TMI Blog2021 (3) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... -3-2021 - Shri Bhavnesh Saini, Judicial Member And Shri B.R.R Kumar, Accountant Member For the Assessee : Shri S.K. Tulsiyan, Advocate For the Revenue : Shri N.K. Bansal, Sr. D.R. ORDER PER BHAVNESH SAINI, J.M. This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-1, New Delhi, Dated 25.07.2013, for the A.Y. 2008-2009, on the following grounds : 1. The order of Ld. CIT (A) is not correct in law and facts. 2. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of ₹ 4,96,00,000/- made by AO on account of unexplained share premium and Share Capital received by assessee from M/s Taranga Vyapar Pvt. Ltd., UDIT Vyapar Private Limited, Remo Engineering Works Pvt. Ltd., Mysol Engineering Pvt. Ltd., Twenty First Century (India) Ltd., as the assessee failed in proving the creditworthiness of the investors and the genuineness of the transactions. M/s Taranga Vyapar Pvt. Ltd does not have any significant funds of its own for investment in the unlisted company like the assessee company. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred in law deleting the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies situated at Kolkata of ₹ 4,96,00,000/-. The details as per the table are given below : S. No. Name of the Share Holder Address Amount (Share Capital + Share Premium) 1. M/s. Taranga Vyapar Pvt. Ltd., 10, Clive Row, 1st Floor, Kolkata-700002 96,00,000/- 2. UDIT Vyapar Private Limited 10, Clive Row, 1st Floor, Kolkata-700002 98,00,000/- 3. Remo Engineering Works P. Ltd., 10-B, Sikdarpara, Kolkata 700 007 94,00,000/- 4. Mysol Engineering Pvt. Ltd., 207, Maharshi Devendra Road, Kolkata 700 007 98,00,000/- 5. Twenty First Century (India) Limited 1, Crooked Lane, 1st Floor, Room No.107, Kolkata-700069. 1,10,00,000/- ₹ 4,96,00,000/- 3.2. The assessee was asked to furnish the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annes Road, Bandra-West, Mumbai 400 050 96,00,000/- 3. Hingara finvest Pvt. Ltd., Shivaji Raje Scheme, B-10/14, Mhada, Room No.101, Ekta Nagar, Malad (W), Mumbai - 400 062. 94,00,000/- 4. Doldrum Investment and Finance Pvt. Ltd., B-501, Pushpak Apartment, Ghartan Pada, Western Express Highway Dahisar (E), Mumbai 400068. 98,00,000/- 5. Oshin Investment and Finance Pvt. Ltd., B-501, Pushpak Apartment, Ghartan Pada, Western Express Highway Dahisar (E), Mumbai 400068 92,00,000/- ₹ 4,84,00,000 /- 3.5. The assessee was asked to submit the evidences of their identity and genuineness of the transactions. The assessee similarly filed copies of the bank accounts, confirmations, income tax returns, acknowledgments and copies of the annual reports of the Investors. The A.O. on going through the same noted that these Investors have shown meager income in their return of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy it is so. At the time of registration of a company, no physical verification of its existence at the address mentioned in the memorandum / article of association is carried out. In fact, physical verification of an applicant for PAN is also not carried out by the Income Tax Department. Secondly, Corporations are legal entities that organize business and channelize capital in any modern economy. These are controlled by few individuals and the natural flow of capital necessitates change of ownership of such entities, sometimes frequently. Therefore, unless it is established that the share capital raised has dubious antecedents or has been induced by the promoters / owners to launder untaxed money, adverse opinion / view cannot be taken. Instead of trying to physically locate private companies at particular addresses, what needs to be verified is their existence in the records of Govt, agencies (ROC, Income-tax, Service Tax, Excise, VAT authorities, etc.), their business activities and financial transactions. In the present case, it is undisputed that all the companies that had subscribed to the share capital of the appellant company are existing entities in the records of IT depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Order of ITAT, Delhi in the case of ITO vs., Synergy Finlease Pvt. Ltd., in ITA.No.4778/Del./2013. 3. Prem Castings (P.) Ltd., vs., CIT [2017] 88 taxmann.com 189 [Alld.] [HC]. 4. CIT vs., MAF Academy (P.) Ltd., 361 ITR 258 [Del.] [HC]. 5. CIT vs., Navodaya Castle Pvt. Ltd., [2014] 367 ITR 306 [Del.] [HC]. 6. Konark Structural Engineering (P.) Ltd., vs., DCIT [2018] 96 taxmann.com 255 [SC]. 7. Pratham Telecom India Pvt. Ltd., vs., DCIT [2018-TIOL- 1983-HC-MUM-IT]. 8. JJ Development Pvt. Ltd., vs., CIT [2018-TIOL-395-SCIT]. 9. DRB Exports (P.) Ltd., vs., CIT [2018] 93 taxmann.com 390 [Calcutta] [HC]. 10. CIT vs., Nipun Builders Developers (P.) Ltd., 350 ITR 407 [Del.] [HC]. 11. CIT vs., Nova Promnoters Finlease (P) Ltd., 342 ITR 169 [Del.] [HC]. 12. CIT vs., N R Portfolio Pvt. Ltd., [2014] 222 Taxman 157 [Del.] [HC]. 5. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that A.O. did not conduct any enquiry in respect of Kolkata parties. No summons under section 131 or notice under section 133(6) have been issued for verification of the transaction. The A.O. made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of PCIT vs., M/s. Ami Industries (India) Pvt. Ltd., [2020] 116 taxmann.com 34 [Bom.] [HC] recently distinguished the Judgment of Hon ble Supreme Court in the case of NRA Iron Steel (P.) Ltd., (supra) on facts by making the following observation and findings in paras 21 to 24 as under : 21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far creditworthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the appeal of the Revenue and the Order of the Hon ble Delhi High Court has been confirmed by the Hon ble Supreme Court by dismissing the SLP of the Department. He has, therefore, submitted that the facts of the case of assessee are identical with the case of Adamine Construction (P) Ltd., (supra) which were also connected with Bhushan Group of cases as is also attributed to the case of assessee. Therefore, the issue is covered in favour of the assessee on the identical facts and circumstances. Learned Counsel for the Assessee, therefore, submitted that the initial onus upon assessee to prove identity of the Investors, genuineness of the transactions and creditworthiness of the Investor Companies have been discharged by producing the relevant documents which have not been doubted by the A.O. Therefore, the addition has been rightly deleted by the Ld. CIT(A). In support of the contention, he has relied upon Judgment of the Hon ble Delhi High Court in the case of CIT vs., Dwarkadhis Investment P. Ltd., [2011] 330 ITR 298 [Del.] [HC], Judgment of Hon ble Gauhati High Court in the case of Nemi Chand Kothari 264 ITR 254 (Gau.), CIT, Orissa vs., Orissa Corporation P. Ltd., 159 ITR 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifically mentioned from their audited accounts that they are having creditworthiness and have sufficient source of funds to make investment in assessee company. The A.O. did not doubt their source at all. As regards the Mumbai Investors, assessee produced their annual accounts which have not been discussed by the A.O. in the assessment order. The A.O. merely reported that they have filed the return of income showing meager income. However, their balance-sheet clearly show that they have sufficient bank balances with them in their bank accounts and in the balance-sheet their capital and reserves are ranging from ₹ 49.99 crores, ₹ 4.01 crore and ₹ 30.02 crores respectively. Thus, all the Investors have sufficient source with them to make investment in assessee company. No evidence was found during the course of search in the Bhushan group of cases to point-out that assessee received any bogus share capital/premium from any of the Investor companies. The report of the Inspector at Mumbai was not confronted to the assessee, therefore, it cannot be read in evidence against the assessee. The A.O. did not make any enquiry on the documentary evidences filed by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable. 6.4. Decision of Hon ble jurisdictional High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under : The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon ble High Court. 6.5. Decision of jurisdictional High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd., ITA.No.169 of 2017 dated 14th March, 2017, in which it was held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and 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 v. Lovely Exports P. Ltd. [2009] 319ITR (St.) 5 (SC) applied. 6.9. Decision of Hon ble jurisdictional High Court in the case of CIT vs. (i) Dwarakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the share applications had changed their addresses or had stopped functioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee. 6.11. Decision of Hon ble jurisdictional High Court in the case of CIT vs. Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) (HC), in which it was held as under : 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. 6.12. Judgment of Hon ble Delhi High Court in the case of Pr. CIT vs., Kurele Paper Mills P. Ltd., 380 ITR 571 (Del.) in which Hon ble Delhi High Court held as under : Held, dismissing the appeal, that the order of the Commissioner (Appeals) revealed that there was a factual finding that no incriminating evidence related to share capital issued was found during the course of search as was manifest from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry conducted by the A.O. support his findings that Investors were non-existing and share capital was bogus. However, in the case of assessee A.O. did not doubt the identity of the Investors. The A.O. did not doubt the source of the Investor companies of Kolkata and mentioned their source in the assessment order itself and in respect of Mumbai Investors, A.O. did not refer to sufficiency of funds with them as per their annual reports which we have mentioned in this Order now. In the case of assessee A.O. did not make any enquiry, therefore, the facts of the case of assessee are clearly distinguishable from the Judgment in the case of PCIT vs., NRA Iron Steel (P.) Ltd., (supra) relied upon by the Ld. D.R. 6.16. The A.O. merely doubted the financial capacity of the Investors because they have reported low income in their return of income. This cannot be the sole basis to doubt the explanation of assessee. It may be suspicion of the A.O. only without bringing any evidence on record. Rather the documentary evidences produced on record clearly support the explanation of assessee. The Hon ble Bombay High Court in the case of Ami Industries (India) Pvt. Ltd., (supra) has disting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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