TMI Blog2022 (2) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... upporting/corroborative documentary evidences, the existence of the share applicant companies was proved beyond doubt by the assessee. The assessee during the course of re-assessment proceedings and first appellate proceedings filed requisite documentary evidences which included share application form, extract of minutes of the meeting of the companies, Master data and signatory details, Certificate of incorporation, MOA, AOA, audited financial statements etc. so as to justify the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them. It is also an uncontroverted fact that the said documents were never disproved by the Ld AO and Ld CIT(A). The identity of the above share applicants was also independently verified by the inspectors during the course of re-assessment proceedings. Notices u/s 133(6) of the Act were issued to the above share applicants which were duly replied to by the share applicants. So far as the share application money received from remaining companies is concerned, we find that the assessee filed ample documentary evidences which discharged the primary onus cast upon it u/s 68 There was no justific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shing inquiries which is not permissible in law. 4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of re- assessment proceedings initiated under section 147 of the Income Tax Act 1961 without obtaining proper sanction from the competent authority under section 151 of the Income Tax Act, 1961. 5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of ₹ 80,00,000/- out of the addition of ₹ 2,60,00,000/- made by the assessing officer under section 68 of the Income Tax Act 1961 on account of share application money received during the year without properly appreciating the facts of the case and submissions made before him more so when the appellant had properly discharged the primary onus case upon it under section 68 of the Act. 6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of ₹ 80,00,000/- out of the addition of ₹ 2,60,00,000/- made by the assessing officer under section 68 of the Income Tax Act 1961 on account of share application money r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enge the action of the Ld CIT(A) in deleting the addition of ₹ 1,80,00,000/- out of the total addition of ₹ 2,60,00,000/- made by the Ld Assessing Officer on account of share application money. Brief facts relating to this issue are that the Ld Assessing Officer during the course of re-assessment proceedings made addition of ₹ 2,60,00,000/- to the total income of the assessee on account of share application money received from following share applicants: S. No Name of the Company PAN Amount [Rs] 1 Kamakhya Developers P Ltd AABCK0981C 10,00,000 2 M/s MAPS Enterprises P Limited AABCM6875B 12,50,000 3 M/s Talent Infoway Limited AAACL3305J 20,00,000 4 M/s Buniyad Chemicals Limited AABCB6954G 10,00,000 5 M/s Jai Hind Synthetics Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 10,00,000 NIL 2 M/s MAPS Enterprises P Limited AABCM6875B 12,50,000 12,50,000 NIL 3 M/s Talent Infoway Limited AAACL3305J 20,00,000 20,00,000 4 M/s Buniyad Chemicals Limited AABCB6954G 10,00,000 10,00,000 NIL 5 M/s Jai Hind Synthetics Ltd AAACJ2475R 10,00,000 10,00,000 NIL 6 M/s Atishay Marketing P Limited AACCA5745R 10,00,000 10,00,000 7 M/s Sun Fruit P Limited (Now known as sun Mercantiles P Ltd) AAJCS2031D 12,50,000 12,50,000 NIL 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book filed before this Tribunal. The learned Counsel for the assessee relied on ample documentary evidences and stated that these documents were never disproved either by the Ld Assessing Officer or by the Ld CIT(A). The learned Counsel for the assessee emphasized the fact that the Ld Assessing Officer himself accepted that inspectors visited and met Shri Ashok Kumar Surekha who represented as Chairman in these companies and relevant details were also provided by him to the inspectors. Detail of all these companies of Kolkata to which notices u/s 133(6) of the Act were issued has been filed in the paper book. The learned Counsel for the assessee also contended that the Ld AO himself did not deny the above submission of the assessee as filed during the course of reassessment proceedings but rather he himself accepted that Shri Ashok Kumar Surekha was the chairman of all the companies. With regard to the remaining share applicants, the Ld. Counsel submitted that the assessee duly explained the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them by filing the ample documentary evidences and share application money received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Certificate of Incorporation 5 1.5 Memorandum of Association 6-23 1.6 Articles of Association 24-49 1.7 Director s report dated 22-07-2008 for the year ended 31 st March, 2008 50-51 1.8 Audited financial statements for the year ended 31 st March, 2008 52-59 1.9 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 60-64 1.