TMI Blog2023 (2) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ron and Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] in our humble view, is not applicable to the facts and circumstances of the case in hand. Also observe that as per the proviso inserted in section 68 of the Act by Finance Act 2012 that the assessee company receiving share capital and share premium are required to prove the source of source to the satisfaction of the Ld. AO has been inserted w.e.f. 01.04.2013 and the same is not applicable in the case of assessee for assessment year 2012-13 and since the assessee has filed sufficient details to our satisfaction to prove the identity, genuineness and creditworthiness of the transaction, we are not in concurrence both the findings of the Ld. CIT(A). Thus no addition was called for u/s. 68 of the Act for the alleged sum of the share capital and premium - Decided in favour of assessee. - I.T.A. No. 574/Kol/2020 - - - Dated:- 24-1-2023 - Shri Rajesh Kumar , Accountant Member And Shri Sonjoy Sarma , Judicial Member For the Assessee : Shri Anil Kochar , Advocate Shri S. L. Kochar , Advocate For the Revenue : Smt. Ranu Biswas , Addl. CIT / DR ORDER Per Shri Sonjoy Sarma , JM 1. This appeal by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are that the assessee is a private limited company. The income of Rs. 10,277/- was declared by the assessee in the e-return filed for the assessment year in question. The case of the assessee was selected for scrutiny through CASS followed by serving of notices u/s. 143(2) and 142(1) of the Act. The assessee submitted various details as called for by the Ld. AO. During the assessment year in question, share capital and share premium of Rs. 1,71,00,000/- was received by the assessee company. While framing assessment, the Ld. AO doubted the creditworthiness of the investor company and genuineness of the transaction as to how the investments were made and he issued notices u/s. 131 of the Act upon the shareholders of the company and asking them to personally appear to verify the identity and creditworthiness of the transactions. In this regard a show cause notice was issued to the assessee company to produce all the shareholders and it was also stated in the said show cause notice to produce the directors of all shareholder companies before the Ld. AO to prove the identity and creditworthiness of the shareholders and genuineness of the transactions. However the assessee did not turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the Ld. AO completely ignored the same and erred in mentioning that no compliances were made in response to such notices. In such circumstances it showed that it was passed completely in a mechanical manner at the ends of both lower authorities and totally disagreed on all the facts of the case and consequent non-application of mind. The Ld. AR also stated that identity of the subscribers have been successfully proved by the assessee as they were regularly assessed to tax and having PANs and genuineness of the transactions were proved from the bank statements of the shareholders as well as the sources of the fund of the shareholders. The creditworthiness of the shareholders was proved from the bank accounts, audited accounts and sufficient bank balance lying in their accounts at the time of issuing cheques for investment in the equity shares of assessee company. 5. On the other hand, the Ld. departmental representative vehemently argued and supported the order of Ld. CIT(A) and also relied on the judgment in the case of PCIT (Central Circle-1, Kolkata) vs. NRA Iron Steel Pvt. Ltd. 412 ITR 161. 6. We have heard the rival contentions and perused the records placed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of the appellant. The appeal by the appellant centers around the correctness or otherwise of this addition. The appellant company had received funds from some corporate entities for the issue of shares to them. These funds were received by cheques and they were deposited in the Bank Ale of the appellant. In due course, shares were allotted to the share applicants, 4s required under the provisions of the Companies Act necessary information was given to the ROC. At this stage, the appellant submits evidences regarding application for issue of shares, allotment and compliance to the provisions contained in the Companies Art. These are basic requirements and these would show that the appellant did received funds which passed through banking channel. These finals have been received from corporate entities to whom the Income Tax Dept had allotted PAN and have been in existence. These evidences are to be properly considered in the matter of adjudication of the issue involved. In the course of assessment proceedings, the A.O. had issued Notices u/s. 133(6) of the Act to the share subscribers calling for certain information in respect of the appellant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. However, in the instant case, even this aspect has also been taken care of and directors of assessee and investor companies have not only filed complete details showing financial strength of the investor companies, sufficient funds available to make the investment but had also filed supporting documents. Thus, all the limbs of section 68 as normally accepted by the revenue and judicial authorities required to be fulfilled about the identity and creditworthiness of the share subscribers and genuineness of the transactions have been successfully proved in the instant case. 8. Further, we notice that Ld. D/R has heavily relied on the judgment of the Hon'ble Supreme Court in the case of NRA Iron and Steel (P) Ltd. (supra), we find that the Hon'ble Supreme Court in para 8.2 of the said decision has made the following observations: 8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance (P.) Ltd. [1995] 82 Taxman 31/[19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 8.3. The Hon'ble Supreme court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound to conduct an independent enquiry to verify the same. However, as noted above, the Ld. AO in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before the Assessing Officer and the Ld. AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transactions, the burden shifted upon the Ld. AO to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe to shares at such a premium or not and moreover the section 68 does not envisages any law on share premium it only requirement is to identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants which same has been discharged by the respondent authority and the same has been accepted by the appellate authorities thus, the same cannot be reconsidered in these appeals as it is a pure question of fact. SLP preferred by revenue was dismissed by Hon'ble Supreme Court and the same is reported in 103 taxmann.com 435 (SC). iii) CIT vs. Kamdhenu Steel Alloys Limited [ITA No. 972 of 2009] dated 23.12.2011 wherein the Delhi High Court in a batch of 11 appeals was required to adjudicate on the very issue of addition made by the AO u/s. 68 in respect of share application monies received by the assessees as alleged unexplained cash credit. In all these cases, the Department had alleged that the share application monies were received from persons who were 'entry operators' and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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