TMI Blog2021 (11) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 147 or set aside u/s 263 of the IT act. It is also to be noted that this is the first year of incorporation of the company and, therefore, it cannot be said that the assessee company has brought in its own unaccounted funds through these investor companies as bogus share capital or share premium. Further, it has been held in various decisions relied on by ld. Counsel that when identity, credit worthiness and genuineness of the transaction is not in doubt, then, addition cannot be made just because the assessee could not produce the directors of the subscriber companies or when the share applicants were not found at their addresses. Once genuineness, credit worthiness and identity of investors are established and whose assessments were completed u/s 143(3) at almost the same time, then, no addition can be made on account of unexplained share capital/premium. In this view of the matter and in view of the detailed reasoning given by the ld.CIT(A) while deleting the addition, we do not find any infirmity in his order - Decided in favour of assessee. - ITA No.1198/Del/2017 - - - Dated:- 25-11-2021 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-14. 2.2 Similarly, he also issued summons u/s 131 to the Delhi based companies. However, there was also no compliance. The AO, thereafter, conducted enquiry by issue of Commission u/s 131(1 )(d) of the Income tax Act, 1961, through the Addl. Director of Income tax (Inv), Unit-II III, Kolkata to examine identity and creditworthiness of the companies and genuineness of the transactions made by the assessee company with the above mentioned twelve different companies based in Kolkata. The ADI (Inv.), Kolkata conducted the enquiries and filed a detailed report where it was clearly stated that notices u/s 131 could not be served on the above twelve companies due to non-existence of these companies in the addresses provided. The AO, thereafter, issued another letter to the assessee confronting the assessee regarding the report of the Investigation Wing at Kolkata. The assessee company, thereafter, filed its final reply on 12th March, 2015 which the AO has reproduced and which reads as under:- 2.3 However, the AO was not satisfied with the submissions made by the assessee. Relying on various decisions, the AO made addition of Rs.10,15,00,000/- to the total income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be relied upon. 3.2 So far as the objection of the AO that the subscribers were not produced in spite of opportunities provided to the assessee, it was submitted that the assessee has submitted sufficient evidence to prove the ingredients of section 68 of the I.T. Act, i.e. identity and creditworthiness of the subscriber and genuineness of transaction. Relying on various decisions including the decision of the Hon ble Delhi High Court in the case of CIT vs. Dwarkadhish Investment Pvt. Ltd. and Dwarkadhish Capital Pvt. Ltd. (2011) 330 ITR 298, it was submitted that no disallowance u/s 68 of the Act can be made merely for non-attendance of the subscribers companies when all the evidences have been filed by the assessee. It was submitted that the subscribers to the share capital in all cases are companies incorporated by a due and rigorous process of law as laid down in the Companies Act, 1956 duly administered by the quasi-legal/administrative authorities, as laid out in the Companies Act, 1956 of which the jurisdictional Registrar of Companies acts as the fulcrum. The entire functioning of companies incorporated under the Companies Act, are duly administered and regulated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 133(6). None of the investor has denied or contradicted the claim of the appellant. Most of the investors independently verified the transaction in response to notices u/s 133(6). The appellant had no legal rights over the investors to enforce their attendance before the AO. On the contrary the AO was legally competent to compel and ensure attendance of the investing companies/witnesses u/s 131 with ample authority to even coerce or penalise them if they failed to appear. Section 68 has no requirement of physical production of the person who has made investments to prove the bonafides of cash credits to support nature and source of the cash credits. In the case of juridical persons like companies the requirement of physical production is even less required. There is no allegation Against the appellant that some entry operator was behind the investing companies who provided entries of share capital in lieu of cash having been provided to them. There is no cash deposit in the bank accounts of the investing companies before the investments were made by them in the appellant company. The AO has brought no evidence on record except his suspicion about the genuineness and creditworthine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged bogus shareholders, whose names are given to the AO, then theDepartment is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment . Further, Hon ble jurisdictional High Court in the case of Gangeshwari Metal P Ltd (2013) 30 Taxmann.com 328 where in the Hon ble Court has held that There are two types of cases, one in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer, after noting the facts, merely rejected the same. