TMI Blog2017 (9) TMI 1974X X X X Extracts X X X X X X X X Extracts X X X X ..... money, made by the assessing officer u/s 68 of the Act. 2. We have heard the parties and perused the record. During the year under consideration, the assessee received share application money of ₹ 9.96 crores and share allotment money of ₹ 3.96 crores. The assessee had issued 19,92,000 shares having par value of ₹ 10/- each with a premium of ₹ 40/- per share. During the year under consideration, the assessee received share application money of ₹ 79,20,000/- on issuing of 7,92,000 shares and premium of ₹ 3,16,80,000/-, both aggregating to ₹ 3.96 crores. A further sum of ₹ 9.96 crores was received towards share application of 19,92,000 shares pending allotment. The aggregate amount received by the assessee during the year was ₹ 13.92 crores (₹ 3.96 crores + ₹ 9.96 crores). 3. Before the Assessing Officer assessee furnished all the details to prove the identity, creditworthiness and genuineness of the transaction. The Assessing Officer noticed that the Additional DIT (Investigation), Kolkata has conducted an inquiry and recorded statement from a person named Mr. Kishan Kumar Verma, son of Shri Vijay Kumar Verma an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, the learned CIT(A) considered the decision rendered by Hon'ble Delhi High Court in the case of CIT Vs. Stellar Investment Ltd. (2001) 251 ITR 263 and also decision rendered in the case of CIT Vs. Divine Leasing and Finance Ltd. (2007) 158 Taxman 440 (Del). The learned CIT(A) noticed that the assessee has furnished all the details to prove the three main ingredients namely identity, creditworthiness of the creditors and genuineness of the transactions. 7. The learned CIT(A) accepted the contention of the assessee that the Assessing Officer has made addition on presumption and surmises. He noticed that identical addition made by the assessing officer in the sister concerns of the assessee named Gibs Computers Ltd (ITA No.1715 3858/M/09), Chat Computers Ltd (ITA No.3859/M/09) and Netscape Software Ltd (ITA No.3852/M/09) has been deleted by ITAT. The Ld CIT(A) also extracted the relevant observations made by ITAT in the order dated 25.1.2012 passed in the case of Gibs Computers Ltd in ITA Nos. 1715 and 3858/M/09. Accordingly he deleted the impugned addition made by the AO. 8. The Ld D.R placed heavy reliance on the order passed by the AO, whereas the Ld A.R stro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directors of the investing companies, who paid the application money and further, the assessee was also asked by the Assessing Officer to produce the directors, whose statements were recorded by the investigation unit 1, Kolkata for cross examination of them. 6.1 .. 6.2 Since the investigation proceedings were not part of the assessment proceedings in the case of the assessee and even the investigation was not either u/s 132 or u/s 133 of the I T Act. It seems that investigation by the ADIT(Inv) Unit 1, Kolkata is preliminary investigation only to verify the suspicion of any concealment of income. The Assessing Officer, during the course of assessment proceedings asked the assessee to produce the said directors for cross examination. It is evident from the letter of the Assessing Officer dated 01.10.2008 as well as dated 16.9.2008 that the Assessing Officer did not summon these directors to be present in the office of the Assessing Officer for the purpose of cross examination by the assessee; but on the contrary, the assessee was asked to produce these directors for cross examination purpose. This is a gross violation of principles of natural justice when the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investing companies together with the return of income, board resolution go to prove that the said application money was paid by the investing company to the assessee against allotments of the preferential shares. The Investing companies have shown the said amount as investment in their books of account. The money routed through banking channels and through account payee cheques/bank draft, undisputed given by the parties. Even, the source of the application money was found in the bank account of the investing companies not by any cash deposit; but through account payee cheques. Therefore, when all the documentary evidence contradicts the statements of the directors recorded by the investigation unit of the department then such statements alone cannot be taken as the basis much less a good or proper basis for any addition. 6.5 It is settled proposition of law that the statement recorded during the course of investigation without corroborative evidence has no evidentiary value. It is pertinent to mention that the statements recorded in this case are not under search or survey or assessment proceedings therefore the same cannot be used against the assesse without following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice in as much as he had neither provided copies of the seized material to the assessee nor had he allowed the assessee to cross-examine one Mr. Manoj Aggarwal on the basis of whose statement the said addition was made. The CIT(A) also held that the entire addition deserved to be deleted, particularly so, because the transactions also stood duly reflected in his regular returns. 7.1 The Hon ble High Court has held that once there is violation of principles of natural justice by not providing seized material to the assessee as well as cross examination of the persons on whose statements, the Assessing Officer relied upon, amounts to denial of opportunity and would be fatal to the proceedings. The Hon ble Delhi High Court has observed in para 7 as under: 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice in as much as seized material is not provided to an assessee nor is cross-examination of the person on whose statement the Assessing Officer relies upon, granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there have to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. 