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 65-71 1.11 Director s report dated 18-08-2015 for the year ended 31 st March, 2015 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55 2.13 Audited financial statements for the year ended 31 st March, 2015 156-170 2.14 Form DIR-12 containing the particulars regarding appointment of/ changes among directors and key managerial personnel 171-174 3 M/s Talent Infoway Limited (Formerly known as M/s Ravit Vinimay Limited) [PAN: AAACL3305J] ₹ 20,00,000/- 3.1 Share application form regarding subscription of equity shares of the assessee company 175-178 3.2 Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Mr. Jayesh K. Sampat for making investment in the equity shares of the assessee company 179 3.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 180-181 3.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles of Association 340-409 4.6 PAN detail as downloaded from the website of Income-Tax Department 410 4.7 TAN detail as downloaded from the website of Income-Tax Department 411 4.8 Audited financial statements for the year ended 31 st March, 2008 412-418 4.9 Form 18 containing the information regarding notice of situation or change of situation of registered office 419-420 4.10 Form 23B containing the information provided by the auditor to the Registrar 421-422 4.11 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 423-429 4.12 Director s report dated 07-05-2014 for the year end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,00,000/- 6.1 Share application form regarding subscription of equity shares of the assessee company 488 6.2 Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in stocks, shares, debentures and securities on behalf of the company 489 6.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 490-491 6.4 Certificate of Incorporation 492 6.5 Memorandum of Association 493-500 6.6 Articles of Association 501-508 6.7 PAN detail as downloaded from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.4 Original Certificate of Incorporation 558 7.5 Fresh Certificate of Incorporation consequent upon Change of Name of the share applicant company from M/s Sun Fruit Private Limited to M/s Sun Mercantile Private Limited 559 7.6 Memorandum of Association 560-574 7.7 Articles of Association 575-590 7.8 PAN detail as downloaded from the website of Income-Tax Department 591 7.9 Director s report dated 22-07-2008 for the year ended 31 st March, 2008 592-593 7.10 Audited financial statements for the year ended 31 st March, 2008 594-601 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended 31 st March, 2008 658 8.9 Audited financial statements for the year ended 31 st March, 2008 659-667 8.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 668-674 8.11 Director s report dated 31-08-2015 for the year ended 31 st March, 2015 675-677 8.12 Audited financial statements for the year ended 31 st March, 2015 678-692 9 M/s Rays Net Mark Private Limited [PAN: AADCR3152L] ₹ 30,00,000/- 9.1 Share application form regarding subscription of equity shares of the assessee company 693 9.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 758-766 10 M/s Breeze Tracom Private Limited [PAN: AADCB1833G] ₹ 25,00,000/- 10.1 Share application form regarding subscription of equity shares of the assessee company 767 10.2 Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in stocks, shares, debentures and securities on behalf of the company 768 10.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 769-770 10.4 Memorandum of Association 771-777 10.5 Articles of Association 778-785 10.6 PAN d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.5 Articles of Association 849-856 11.6 Director s report dated 22-08-2008 for the year ended 31 st March, 2008 857-858 11.7 Audited financial statements for the year ended 31 st March, 2008 859-867 11.8 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 868-872 11.9 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 873-879 11.10 Form 66 regarding submission of compliance certificate with the Registrar for the Financial Year 2007-08 880-881 11.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 917-923 12.12 Director s report dated 13-08-2013 for the year ended 31 st March, 2013 924-925 12.13 Audited financial statements for the year ended 31 st March, 2013 926-939 12.14 Form DIR-12 containing the particulars regarding appointment of/ changes among directors and key managerial personnel 940-949 13 M/s Regal Vanijya Private Limited [PAN: AADCR6961K] ₹ 15,00,000/- 13.1 Share application form regarding subscription of equity shares of the assessee company 950 13.2 Company Master Data and Signatory Details as do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and key managerial personnel 1022-1030 14 M/s Vaishno Devi Coloniser Private Limited [PAN: AABCV8060B] ₹ 25,00,000/- 14.1 Share application form regarding subscription of equity shares of the assessee company 1031-1032 14.2 Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Sanjay Jhanwar for making investment in the equity shares of the assessee company 1033 14.