TMI Blog2021 (4) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... e has explained not only the source of making investment in assessee company, but, also explained the reason why it has made an investment in assessee company at premium. The assessee has explained before the authorities below the reasons for allotting the shares at premium because the assessee has purchased an immovable property in assessment year under appeal and Delhi Government has issued a Notification in the Master Plan which was about to be implemented through which the Government proposes to develop dwelling houses in low density area which would benefit the assessee and the Investors. All these explanation of assessee and Investors have not been doubted by the A.O. The Ld. CIT(A) in his findings have also categorically found that the enquiry report have not been confronted to assessee, therefore, it cannot be read in evidence against the assessee. No material is produced before us to contradict the finding of fact recorded by the Ld. CIT(A). Considering the above evidence and material on record, it is clear that A.O. did not make any enquiry on the documentary evidences filed by assessee and did not doubt the documentary evidences filed by assessee, therefore, ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The details of the same are noted in Para-3.1 of the assessment order. The assessee-company has filed the confirmation, balance-sheet, profit and loss account and bank statement of the 06 Investors. The A.O. issued notices under section 133(6) of the I.T. Act, 1961 to all the Investors and asked them to file copy of their ledger account, copy of their return of income and computation copy of their balance-sheet, profit and loss account for the assessment year under appeal and earlier years, how there was a contact with the assessee company ? whether the Directors are related to you ? bank statements, basis for making contributions in assessee company, copy of share application form, value of the shares at par or at premium, present status value of the share, correspondence with the assessee company, minutes books of Board of Directors, whether all the shares are kept with assessee company or transferred subsequently. 3.1. The A.O. noted that replies from 04 individual Investors have been received and A.O. accepted that they are inducing genuine money into the share capital of the assessee company. The A.O. as regards 02 remaining corporate companies M/s Avanti Vyapaar Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the Investor Companies, audited accounts of 04 years have been filed before Assessing Officer along with their assessment orders under sections 143(3)/143(1) and their bank statements. Therefore, creditworthiness of the Investors are established. Genuineness of the transaction is proved by filing copy of Form No.2 along with challan and Annexure filed with the Registrar of Companies [ ROC ] for allotment of shares, confirmation of both the Investors along with bank statements, Board Resolution of both the Companies along with their Memorandum and Articles of Association and bank statements showing payments made to the assessee company and bank statements of the assessee to show amounts have been received through banking channel. The assessee also explained the source of funds with the Investor Companies and in case of M/s. Golden Vyapaar Pvt. Ltd., the funds available with this Investor was on account of amount received by sale of shares of some other companies and in case of M/s. Avanti Vyapaar Pvt. Ltd., the amount have been raised against repayment of the loans. The details of the same are mentioned at Page-8 of the appellate order. It was, therefore, submitted that both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings. 3.3. From the assessment order, it is observed that the AO also issued notices u/s 133(6) to the share holders to file confirmations, balance sheets, copies of bank accounts and other details. The notices issued to the aforementioned 2 corporate entities were returned back un-served, though subsequently replies were received by the A.O. from these two companies, as mentioned at page-5 of the assessment order. Later on, the AO issued summons u/s 131 of the I.T. Act to the directors of the appellant company and also to the directors of the 2 corporate shareholder companies. Subsequently, vide show cause dated 16/03/2015, the AO confronted the appellant and asked to produce directors of the shareholder companies as summons u/s 131 of the I.T. Act could not be served on them. 3.4. The AR contended that subsequently the alleged share applicant companies furnished their replies in response to notices issued to them u/s 133(6) and Mr. Anand Kumar Aggarwal, director of M/s. Avanti Vyapaar Pvt. Ltd. appeared before the A.O. for personal deposition and his statement was recorded on oath. The AO has mentioned about the receipt of such replies and personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany has hampered the assessment proceedings. Perhaps the assessee company was aware of the fact that if any investigations are to be carried out, then real facts would emerge and the genuineness of the transactions would be revealed. Further the financials of the assessee company also not justified the huge share premium received. 4.4. Further it is concluded that since it is known fact that various companies and group of companies are involved in financial manipulation and providing accommodation entries. In the present case also circumstances indicate that the assessee was not having any adequate financial creditahility as per the return filed hy the assessee. The assessee has also not discharged the onus of establishing the identity, genuineness and creditworthiness of the parties and also appears to be involved in financial manipulations. 3.7. The AR of the appellant contented that the AO had already made deeper scrutiny in the case of the appellant and without bringing any evidence on record in support of his contention, alleged that documents / details filed by the appellant were not sufficient concluded that investor companies were entry operators, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. 