15 At this stage, we would like to refer to the judgment of the Bombay High Court in the case of CIT v. Creative World Telefilms Ltd. (in I. T. A. No. 2182 of 2009 decided on October 12, 2009) [2011] 333 ITR 100. The relevant portion of this order is reproduced below: In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement not traceable . In our con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholders in accordance with law and, thus, not remediless. It is, thus, for the Assessing Officer to make further inquiries with regard to the status of these parties to bring on record any adverse findings regarding their creditworthiness. This would be more so where the assessee is a public limited company and has issued the share capital to the public at large, as in such cases the company cannot be expected to know every detail pertaining to the identity and the financial worth of the subscribers. Further the initial burden on the assessee would be somewhat heavy in case the assessee is a private limited company where the shareholders are family friends/close acquaintances, etc. It is because of the reason that in such circumstance, the assessee cannot feign ignorance about the status of these parties. 21 We may also usefully refer to the judgment of the Supreme Court in the case of CIT v. P. Mohanakala [2007] 291 ITR 278. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. 22 We would like to refer to another judgment of the Division Bench of this court in the case of CIT v. Value Capital Services P. Ltd. [2008] 307 ITR 334. The court in that case h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer under influenced of the report of the investigation wing without giving opportunity to the assessee for cross examination of the persons, is not sustainable. 11 The Assessing Officer has raised some doubts and suspicion about the movement of the money through various levels but could not establish any direct or indirect link of the said outward movement from the assessee and then again received by the assessee in the form of application money. Even the revenue has failed to bring anything on record to show movement of the alleged cash from the assessee. 12 The Hon ble Delhi High Court, in the case of Oasis Hospitalities P Ltd (supra) in para 33 and 34 has observed as under: 33 The Tribunal while confirming the aforesaid view of the Commissioner of Income-tax (Appeals) has summarized the discussion as under: 9. We have carefully considered the rival submissions in the light of the material placed before us. The necessary details were filed by the assessee with the Assessing Officer to show the identity of the person who had applied for the shares. The shares also been allotted to respective persons in respect of which intimation was given to the Registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record. 14 It is to be noted that it is not the case of any additional evidence or fresh material produced by any of the parties before us which requires examination or investigation to verify the correctness of the new facts first time brought before us. The case of the revenue is that the cash moved from the assessee routed through various level and then reached to the assessee in the form of share application money. The stand of the revenue is not in consonance with the statements of the directors of the investing companies which is the basis of the investigation report as well as addition by the AO. In their statements the directors stated to have received cash from assessee for investing in the preferential share of the assessee company, whereas, this fact was not found to be correct from the record and the revenue also took a stand that the cash was not directly given to the investing companies but routed through various levels. When it was found by the investigating unit as well as recorded by the AO that the fund in the bank account of the investing companies was deposited through a/c payee cheques than it is apparent that the statements of the directors are in tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llotted to the applicants and the same has been taken on file by the Registrar of Companies. Perusal of the same reveals that the shares allotted to the various companies totaling ₹ 27,61,50,000/- has been duly shown as shares allotted in those returns. The objections raised by the learned D.R. before us at best could raise doubts about the satisfaction of the three conditions for accepting credit entry in the books of accounts. Those objections cannot be the basis to hold that the Assessee has not satisfactorily explained credit entry in its books of accounts. The investigation referred to by the AO in the order of assessment, as we have already seen has been held by the Tribunal in the case of Chat Computers (supra) to be insufficient to hold that the credits in question were unexplained. We are therefore of the view that the addition of ₹ 27,61,50,000/- being the share capital received by the Assessee during the previous year for which allotment of shares were made and the share application money received pending allotment of ₹ 6,42,00,000 cannot be treated as unexplained and the addition made in this regard is directed to be deleted. 