TMI Blog2022 (2) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... tment made in the assessee company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt, if any, regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers. We note that with effect from assessment year 2013-14 section 68 of the Act has been amended to provide that if a closely held company fails to explain the source of share capital, share premium or share application money received by it to the satisfaction of the A.O., the same shall be deemed to be the income of the company u/s 68 of the Act. The said amendment has been held to be prospective and not retrospective by Gagandeep Infrastructure Private Limited[ 2017 (3) TMI 1263 - BOMBAY HIGH COURT] . We note that in assessee`s case under consideration, the amended provisions of section 68 are not applicable, as the assessment year involved in the assessee`s case is assessment year 2012-13, hence the assessee need not to explain the source of the source. We note that with effect from assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and other High Courts holding that the share capital/share premium cannot be added in the hands of the company. 3.Brief facts as discernable from the orders of lower authorities are that assessee before is a private limited company and engaged in the business of manufacturing of texturized yarn. The assessee-company field its return of income on 03.09.2012 showing total loss at (-) ₹ 18,22,48,493/-. The return of income was processed u/s 143(1) of the Act. Later, the assessee`s case was taken up for scrutiny and accordingly notice u/s 143(2) of the Act was issued on 06.08.2013. During the course of assessment proceedings, it was noticed from the details filed by the assessee that assessee has received share capital/share premium from the various parties and failed to explain the identity, creditworthiness and genuineness of the transactions. Before us, ground raised by the assessee pertains to making addition of ₹ 2,33,01,950/- on account of bogus share application money under section 68 of the Act. During the course of assessment proceedings, the assessing officer found that appellant had received a sum of ₹ 2,33,01,950/- towards share capital/premium fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was having common addresses at Ranchi. In order to verify the identity, creditworthiness and the genuineness of the transactions, an enquiry was got conducted by the assessing officer at Ranchi by issuance of commission u/s 131(1)(d) of the Act to DDIT(Inv.), Ranchi. The DDIT(Inv.)Ranchi in his report dated 13.03.2015 submitted that the investors failed to submit the documents which were required to be produced as per the summons issued under section 131 of the Act. The investors did not produce the balance sheet, capital account to prove their creditworthiness. The investors were issued summons but they did not attend the hearing proceedings personally nor did they furnish the details before the Investigation Wing. In absence of the basic details by these investors such as books of accounts, balance sheet, complete bank statements, cash book etc, the creditworthiness of the investors could not be proved. The assessing officer observed that these investors were having meager income and had filed return of income u/s 44AD of the Act. The assessing officer noted that these investors were failed to prove their creditworthiness before the DDIT(Inv.) at the time of enquiry u/s 131(l)(d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and addresses of the share applicants etc.We note that it is well settled position of law on the issue under consideration that an assessee receiving a credit has to testify its case through the 'triple marker test' of Identity, Creditworthiness and Genuineness of Transactions. It is imperative, therefore, that the case be analyzed in light of these three well-settled canons of adjudication, as embedded in the statute as also promulgated by various judicial pronouncements. In order to prove these three ingredients of section 68 of the Act, Learned Counsel submitted a chart before the Bench. The said chart contains the comprehensive detail in respect of each share applicants, showing Name of the share applicant, PAN number of share applicant, net income of the share applicant, amount of share capital, balance of capital and reserves of each share applicants, documents and evidences submitted by each share applicant before the lower authorities, sources of payment and bank statement of each share applicant. The said chart is reproduced below Sr No Name PAN No Net income of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Menka Sen AVOPS0247N 239650 1100000 3218987 ITR Computation of income, Bank statement, balance sheet Amount received from Capital Real Estate 450000 cancellation of land agreement and rest amount received from debtors. 143 8 Prakash Lal HUF AAGHP0363P 201890 1050000 1466568 ITR Computation of income, Bank statement, balance sheet Amount received from Krishna Rice Mill against sale of paddy 148 9 Subodh Kr.Sinha AGJPS5362C 409410 500000 3655435 ITR Computation of income, Bank statement, balance sheet Amount received from Debtors/advances 10 S.S. Agarwal HUF AAPHS4115K 254940 600000 1832730 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , balance sheet Amount received from Krishna Rice Mill against sale of paddy 191 18 Krishna Singh BBPPS7333R 557870 300000 4727271 ITR Computation of income, Bank statement, balance sheet Amount received from Mourya Vihar ₹ 488367 against contract work. 198, 199, 200 201 19 Roshanlal HUF AAGHR7904A 219240 800000 3582362 ITR Computation of income, Bank statement, balance sheet Amount received from Bus hire charges from Wd.a.v.School and 280000 from Hindustan Credit Corpn. 