the inspector who could not find 7 shareholders on the addresses provided by the appellant company. 5.1.2 Merely not producing shareholders before the AO would not mean that the appellant company has not proved the identity of the shareholders. Ld. AO failed to consider other documentary evidences such as copy of acknowledgement of return of income, balance sheet, bank account details of the shareholders, confirmations of shareholders etc. which were submitted during assessment proceedings proving the identity of the shareholders. The appellant company has also filed share application forms received from shareholders and copy of correspondence with the shareholders. It was contended that shareholders were not under command of appellant. They were not ready to ; -; come on requests of appellant. 5.1.3 AO himself has stated in the order that as per the information on the official website of the ROC (MCA) the preference shareholders have continued with the appellant company till 31.03.2012. This, itself, proves the identity of shareholder as they were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(Inv) Baroda in the case of M/s. Citygold Education Research P. Ltd. in order No. CIT(A)-16/ITO 8(1)(3)/IT 178/2012-13 dated 22.05.2015. The observations of QT(A)-16 i.e. my predecessor is reproduced herein below: 5.14 Report of the DDIT, (INV) Unit l-(3) dated 2-3-2015 is sub the AO. The DDIT (INV), Ahmedabad has also forwarded the states:-: Shri Vimal Nemchand Gala, director and authorised for the deposition . M/s Dynachem Pharmaceuticals (Exports) Limited, Sonal Internationa^ Limited, SonalSil - Chem Limited, Sonal Cosmetic (Exports) Limited. 5.15 Prom the statement of Shri Vimal Nemchand Gala it can be noticed as follows: i. Business activities of the companies were explained. They are engaged in business of trading in chemicals (Ans to Q 4) ii. Confirmed the transaction of subscribing preference share of the appellant company. (Ans to Q 8) in. Details about business activities (Real estate) of appellant company were also provided. (Ans to Q 9) iv. The shares were subscribed for the purpose of investment and through common acquaintances. (Ans to Q9) v. Investment registers, audited accounts, return of income and bank statements were provided for the FY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny has received bogus funds in the form of share application money pending allotment as on 31.03.2006 from a few companies whose credit worthiness is doubtful. In the said list, name of 3 companies were also appearing. 5.2.2 The said 3 companies were providing bogus funds to M/s. J Kumar Infraprojects Ltd, but it does not prove that the said companies has made bogus investment in the appellant company also. No such confession is available for investment in appellant company. Moreover, the investment made in the appellant company is after the date of search on J.Kumar Infra Projects Ltd i.e. 26.08.2009. 5.2.3 As regards issue of notice u/s. 133(6) to the bank and observation of AO that KYC forms do not reveal any particulars or specifics as may establish the identity of the person behind the shareholder company, it has been stated by the appellant that they are duly signed by the director of the company and also name of the authorised director is mentioned on the form and bank A/c itself proves the identity. 5.2.4 The appellant company had explained individual capacities of each shareholders to''snow its credibility to invest in shares of appellant company which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss Block of Fixed Assets of ₹ 3,21,21,162 iii. The company has huge investments of ₹ 11,07,19,768. 1.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 1.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. Further, in case of M/s. Citygold Education Research Private Limited, the said party appeared before DDIT (Inv) and explained business activities carried on by them and also produced audited accounts, investment register, return of income, bank statement before DDIT(Inv), Unit - 1(3), Ahmedabad. The observation of the CIT(A)-16 i.e. my predecessor in case of abovementioned company is reproduced herein below: 5.9.3 ........... Further, in the statement recorded on oath u/s. 131 of Shri. Vimal Gala, director of Sonal Cosmetics (Export) Limited, he has confirmed the transaction of investing in the preference shares of the appellant company. The observation made by the AO were before the above statement taken on oath. However now, there is no room for doubt. 1.3 The appellant had also filed its confirmation also on page 11 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In case of SonalSil - Chem Ltd(₹ 2,00,40,000), the said company has produced 20th Annual Report in the year under consideration. This shows that it is very old company. The financial statement of the said company reveals the following; i. Equity share capital of ₹ 8,45,40,000. ii. Gross Block of Fixed assets of ₹ 6,89,16,942. iii. The company has huge investments of ₹ 1,41,83,691 3.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. . 3.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. Further, in case of M/s. City gold Education Research Private Limited, the said party appeared before DDIT (Inv) and explained business activities carried on by them and also produced audited accounts, investment register, return of income, bank statement before DDIT(Inv), Unit - 1(3), Ahmedabad. The observation of the OT(A)-16 i.e. my predecessor in case of above mentioned company is reproduced herein below: 5.11.5 The above company has specifically confirmed the transaction of making investment in the shares of appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve statement taken on oath. However now, there is no room for doubt. 