10. The co-ordinate be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1,88,000 equity shares Vvapar Pvt. Ltd. and paid a sum of ₹ 94,00,000 by two demand drafts. The sum of ₹ 39,00,000 has been paid by demand draft dated 28th July, 2005 vide draft no 242342 drawn on South Indian Bank, Kolkata branch and second draft of ₹ 55,00,000, dated September 30, 2005 bearing draft no 1706 drawn on HDFC Bank, Kolkata. The company is assessed to Income-tax under P.A.No AABCB4390G. The share applicant along with share. application form has submitted extract of the board minutes containing board resolution authorizing the directors of the company to make investments, certificate of incorporation of company and memorandum and articles of association of company. (4) Platinum Commerce Pvt. Ltd.- This company has made an application for 3,46,000 equity shares and paid a sum of ₹ 1,73,00,000 by four demand drafts. An amount of ₹ 1,00,00,000 has been paid by two demand drafts of ₹ 50,00,000 each dated 25th July, 2005 vide draft nos 415573 and 415033 drawn on ABN Amro Bank, Kolkata branch and a draft of ₹ 23,00,000, dated 13th September, 2005 bearing draft no 753159 drawn on ABN Amro Bank, Kolkata. The company is assessed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors of the company to make investments, certificate of incorporation of company memorandum and articles of association of company, acknowledgement evidencing filing of return of income, director's report, balance sheet and profit and loss as on 31 St March, 2006. The capital and reserves of the company are ₹ 1,63,97,000 and ₹ 11,14,20,000 respectively and loans and advances are ₹ 69,94,313. (7) Cosmic Trade Inv. Pvt. Ltd. - This company has made an application for 4,70,000 equity shares and paid a sum of ₹ 2,35,00,000 by six demand drafts drawn on The South Indian Bank, Kolkata. The sum of ₹ 50,00,000 has been paid by demand draft dated 25th July, 2005 vide draft no 242335, draft of ₹ 60,00,000, dated 8t1 September, 2005 bearing draft no 242376, draft of ₹ 50,00,000 dated 12th September, 2005 and four demand drafts of ₹ 25,00,000 each dated 13th September, 2005. The company is assessed to Income-tax under P.A.No AABCC10I4C. The share applicant along with share application form has submitted extract of the board minutes containing board resolution authorizing Sri S. Shethi and Sri B.K Patni, the directors of the company t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , acknowledgement evidencing filing of return of income, director's report, balance sheet and profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on 31st March, 2006 are ₹ 1,72,46,180 and ₹ 13,19,12,003.29 respectively and loans and advances are ₹ 1,16,42,405. (10) Pentex Expo Pvt. Ltd. This company has made an application for 1,00,000 equity shares and paid a sum of ₹ 50,00,000 by demand draft drawn on The South Indian Bank, Kolkata. The sum of ₹ 50,00,000 has been paid by demand draft dated 23rd July, 2005 vide draft no 242340. The company is assessed to Income-tax under P.A.No AABCP486IE. The share applicant along with share application form has submitted extract of the board minutes containing board resolution authorizing Shri Suresh Kumar Bagaria, the director of the company to make investments, certificate of incorporation of company memorandum and articles of association of company, acknowledgement evidencing filing of return of income, director's report, balance sheet and profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on March, 2006 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... St March, 2006 are ₹ 1,28,86,000 and ₹ 7,11,83,765.83 respectively and loans and advances are ₹ 7,13,528. (14) Raiesh Vanijva Pvt. Ltd. - This company has made an application for 1,00,000 equity shares and paid a sum of ₹ 50,00,000 by demand draft drawn on ABN Arnro Bank, Kolkata. The sum of ₹ 50,00,000 has been paid by demand draft dated 26th November, 2005 vide draft no 879413. The company is assessed to Income-tax under P.A.No AABCR6316C. The share applicant along with share application form has submitted profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on 31 March, 2006 are ₹ 2,02,47,000 and ₹ 11,06,70,176 respectively and loans and advances are ₹ 60,87,324 (15) Dabriwal Invest Finance Pvt. Ltd. - This company has made an application for 2,00,000 equity shares and paid a sum of ₹ 1,00,00,000 by three demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 50,00,000 has been paid by demand draft dated 26th November,, 2005 vide draft no 529671, and two demand drafts of ₹ 25,00,000 each dated Rd December, 2005 vide draft nos 529676 and 529677. The company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50911 and a demand draft of ₹ 50,00,000 dated 29th December, 2005 vide darft no 550921. The company is assessed to Incometax under P.A.No AABCB3321R. The share applicant along with share application form has submitted profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on 3lst March, 2006 are ₹ 2,49,66,000 and ₹ 12,34,83,781 respectively and loans and advances are ₹ 85,36,653. (20) Purnima Vypaar Pvt. Ltd. - This company has made an application for 20,000 equity shares and paid a sum of ₹ 10,00,000 by demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 10,00,000 has been paid by demand draft dated 29th November, 2005 vide draft no 829568. The company is assessed to Income-tax under P.A.No AADCP5588N. The share applicant along with share application form has submitted extract of the board minutes containing board resolution authorizing Mr. Sanjay Kr. Jha and Mr. Rakesh Kr. Mishra, the directors of the company to make investments, certificate of incorporation of company memorandum and articles of association of company and acknowledgement evidencing filing of return of income. (21) Clara Vyp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawn on ABN Amro Bank, Kolkata. The sum of ₹ 10,00,000 has been paid by demand draft of ₹ 10,00,000 dated 29th November, 2005 vide draft no 957379. The