3.11. The Assessing Officer has himself mentioned in the assessment order that in response to notices issued u/s 133(6). the share applicants have furnished replies along with documentary evidences and in response to summon u/s 131, director of one of the share applicant companies as well as of the appellant company appeared for personal deposition and their statements were recorded, which is part of assessment record. The AO has not brought anything on record to dispute the facts/details furnished by the appellant despite conducting independent enquiries in terms of section 133(6) / 131 of the I.T. Act. 3.12. The appellant had produced before the A.O. the Permanent Account Numbers (PANs), certificates of incorporation of the two corporate share applicants, their RBI registration certificates and copies of their bank statements. All these, coupled with the fact that they replied to notices issued by the A.O., establish their identities. Creditworthiness of the parties are proved from the fact that they were l.T. assessees, had sufficient balances in their bank accounts to be able to advance the share application money to the appellant company and their bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3.13. In my considered view, on the above facts of the appellant s case and documents / evidences placed on record, case laws relied upon by the appellant and undisputed fact that the share applicants duly complied with the notices / summons u/s 133(6) / 131 of the I.T. Act by filing their replies and directors of the share applicant company also came for personal deposition, so by furnishing documents / evidences to prove the identities and creditworthiness of the share applicants and genuineness of transactions of share capital / premium issued during the year, the onus on the appellant stands discharged u/s 68 of the I.T. Act. 3.14. Accordingly, this appeal of the appellant deserves to be allowed and the addition of ₹ 2,12.50,000/- made by the Assessing Officer on account of unexplained cash credit u/s 68 of the I.T Act is deleted. Therefore, grounds of appeal nos. 1 (a) to 1 (d) are hereby allowed. 4. In the result, the appeal is allowed. 4. The Ld. D.R. relied upon the Order of the A.O. The Ld. D.R. submitted that both the Investor Companies have shown meager income in their return of income and as such have no creditworthiness. The Ld. D.R. relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that shares were issued at premium due to the reason that assessee company has purchased land during financial year under consideration and Delhi Government issued a Notification in the Master Plan which was about to be implemented. Under that Master Plan Government proposed to develop dwelling houses in low density area near Village-Simphola. Therefore, looking at the good future, returns of investment and business proposals, shareholders of the assessee company agreed to pay premium on the shares. The balance-sheet of the assessee for the assessment year under appeal is also referred which shows that in assessment year under appeal assessee company has made investment in property of ₹ 2,40,85,100/-. Learned Counsel for the Assessee, therefore, submitted that assessee explained each and every issue before the A.O. which have not been doubted by the A.O. Therefore, on mere suspicion A.O. made the addition against the assessee which have been rightly deleted by the Ld. CIT(A). Learned Counsel for the Assessee, submitted that merely because premium rate was charged on the share is no ground to make the addition against the assessee particularly when documentary evidences fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank statements, their assessment orders, copy of Income Tax return, ROC Certification, PAN Card, Board Resolution etc., The documentary evidences filed on record have not been doubted by the A.O. The A.O. on going through the replies filed by both the Investor Companies directly before him found that both the Investor Companies have shown meager income in their return of income for the assessment year under appeal. This is the sole reason which prompted the A.O. to doubt the creditworthiness of the Investors and their genuineness of the transaction in the matter. The A.O. did not doubt the identity of both the Investor Companies. The A.O. also did not doubt their identity because both the Investor Companies are assessed to tax and are registered with RBI as NBFC Company and also registered with the ROC. Therefore, both the companies being legal entities, there were no question of doubting identity of both the Investor Companies. The assessee as regards their creditworthiness filed their balance-sheet for 04 years including assessment year under appeal, their bank statements and assessment order/intimations under section 143(3)/143(1) of the I.T. Act, 1961. The bank statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked creditworthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case. 23. Therefore, on a thorough consideration of the matter, we are of the view that the first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below. 24. Under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itial onus upon the assessee to prove creditworthiness and genuineness of the transaction have been discharged by the assessee. In support of the above findings, we rely upon the following decisions. 6.2. CIT vs. Fair Investment Ltd., 357 ITR 146 in which it was held that A.O. did not summon investors and did not make efforts. There is no finding that material disclosed was untrustworthy. The Appellate Authorities rightly deleted the addition. 6.3. Decision of Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 in which it was held as under: 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, but it cannot be regarded as undisclosed income of assessee company. 6.4. Decision of Hon ble jurisdictional High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., Ors. 361 ITR 220 (Del.) in which it was held as under : Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside. 6.8. Decision of Hon ble jurisdictional High Court in the case of Divine Leasing Finance Ltd., 299 ITR 268, in which it was held as under : No adverse inference should be drawn if shareholders failed to respond to the notice by A.O. 6.9. Decision of Hon ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held as under : Dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented the company's own income from undisclosed sources. It was nobody's case that the nonresident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified. 6.11. Decision of Hon ble jurisdictional High Court in the case of CIT vs. WinstralPetrochemicals P. Ltd., 330 ITR 603, in which it was held as under : Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications had chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case. 6.15. The Hon ble Madhya Pradesh High Court in the case of PCIT vs., Chain House International Pvt. Ltd., 98 taxmann.com 47 [HC] [MP] [ 408 ITR 561 [HC] [MP] ] while deciding several appeals including the appeal of the Revenue in the case of Bharat Securities Pvt. Ltd., held that once genuineness, creditworthiness and identity of the Investors are established, no addition could be made as cash credit on the ground that shares were issued at excess premium. The Departmental SLP have been dismissed by the Hon ble Supreme Court reported in 113 taxmann.com 32 (SC) in the case of PCIT vs., Bharat Securities Pvt. Ltd., 6.16. The Ld. D.R. heavily relied upon the Judgment of Hon ble Supreme Court in the case of PCIT vs., NRA Iron Steel (P.) Ltd., (supra). In this case, the Investors were being non-existing and have not having capacity to invest funds and that detailed enquiry conducted by the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