207 208 20 Subodhkumar Sinha HUF AAJHS5698K 196470 200000 2528915 ITR Computation of income, Bank statement, balance sheet Amount received from debtors/advance 212 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that Ld. CIT (A) has observed that there is contradictory reports of the AO. It was further observed that the assessee had filed all address of the creditors but due to time gap, It is possible that at the time of enquiry they will have shifted to new address. However, copies of income-tax returns and copy of new address was filed before CIT (A) in respect of 8 person who were not found at the stated address as per enquiry reports. The learned counsel for the assessee referred para No.10 of appellate order wherein the CIT(A) has examined and discussed the issue of identity, creditworthiness and analysis of bank account and genuineness of transaction. It was submitted that that as per para No. 11 of CIT(A) order the AO has not made addition in respect of person mentioned in table at para No. 11.1 observed that the AO has not made addition in respect of Serial No. 45, 46, 47, 49, 50, 51 and 52 without any discussion in the assessment order. There is no discussion authority these loans were treated as explained, whereas fact and circumstances of other creditors are same. 21. The learned counsel relied in the case of CIT v. RanchhodJivabhai Nakhava [2012] 21 taxmann.com 159 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is not expected to prove: the genuineness of cash deposits in bank accounts of those e creditors because under the law the assessee can be asked to prove source of credit but not the source of the source held by the Hon'ble Bombay High Court in the case of Orient Trading Co. v. CIT [1963] 49 ITR 723 (Bombay). Therefore, in such a situation and considering above fact and finding ,we are in complete agreement with the reasoning given by the Ld. CIT (A) that when full particulars, inclusive of the confirmation with name, PAN, copy of Income-tax returns, balance sheet Profit Loss Account computation of income are furnished and same reflected in their books of accounts. Further, the findings recorded by the Ld. CIT (A) are also supported by the decision of Hon'ble Gujarat High Court and Hon'ble Supreme Court as discussed above. The addition so made is rightly deleted by the Ld. CIT(A). In view of these facts and circumstances, we do not find any infirmity in the order of CIT(A), accordingly, same is upheld. Accordingly, all the grounds of appeal of as taken by the Revenue are therefore, dismissed. 9.By submitting the documents in respect of each share applicant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, it is vivid that all 35 parties are availability at the stated addresses, all these 35 parties have filed their Income Tax Return ( ITR) for A.Y 2012-13,and all of 35 parties have made investment through banking channel. The ld Counsel submits that even books of account, balance sheet, complete bank statement, cash book etc. were submitted before the Income Tax officer. Hence, ld Counsel contended that there is no failure on the part of the assessee to submit Income Tax Return, books of account, balance sheet, complete bank statement, cash book etc, before the Income Tax Authorities. 12. Learned Counsel further drew our attention on page no.6 of the paper book which is annexure of the letter of JCIT(Inv) Ranchi dated 13.03.2015, wherein it is stated that address of parties were genuine and parties were engaged in retail trade, the notices issued by Income Tax Authorities were served upon the parties. The parties have confirmed and disclosed the source of their personal investment made in the assessee-company. Some of the parties made the investment in assessee-company as share applicants out of their own funds; some of the parties have invested in assessee-company out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, then the Department is free to proceed to reopen the individual assessment in accordance with law. Such amounts cannot be regarded as undisclosed income under section 68 of the Act. Applying the said principles to the facts of the present case, the Assessing Officer having traced out the source of funds to specific persons who had invested the same in share of the assessee-company, it was open for the Assessing Officer to proceed against the said persons. The funds not having emanated from the assessee-company, there was no warrant for making addition of the said amount as undisclosed income under section 68 of the Act in its hands. In the circumstances, the Tribunal was justified in deleting the addition of ₹ 50,00,000 made under section 68 of the Act. The question stands answered accordingly, that is, in favour of the assessee and against the Revenue. 14.We note that law regarding addition u/s 68 on account of the share application money has been laid out by the Hon'ble Supreme Court in the case of CIT v/s Lovely Exports ( 2008) 216 ITR 195 ( SC) wherein it has held that: if share application money is received by assessee - company from alleged bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts in which, the issue of share application money was considered and mainly relied on the decision of the Apex Court in CIT v/s Lovely Exports P Ltd (2010 ) 14 SSC 761) 4.1 In the facts of the case, it is not disputed that the assessee had furnished the assessing officer the names of 15 persons from whom the share application money was receive. The assessee had also produced in respect of each of them the copies of revenue records in form no. 7/12 extracts showing that they were holders of agricultural land. In Lovely Exports (supra), the Supreme Court considered the issue of share application money regarded as undisclosed income u/s 68 of the Act and observed that if share application money was received by assessee - company, from the alleged bogus share holders, whose names were given to assessing officer then the Department was free to proceed to reopen the individual assessments in accordance with Law. 18. We note that with effect from assessment year 2013-14 section 68 of the Act has been amended to provide that if a closely held company fails to explain the source of share capital, share premium or share application money received by it to the satisfaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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