company is assessed to Incometax under P.A.No AABCV9789K. The share applicant along with share application form has submitted extract of the board minutes containing board resolution authorizing Mr. Abhishek Agarwal and Mr. Vikash Kumar Bhavsinghka, the directors of the company to make investments, certificate of incorporation of company memorandum and articles of association of company, acknowledgement evidencing filing of return of income, profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on 31st March, 2006 are ₹ 20,75,000 and ₹ 37,52,25,000 respectively and loans and advances are ₹ 1,25,856. (25) Irirs Commrecial Pvt. Ltd. - This company has made an application for 70,000 equity shares and paid a sum of ₹ 35,00,000 by demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 35,00,000 has been paid by demand draft of ₹ 35,00,000 dated 3rd December, 2005 vide draft no 354409. The company is stated to have assessed to Income-tax unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made an application for 40,000 equity shares and paid a sum of ₹ 20,00,000 by demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 20,00,000 has been paid by demand draft dated 30th November, 2005 vide draft no 561288. The company is assessed to Income-tax under P.A.No AABCL0976E. The share applicant along with share application form has submitted extract of the board minutes containing board resolution authorizing Sri Ashok Kumar Agarwal and Sri Gautam Ghosh, the directors of the company to make investments, certificate of incorporation of company memorandum and articles of association of company, profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on 31st March, 2006 are ₹ 34,16,750 and ₹ 6,30,26,825.5 1 respectively and loans and advances are ₹ 88,07, 118. (29) Padmashree Suppliers Pvt. Ltd. - This company has made an application for 40,000 equity shares and paid a sum of ₹ 20,00,000 by demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 20,00,000 has been paid by demand draft dated 30t November, 2005 vide draft no 561330. The company is assessed to Income-tax under P.A.No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 1,000 and ₹ 4,21,99,000 respectively and loans and advances are ₹ 5,57,90,542. (32) SAS Concerete Infrastructure Pvt. Ltd. - This company has made an application for 60,000 equity shares and paid a sum of ₹ 30,00,000 by demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 30,00,000 has been paid by demand draft dated 291h December, 2005 vide draft nos 858928. (33) Alex Polymers Pvt. Ltd. - This company has made an application for 40,000 equity shares and paid a sum of ₹ 20,00,000 by two demand drafts drawn on ABN Amro Bank, Kolkata. The sum of ₹ 20,00,000 has been paid by two demand drafts of ₹ 10.00,000 each dated 12th January, 2006 vide draft nos 782660 and 782661.. The company is assessed to Income-tax under P.A.No AACCAI922G. The share applicant along with share application form have submitted extract of the board minutes containing board resolution authorizing Sri Ashim Lahiri and Sri Arindam Banerjee, the directors of the company to make investments, certificate of incorporation of company memorandum and articles of association of company, acknowledgement evidencing filing of return of income, profit and loss account a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4G. The share applicant along with share application form has submitted extract of the board minutes containing board resolution authorizing Mr Ramesh Kr Agarwal and or Mr Vikramaditya Jaiswal, the directors of the company to make investments, certificate of incorporation of company memorandum and articles of association of company, acknowledgement evidencing filing of return of income and profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on 31 St March, 2006 are ₹ 97,32,500 and ₹ 6,34,91,119.25 respectively and loans and advances are ₹ 53,39,744.42. (37) Dherar Textiles Pvt. Ltd. - This company has made an application for 1,00,000 equity shares and paid a sum of ₹ 50,00,000 by two demand drafts drawn on ABN Amro Bank, Kolkata. The sum of ₹ 50,00,000 has been paid by two demand drafts of ₹ 25,00,000 each dated 13 1h January, 2006 vide draft nos 467834 and 467835. The company is assessed to Income-tax under P.A.No AABCD0906G. The share applicant along with share application form has submitted extract of the board minutes containing board resolution authorizing Mr Manish Tibrewal and or Mr Subhash A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tar Traffin Pvt. Ltd. - This company has made an application for 80,000 equity shares and paid a sum of ₹ 40,00,000 by a demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 40,00,000 has been paid by demand draft dated 14t11 January, 2006 vide draft no 380518. The company is assessed to Income-tax under P.A.No AADCS5989A. The share applicant along with share application form has submitted profit and loss account as on 31st March, 2006. The share capital and reserves of the company as on 31st March, 2006 are ₹ 2,06,82,000 and ₹ 10,42,77,598.58 respectively and loans and advances are ₹ 73,67,537. (41) NKP Ho1dins Pvt. Ltd. - This company has made an application for 40,000 equity shares and paid a sum of ₹ 20,00,000 by a demand draft drawn on ABN Amro Bank, Kolkata. The sum of ₹ 20,00,000 has been paid by demand draft dated 13th January, 2006 vide draft no 431967. The company is assessed to Income-tax under P.A. No AABCN0557B. The share applicant along with share application form has submitted profit and loss account as on 3 1 St March, 2006. The share capital and reserves of the company as on 31st March, 2006 are ₹ 2,22,23,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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