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 1034-1035 14.4 Certificate of Incorporation 1036 14.5 Memorandum of Association 1037-1046 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.3 Certificate of Incorporation 1117 15.4 Memorandum of Association 1118-1125 15.5 Articles of Association 1126-1133 15.6 PAN detail as downloaded from the website of Income-Tax Department 1134 15.7 Director s report dated 22-08-2008 for the year ended 31 st March, 2008 1135-1136 15.8 Audited financial statements for the year ended 31 st March, 2008 1137-1145 15.9 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 1146-1150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2008 1205-1213 16.9 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 1214-1218 16.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 1219-1225 17 Copy of account payee cheques and pay-in-slips/ receipts in respect of share application money received by the assessee company during the Financial Year 2003-04 1267-1272 18 Copy of replies as posted directly by the following share applicant companies in response to notices issued under section 133(6) of the Income-Tax Act, 1961 by the assessing officer in the case of the assessee company: 18.1 M/s Kamakhya Developers Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited AADCR3152L 30,00,000 Yes, reply filed 4 M/s Breeze Tracom P Limited AADCB1833Q 25,00,000 Yes, reply filed 5 M/s Excel Merchant P Limited AABCE8172B 10,00,000 Yes, reply filed 6 M/s Regal Banijya P Limited AADCR6961K 15,00,000 Yes, reply filed 7 M/s Shubham Dealers P Limited AALCS0985Q 30,00,000 Yes, reply filed 8 M/s Sun Fruit P Limited [Know Known as Sun Mercantile P Limited AAJCS2031D 12,50,000 Yes, reply filed Total 1,45,00,000 11. Before us, the ld. Counsel for the assessee contended that the additional information required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the A.Y. 2009-10] 2 M/s Buniyad Chemicals Limited AABCB6954G 10,00,000 [1] M/s Swift Intermedia Convergence Ltd [ITA No 566/Ind/ 2013 dt 09-12-2015 for A.Y. 2009-10] [2] M/s Ad-Manum Packaging P Limited [ITA No 543/ Ind/ 2013 dt 0912-2015 for the A.Y. 2009-10] 3 M/s Jai Hind Synthetics Ltd AAACJ2475R 10,00,000 M/s Deep Darshan Properties P Limited [ITA Nos 2117 2118/ Mum/ 2014 dt 28-09-2015 for the Asst Years 2006-07 2007-08] 4 M/s Atishay Marketing P Limited AACCA5745R 10,00,000 M/s Bhiwani Vanaspati Limited [ITA No 522/Kol/2011 dt 15-03-2012] 5 M/s Tuticorin Trexim P Limited [Currently known as M/s Makes worth Projects Developers P Ltd] AAACT9539J 20,00,000 M/s Luminant Investment Limited [ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and source of a sum found credited in his books, the sum may be treated as the undisclosed income of the assessee. The initial burden is on the assessee to explain the nature and source of the credit and to do so, the assessee is required to prove (a) Identity of the shareholder (b) Genuineness of transaction and (c) Credit worthiness of shareholders ; (a) The identity of the shareholder can be proved by either (if individual) producing him before the AO or by way of documents, registered address, PAN etc; (b) The genuineness of the transaction can be shown from the fact that the money has been received from the shareholder. If the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved . Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc; (c) The creditworthiness or financial strength of the creditor/subscriber can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 3.9.3] That Hon ble Apex Court in the case of Lovely Export P limited ( Supra) has categorically held that if the assessing officer is not satisfied with the explanation of the assessee in that case also necessary addition is to be made in the hand of share applicant and not in the case of the assessee. Hon ble Delhi High Court vide its order dt 11-04-2012 in the case of Goel Sons Golden Estates Pvt Ltd has held [ Copy of the decision is reproduced in the case of M/s Excellence Town Planner P Limited [ Appeal No ITA No 871/ Del/ 2010 dt 25-05-2012][Refer Para 3 of that order ]:- 3. We have examined the said contention and find that the assessee during the course of assessment proceedings has filed confirmation letters from the companies, their PAN number, copy of bank statements, affidavits and balance sheet . Thereafter the Assessing Officer had asked the assessee to produce the said Directors/Parties. Assessee expressed its inability to produce them . The Assessing Officer did not consequent thereto conduct any inquiry and closed the proceedings. This is a case where the Assessing Officer has failed to conduct necessary inquiry, verification and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween self-confessed accommodation entry providers , whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such entry providers . The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre- meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are being initiated separately. The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. The appeal is