4.3 The appellant had also filed its confirmation also on page 42 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS cheques. 4.4 The said company were holding till date the shares of the appellant company as stated by it in its reply to notice u/s, 133(6). 4.5 Hence addition made in the assessment is not correct. 5. In case of Aarika Steel and Metal Private Ltd (₹ 1,00,80,000), the financial statement of the above company reveals the following: i. Equity share capital of ₹ 50,95,000/- with high reserves and surplus of ₹ 9,49,52,194/- The company has huge investments of ₹ 9,61,55,000/-. 5.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 5.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 5.3 The appellant had also filed its confirmation also on page 54 of PB where the the above company has confirmed of having applied for the shares at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above details prove the credibility of the company and capacity to make investment in the appellant's company. 7.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 7.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 7.4 The appellant had also filed its confirmation also on page 96 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS cheques. 7.5 However, the above party did not reply to the notice u/s. 133(6). In absence of any confirmation from M/s. Empower Industries India Ltd. onus of proving/ identity creditworthiness and genuineness of transaction is not discharged. Hence addition of ₹ 5,00,40,000/- made in the assessment is confirmed. 8. In case of Ealdor Retails Private Limited(₹ 2,50,80,000), the financial statement of the said company reveals the following: i. Equity share capital of ₹ 95,35,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital of ₹ 41,26,6007- with high reserves and surplus of ₹ 9,66,71,290/- ii. The company has huge investments of ₹ 9,56,30,000/- 10.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 10.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 10.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 10.4 The appellant had also filed its confirmation which is placed on page 146 of paper book where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS cheques. 10.5 The said company are holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 10.6 Hence addition made in the assessment is not correct. 11. In case of Benchmark Buildcon Pvt Limited (₹ 1,00,80,000), the financial statement of the said compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,00,80,000), the financial statement of the said company reveals the following : i. Equity share capital of ₹ 51,68,200/- with high reserves and surplus of ₹ 12,78,97,313/- ii. The company has investment of ₹ 9,77,92,900/- 13.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 13.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 13.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 13.4 The appellant had also filed its confirmation which is placed on page 188 of paper books where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS cheques. 13.5 The said company is holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 13.6 Hence addition made in the assessment is not correct 14. In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observation of the CIT(A) - 16 i.e. my predecessor is reproduced herein below; 5.5.2 Also AddL, Director of Income Tax (Investigation), Baroda, has sent his report dated 4-6-2024 confirmed that the party namely M/ s. Prabhav Industries Limited actually exists and its address has changed. It shows the shares as investment as shown by the appellant, Balance sheet for y.e. on 31-3-10 is filed before him and the same shoivs the same figures as stated herein above, from the bank statements filed by it investment on various dates have been found. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. 15.4 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 15.5 The appellant had also filed its confirmation also on page 241 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS cheques. 15.6 The said company is holding till date the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d surplus funds inform of share capital. The said funds are extended as loans to various parties. The investments have been made out of the share capital and the short-term loans taken from other parties or loan repayments received by these companies. .(Ans to Q 12) vii. It was confirmed that shares are still held with the all four companies and share certificates issued by the appellant company to all the four companies were submitted. (Ans to Q 75,26) Thus, from the above statement recorded on oath and the documents provided by Shri Hiren C. Chhatrewala, the identity creditworthiness of M/s. Raw Gold Securities Pvt Ltd and genuineness of the transaction with the said company cannot be doubted. 16.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment 16.4 The appellant had also filed its confirmation which is placed on page 248 of paper book where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS cheques. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank accounts which reflects that the appellant company has paid back the amount of investment 18.4 The appellant had also filed its confirmation which is placed on page 287 of paper book where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS cheques. 18.5 The said company are holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 18.6 Hence addition made in the assessment is not correct. 19. In case of Lilac Medicines Private Limited - ₹ 2,00,40,000, the financial statement of the said company reveals the following: i. Equity share capital of ₹ 1,30,50,0007- with high reserves and surplus of ₹ 4,71,67,413/- ii. The company has investment of ₹ 7,90,40,000/- 19.1 19.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 19.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 19.3 The bank account of the said company reflects the payment made to the appellant company for investin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. In the appellant's case, the appellant along with the bank account details of the shareholders, has provided balance sheet of shareholders, confirmation of the shareholders and many other documentary evidences which show the identity and creditworthiness of the shareholder. iii. In case of Vijay Talwar v. CIT (2011) 330 ITR 1 wherein it is held that: 24. ....All the authorities below, in particular the Tribunal, /;, in unison that the assessee did not produce any evidence to re: .: presumption drawn against him under section 68 of the Act, by producing the parties in whose name the amounts in question had been credited by the assessee in his books of account. In the absence of any cogent evidence, a bald explanation furnished by the assessee about the source of the credits in question viz., realisation from the debtors of the erstwhile firm, in the opinion of the Assessing Officer, was not satisfactory. It is well settled that in view of section 68 of the Act, ivhere any sum is found credited in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68. iii. In the case of Shree Rama Multi Tech Ltd. v CIT (2013) 34 taxmann.com 177 (Guj) the assessee company had furnished complete details of receipt of share application money along with share application forms, names, addresses, PAN and other relevant details of share applicants. On the basis of this it was held by High Court of Gujarat that share application money could not be added as cash credit under section 68. iv. In case of CIT v. Orissa Corpn. (P.) Ltd. (1986) 25 TAXMAN 80F (SC) the Supreme Court affirmed the decision of High Court wherein Tribunal deleted the impugned addition as well as the penalty imposed on the grounds that (i) assessee have given the names and addresses of the creditors, (ii) it had also produced before ITO letters of confirmation, the discharged hundis and particulars of the different creditors including their general index numbers with the Income-tax Department and (iii) the revenue, apart from issuing notices under section 131 to creditors at instance of assessee, did not pursue the matter further, nor it examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ottees; (iv) balance sheets and (v) copies of share allotment certificates and of the Board's resolution of the share applicants. The identity of the applicants was held to be established by the production of copies of the PAN cards and registration certificate with the Registrar of Companies. On this basis, the Tribunal held that the assessee had discharge the onus which lay on it to prove the identity of the applicant companies, their creditworthiness and genuineness of transactions. ix. In case of CIT v. Misra Preservers (P.) Ltd. (2013) 31 taxmann.com 214 (Allahabad) Assessing Officer made addition to assessee's income in respect of unexplained share application money received from various persons. In appellate proceedings, assessee brought on record evidence establishing identity of share applicants. It was also proved that they made payment by cheques and most of them were assessed to tax. Tribunal thus, set aside addition made by Assessing Officer. Impugned order passed by Tribunal did not require any interference. x. In case of CIT v. Expo Globe India Ltd. (2014) 51 taxmann.com 208 (Delhi) assesses received share application money during relevant assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . once again issued notices u/s.133(6) on the latest address which were duly complied by the subscriber of shares alongwith all necessary details which were called by the A.O. except Empower Industries India Ltd. which has subscribed shares of ₹ 5,40,00,000/-. All the subscribers of shares except Empower Industries India Ltd. furnished audited financials alongwith other necessary details as called by the A.O. Therefore, the only basis on which AO made addition u/s.!43(3) about non services of notice issued u/s.131/136 is no more valid because not only notices were served but complied by the recipient except one. The A.O. had not pointed out any defects in the information received in response to notices issued u/ s.l33(6). During appellate proceedings, it was also submitted that at the time of remand proceedings, appellant was ready to produce the principal officer of companies which had subscribed the shares of appellant company but after receipt of information u/s.l33(6) A.O. did not insist for it. Therefore keeping in view various facts as narrated about and various case laws discussed in the foregoing paragraphs out of addition of ₹ 38,12,79,600/- made u/s.68, additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,40,000 4. Dynachem Pharmaceuticals (Exports) Ltd. 2,00,40,000 5. Aarika Steel and Metal P. Ltd. 1,00,080,000 6. Priority Traders P. Ltd. 2,50,80,000 7. Empower Industries India Ltd. 5,00,80,000 8. Ealdor Retails P. Ltd. 2,50,80,000 9. Tac Technosoft P. Ltd. 2,50,80,000 10 Safford Mercantile P. Ltd. 1,00,80,000 11 Benchmark Buildcon P. Ltd. 1,00,80,000 12 Jagdamba Coplex P. Ltd. 1,00,80,000 13 Proficient Merchandise P. Ltd. 1,00,80,000 14 Nihal Merchantile P. Ltd. 1,00,80,000 15 Prabhav Industries Ltd. 4,00,80,000 16 Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38,12,79,600 Taxable income 29,45,44,124 Rounded off u/s.288A 29,45,44,120 2. Book profit u/s.H5JB of the Act As per assessee's computation (-) 8,79,47,093 20. The appellant filed appeal before the CIT(A) against the said addition made u/s.68 of the Act. During the appellate proceedings, various evidence were filed before the CIT(A) and the remand report was called for from the Assessing Officer. The Assessing Officer in remand proceedings issued notices u/s.!33(6) of the Act at the fresh addresses submitted by the appellant and the same were duly responded by all the parties except one i.e. Empower Industries India Ltd. ( Empower in short) 21. After taking into account the material gathered during the appellate proceedings, the submissions/details filed by the appellant, the reasons given for making addition u/s.68 of the Act in the assessment order and the remand report submitted by the Assessing Officer, the CIT(A) evaluated the amount invested by each shareholder and dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is list did not make investment in the appellant. ii. The investment was made in the appellant company subsequent to the date of search on J. Kumar Infra Projects Ltd. i.e. 26.08.2009. iii. The appellant company had furnished details which show the individual capacity of the shareholder which had been discussed at length in the appellate order f. The reasons given by the Assessing Officer, to conclude genuineness of transactions had not been established, were untenable in view of the fact that the Assessing Officer had nowhere mentioned that there were immediate cash transactions in the bank statements and that the Assessing Officer has not doubted the fact that shareholders had enough balance to make the investment in the appellant. Similarly, the list of Hawala Dealers issued by the Sales-tax Department had no connection with the investment transactions with the appellant, [para 5.3.3 of the CIT(A)'s order]. g. The details submitted by the appellant prove the identity-, credibility and genuineness of transactions in the case of each shareholder. However, since Empower did not respond to notice u/s.!33(6) of the Act, the addition is sustained u/s.68 of the Act only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this party has been extracted on page 10 of the said order of the Hon'ble Tribunal. On its perusal, it can be seen that the CIT(A) has deleted the addition on the basis of fact that statement of Shri Devang Dinesh Chandra Master, Director of Empower, was recorded u/s.131 of the Act on 12.03.2013 (i.e. before the Assessing Officer passed the assessment order in the case of appellant) wherein he had admitted that trading activities were bogus but it did not mean that investments were bogus. The confirmation for having made investment by the party was filed by the assessee therein and that investment was held till that date. The Hon'ble Tribunal upheld the deletion vide para 6 of the order of the Hon'ble Tribunal wherein it has been considered that notices were served in the case of Empower and related details were on file, the party had confirmed transaction before DIT, Baroda and that the CIT(A) had deleted addition after taking into account the remand report of the Assessing Officer. 28. On perusal of the paper book filed by the appellant it can be seen that the appellant has filed the requisite details discharging the initial onus laid on it u/s.68 of the Act and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled principles of law. 34. During the appellate proceedings, the Assessing Officer had caused fresh enquiries and furnished his remand report. The CIT(A) has also caused verification by deputing his inspector and found the information collected to be correct. Thus, it is submitted that it is not the case where no enquiries had been caused. The initial onus laid upon the assessee has been duly discharged and on further verification, no adverse material has been found. Therefore, the addition made by the Assessing Officer u/s. 68 of the Act has been righlty deleted by the CIT(A). 13. Thereafter, the ld. Counsel of the assessee has referred to several case laws which are as under: 1. ACIT vs. Gagandeep Infrastructure Pvt. Ltd. for A.Y. 2008-09 in ITA No. 5784/Mum/2011 dated 23.01.2014; 2. CIT vs. Creative World Telefilms Ltd. (333 ITR 100 (Bom)); 3. ITO vs. Shreedham Construction Pvt. Ltd. for A.Ys. 2008-09, 2009-10 and 2012-13 in ITA Nos. 3754-3756/Mum/2017 dated 14.11.2017; 4. Arceli Reality Limited v. ITO for A.Y. 2007-08 in ITA No. 6492/Mum/2016 dated 21.04.2017; 5. Lalitha Jewellery Mart P. ltd. vs. DCIT (399 ITR 425 (Mad)); and 6. Orchid Industries P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49. The search results are enclosed herewith for Your Honours' ready reference. 