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r justified or sustainable on the facts of the case; The AR of the appellant has submitted that the AOs of investing companies have made assessments u/s 143(3) of the Act in majority of investing companies and nothing wrong has been found by them against those investing companies. When the assessments u/s 143(3) have been completed and everything has been found to be in order there can be no justification for suspicion on existence of the investing companies on the basis of inspector s reports etc The appellant company has allotted shares for the share capital and share application money received by it. In this regard, I have also taken into consideration the jurisdictional Delhi High Court rulings which lays down the parameters for verification of share application money which has been further confirmed by the Apex court. In respect of the share application money the Hon ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC) has held as under:- Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act, i.e., identity and credit worthiness of the investor companies and the genuineness of the transaction. He submitted that the ld.CIT(A), without properly appreciating the facts, has deleted the addition which is not justified under the facts and circumstances of the case. 6. The ld. Counsel for the assessee, on the other hand, strongly supported the order of the CIT(A). He submitted that the basic reason for which the AO made the addition u/s 68 is that the shareholders were not found at their addresses and the assessee could not produce the directors of the investor companies. Referring to the following decisions, the ld. Counsel submitted that when identity, credit worthiness and genuineness of the transaction is not in doubt, then addition cannot be made just because the assessee could not produce the directors of the subscriber companies or when the share applicants were not found at their addresses:- 1. Hi-Tech Residency (P) Ltd. [2018] 96 taxmann.com 403 (SC) 2. Hi-Tech Residency (P) Ltd. [2018] 96 taxmann.com 402 (Delhi) 3. Softline Creations (P) Ltd. 2016-TIOL-2130-HC-DEL-IT 4. Victor Electrodes Ltd. 2010-TIOL-988-HC-DEL-IT 5. Gangeshwari Met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmann.com 357 (Delhi - Trib.) 18. CIT v. Shiv Dhooti Pearls Investment Ltd. [2015] 64 taxmann.com 329 (Delhi) 19. CIT v. Five Vision Promoters (P) Ltd. [2016] 65 taxmann.com 71 (Delhi) 20. CIT v. SVP Builders (India) Ltd. [2016] 67 taxmann.com 5 (Delhi) 21. CIT v. Anshika Consultants (P) Ltd. [2015] 62 taxmann.com 192 (Delhi) 22. CIT v. Rama Krishna Jewellers [2014] 52 taxmann.com 23 (Delhi) 23. ITO v. Neelkanth Finbuild Ltd. [2015] 61taxmann.com 132 (Delhi - Trib.) 24. Gulshan Verma v. DCIT, [2015] 61taxmann.com 178 (Chandigarh - Trib.) 25. ACIT vs. Real Time Marketing (P) Ltd [(2008) 306 ITR 35 (Del)] 26. CIT vs. Value Capital Services (P) Ltd [(2008) 307 ITR 334 (Delhi)] 27. CIT v. Winstral Petrochemicals (P) Ltd [(2011) 330 ITR 603 (Delhi)] 28. CIT v. Gangour Investment Ltd [(2011) 335 ITR 359 (Delhi) 29. CIT vs Kamdhenu Steel Alloys Limited and Others (in ITA No. 978/2009 vide order dated 23, December, 2011) 30. Pr. CIT vs. Softline Creations (P) Ltd. 2016-TIOL-2130-HC-DEL-IT 31. Pr. CIT vs. ISF Securities (P) Ltd. 2016-TIOL-2038-HC-DEL-IT 32. ACIT vs. M/s Ottoman Steel Tubes (P) Ltd. ITA No.3810/Del/2011 ITAT Bench-E, Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, made addition of Rs.10,15,00,000/- u/s 68 of the IT Act on the ground that the assessee company has received share premium of Rs.90/- each at face value of Rs.10/- on 10,15,000/- shares from 19 companies and the shareholders were not found at their respective addresses and the assessee could not produce the directors of the investor companies. We find, the ld.CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. We do not find any infirmity in the order of the CIT(A) on this issue. A perusal of the paper book filed on behalf of the assessee shows that these investor companies are assessed u/s 143(3) by the concerned AOs almost at the same time when the Investigation Wing had submitted its report to the AO regarding their non-existence. The AO, in the case of Swabhumi Agency Pvt. Ltd., passed the order u/s 143(3) on 20th March, 2015, copy of which is placed at pages 35 and 36 of the paper book. Similarly, for AY 2013-14, the AO passed the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Rs.13,21,25,000/- for calculating the disallowance u/s 14A of the Act. We find, the assessee has filed the order u/s 143(3) in the case of M/s Helpful Vintrade Pvt. Ltd. for AY 2014-15 passed on 24th August, 2016, copy of which is placed at pages 62 and 63 of the paper book wherein the AO has considered the average investment at Rs.12,71,55,000/- while completing the disallowance u/s 14A. Similarly, in the case of M/s Justify Vanijya Pvt. Ltd., the AO has passed the order u/s 143(3) on 24th March, 2015 for AY 2012-13 and on 29th February, 2016 for AY 2013-14 copies of which are placed at pages 64-68 of the paper book. Here also the AO while computing the disallowance u/s 14A has considered the average investment at Rs.15,16,50,000/- for the AY 2012-13 and Rs.13,05,50,000/- for AY 2013-14. We further find from the various details furnished by the assessee in the paper book that it has filed the master data of all the investor companies as downloaded from the MCA website, copies of which are placed at pages 69-84 of the paper book. Therefore, we find merit in the argument of the ld. Counsel that the Revenue cannot allege that the investor companies are bogus when the assessments ..... X X X X Extracts X X X X X X X X Extracts X X X X
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