dismissed. Hon ble Mumbai Bench of ITAT in the case of DCIT vs M/s Rank Shipping Agency Pvt Ltd [Appeal No ITA No 5946/Mum/ 2008 dt 21-11-2012] had an occasion to dealt with the issue in respect of share application/ share capital and held that:- 30. Now coming to the question as to whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k statement. Further, said share applicants have also filed confirmation letters placed at page 34 in the case of JMD Telefilms Industries Ltd., at page 117 in the case of Warmer Multimedia Ltd., at page 179 in the case of Shrestha Leasing Finance Ltd,. and at page 302 in the case of Trio Mercantile Trading Ltd. In the said confirmation letters, bank details to make the payment to assessee company for allotment of shares is also stated. The transactions are admittedly recorded in the books of account both by the assessee company as well as aforesaid share applicants. Therefore, we are of the considered view that no addition on account of unexplained cash credit is warranted in the case of assessee on the given facts and circumstances as discussed above. Hence, we are of the considered view that the action of AO is contrary to the decision of Hon'ble apex Court in the case of Lovely Exports (supra). Accordingly, we delete the addition of ₹ 72 lakhs sustained by ld CIT(A) by allowing grounds of appeal taken by assessee. Hon ble ITAT, Indore Bench in the case of M/s Rajshree Finsec P Limited [Appeal No 545/ Ind/2010 dt 06-02- 2012 for the Asst Year 2007-08 ] had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their identity is proved, then no addition is warranted in the case of the assessee. So far as the decisions cited in the impugned order are concerned, in view of the decision from Hon'ble Apex Court in the case of Lovely Exports (supra), has remained for academic interest only, being on different facts, therefore, we are refraining ourselves in dealing with each and every case individually, especially in the light of the evidences, filed by the assessee, evidencing that the identity of such share applicants was very much proved by further filing of confirmation by them. 7. In view of these facts, the decision from Hon'ble Apex Court in Lovely Exports (supra) and uncontroverted fact that the summons issued to the impugned share applicants were duly received by them with further filing of confirmation by such share applicants, at least their identity is proved, therefore, this appeal of the assessee deserves to be allowed [Emphasis applied] Hon ble ITAT, Indore Bench, Indore vide its order dt 28- 03-2012 in the case of M/s Mittal Appliances Limited for the Asst Year 2004-05 after considering the decisions as referred in Para 1.12.1 of this letter, acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing Finance Ltd. (supra), considering the similar question held that the assessee Company having received subscript ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer, without taking step for verification of the Income Tax Return of the creditors, took unnecessary step of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing officer is satisfied with the transaction. 18. We, thus, find that in the case before us the Tribunal below rightly set-aside the deletion made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the Income Tax return of the creditors. The position, however, would have been different if those creditors were not income tax assessee or if they had not disclosed those transactions in their income tax returns or if such returns were not accepted by their A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. 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 of Section 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 Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are application money to the assessee during the year under consideration. It is also an uncontroverted fact that notices under section 133(6) of the Act were issued to the said share applicants which were duly complied with. The Ld Assessing Officer himself accepted that inspectors met Shri Ashok Kumar Surekha who represented as the Chairman in these companies. The share applicant companies also provided their acknowledgement of return, copy of account of the assessee in their books of accounts, copy of share certificate and copy of their bank statement directly to the Ld Assessing Officer which were never disproved by the Ld Assessing Officer. We find that with the help of supporting/corroborative documentary evidences, the existence of the share applicant companies was proved beyond doubt by the assessee. The assessee during the course of re-assessment proceedings and first appellate proceedings filed requisite documentary evidences which included share application form, extract of minutes of the meeting of the companies, Master data and signatory details, Certificate of incorporation, MOA, AOA, audited financial statements etc. so as to justify the identity and creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X
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