50. It is submitted that the Hon'ble Tribunal has confirmed the deletion of similar addition made u/s.68 of the Act in the case of Citygold Education Research Ltd. (supra) after taking into account that the investor companies are not shell companies or appear in the list prepared by Ministry of Corporate affairs and that the investors are very much on the register of Registrar of Companies. Hence, the order of the CIT(A) deleting the addition made by the CIT(A) may kindly be upheld. 15. We have heard both the counsels and perused the records. Upon careful consideration we note that assessee company in this case has received share application money from 19 corporate entities. The assessee has submitted that documentary evidences in connection with the share application money received. These included various details like name, address, company incorporation details, share application details, balance sheets, bank statements, permanent account number and income tax returns. The assessing officer has taken adverse inference because he noted that assessee has neither produced the concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company shall be deemed to be not satisfactory, unless- (a) 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 (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 17. The Hon'ble jurisdictional High Court had occasion to consider the addition of similar share applications u/s. 68 in several case laws. 18. We may gainfully refer to the Hon ble jurisdictional High Court expositions in this case as under: 1) CIT vs. Gagandeep Infrastructure (P.) Ltd. [2017] 394 ITR 680 (Bom) had held as under: (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. 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 shares 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 be applicable in the facts and circumstances of the present case 19. From the expositions, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpower Indus India Ltd. Harekrishna securities Pvt. Ltd., Signora Finance Pvt. Ltd. Sonal Cosmetics (Exports) ltd., Raw Gold Securities Pvt. Ltd., Sonal Sil Chem Limited., Dynachem Pharmaceuticals (Exports) Ltd., Sonal International Ltd., Alken management and Financial Ltd. and Lilac Medicines Pvt. Ltd. All these parties have admitted the transactions and also filed financials of these companies showing the investment in shares of the assessee company. The CIT(A) after getting the remand report from the AO, deleted the addition. 7. We find that the AO proceeded to discredit the investors of the assessee, which is completely erroneous. The AO was looking for proof beyond doubt and proceeded on an element of suspicion that the amounts of investments are really those of the assessee, which have been ploughed back by the assessee. But the settle principle of law is that any amount of suspicion however, it strong might be, is no substitute for proof. Suspicion is not sufficient enough to lead to the conclusion that the investments received by the assessee company are all manipulated receipts and on that basis he can record a finding that the explanation of the assessee is not satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 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 ofSection 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 pre-proviso 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 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be applicable in the facts and circumstances of the present case 10. We have also made enquiry from the learned Sr. Departmental Representative, whether the investors or this company is a Shell company or in the list prepared by Ministry of Corporate Affairs, Govt. of India. The learned Sr. DR, stated that this information is not available with the department. Further, we made enquiry from the learned Counsel for the assessee whether this company has been strike off from the Registrar Of Companies or not, the learned Counsel stated that it is very much on the register of Registrar Of Companies. In view of these facts, we reach to a conclusion that this is existing company and even the investors are existing. 11. In view of the above facts and circumstances of the case, we are of the view that CIT(A) has rightly deleted the addition and we confirm the same. This issue of revenue's appeal is dismissed 12. In the result, the appeal of Revenue is dismissed. 21. We find that deletion of addition by the ld. Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. Lilac Medicine P. Ltd. Amalgamated 49. The search results are enclosed herewith for Your Honours' ready reference. 50. It is submitted that the Hon'ble Tribunal has confirmed the deletion of similar addition made u/s.68 of the Act in the case of Citygold Education Research Ltd. (supra) after taking into account that the investor companies are not shell companies or appear in the list prepared by Ministry of Corporate affairs and that the investors are very much on the register of Registrar of Companies. Hence, the order of the CIT(A) deleting the addition made by the CIT(A) may kindly be upheld. 22. Hence, following the above said precedents, we are of the opinion that the addition deleted by the ld. Commissioner of Income Tax (Appeals) are in accordance with the above precedent's except for one share applicant namely Jagdamba Coplex Private Limited. In the case of this company according to the submissions of the Ld counsel of the assessee himself the name of the company has been struck off from the website of Ministry of Corporate Affairs. The Ministry of Corporate Affairs has struck off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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