TMI Blog2023 (3) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in the due course of business. Thus, we fail to find any infirmity in the finding of ld. CIT(A). Appeal of revenue dismissed. - I.T.A. Nos. 86 & 87/GTY/2017 - - - Dated:- 3-3-2023 - SRI RAJPAL YADAV , VICE PRESIDENT ( KZ ) And DR. MANISH BORAD , ACCOUNTANT MEMBER Sh. N.T. Sherpa, JCIT, appeared on behalf of the Revenue Sh. J.P. Gupta on behalf of R. Goenka, Sr. Adv. appeared on behalf of the Assessee ORDER Per Manish Borad , Accountant Member : Both these appeals filed by the Revenue pertaining to the Assessment Years (in short AY ) 2011-12 2012-13 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the Act ) by ld. Commissioner of Income-tax (Appeals)-2, Guwahati [in short ld. CIT(A) ] dated 23.02.2017 arising out of the assessment order framed u/s 153C/143(3) of the Act dated 31.03.2015. 2. The Revenue is in appeal before this Tribunal raising the following grounds: Assessment Year: 2011-12: (i) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 2,00,00,000/- on account of Share Capital. (ii) For that the Ld. CIT(A) was not justified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For AY 2011-12 Sl. No. Name Share Capital Share Premium 1 Gajanan Dealers Pvt. Ltd. 1.50 Cr 6 Cr 2 Rich Valley Traders Pvt. Ltd. 40 lakh 1.60 Cr 3 Sarovar Dealers Pvt. Ltd. 10 lakh 40 lakh Total 2 Cr 8 Cr For AY 2012-13 Sl. No. Name Share Capital Share Premium 1 Rich Valley Traders Pvt. Ltd. 9 lakh 36 lakh 2 Sarovar Dealers Pvt. Ltd. 55 lakh 2.20 Cr Total 64 lakh 2.56 Cr 6. During the course of assessment proceedings, the assessee filed the financial statements and other details but ld. AO was not satisfied and due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants whom the assessee claims to have received the share application money from, the Company evidence to prove its claim. In view of the above, the genuineness and creditworthiness of the alleged share applicants remained unverifiable. Therefore, there is reason to doubt the veracity of the transactions. Failure on the part of the assessee to furnish documentary evidence such as return of income and balance sheet of the investor companies / persons and their bank statements and confirmations from the investors clearly indicates that the assessee had actually not received any such Share Capital during the year and the amount shown under the head is Company's own unaccounted money which is introduced in the garb of Share Capital. As shown in the table, the total amount of shares claimed to have been allotted during the year to the above three Companies I Parties amounts to Rs.2,00,00,000/-. In view of the discussions made above, Share Capital of Rs.2,00,00,000/- has been treated as bogus and the amount is brought to taxation as undisclosed income. [Add: 2,00,00,000/-] b) Share Premium: On perusal of the details filed, it is also seen that the assessee has shown an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the alleged share applicants are paper companies not having sufficient net worth to make investment. It was also submitted that the assessee did not file the relevant details before ld. AO which could have given the opportunity to ld. AO to conduct necessary enquiry and thus, prayed that the finding of ld. CIT(A) may be reversed. 11. On the other hand, ld. Counsel for the assessee heavily relied on the finding of ld. CIT(A) and also stated that the case under consideration was subsequent to the carrying out of search. No incriminating material was found during the search proceedings pertaining to AY 2011-12 AY 2012-13. Further, no enquiries were conducted by ld. AO and all the alleged share applicants are having sufficient creditworthiness to invest in the share capital and share premium of the assessee company and no defect has been pointed out by ld. AO even in the remand proceedings in various documents filed before ld. CIT(A). Thus, prayer was made to confirm the finding of ld. CIT(A). 12. We have heard rival contentions and perused the records placed before us. The Revenue is aggrieved with the deletion of addition made u/s 68 of the Act by ld. CIT(A) for the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order has mentioned requisition u/s 133(6) of the Act were issued on 10.03.2015 to the three companies from whom share capital and share premium was received by the appellant. But till completion of the assessment, no reply was received from them. Hence, he held that the share capital of Rs.20000000/- was not actually received by the appellant. He, therefore treated it as bogus. The assessing officer further held that the share premium of Rs.80000000/- was appellant s own money invested in the garb of share premium. He, therefore, added these amounts in the total income of the appellant. (iii) It is respectfully submitted that the addition made by the assessing officer is totally misconceived, without any basis/ materials and therefore, neither sustainable on facts nor in law for the reasons mentioned hereinafter. (iv) A perusal of the assessment order would show that no incriminating document/material relating to the share capital/share premium/share application was found and/or seized in the case of the appellant. The assessing officer has neither referred to nor relied upon any such document while making the assessment. (v) It is respectfully submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital/ share premium even though admittedly, the details of share holders/ applicants were furnished to the assessing officer. (e) A perusal of the details filed would prove beyond any reasonable doubt the identity of share holders/ applicants, their credit worthiness and genuineness of the transactions. In view of the above, no addition was warranted on account of share capital and share premium received by the appellant. Hence, the same may kindly be deleted. (vi) Prayer under Rule 46A of the Income Tax Rules 1962: The documents submitted in support of ground nos. 4 and 5 are in the nature of additional evidences. As submitted hereinbefore in the preceding paragraphs, the appellant s assessment was completed without the appellant being given proper and meaningful opportunity of being heard. Also, the appellant was prevented by sufficient cause for not submitting these documents in course of the assessment proceedings. Hence, the appellant s case is covered by clause (b), (c) and (d) of Sub-Rule (1) of Rule 46A of the Income Tax Rules, 1962. In view of the above, it is prayed that the above referred additional evidence may kindly be admitted as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made by the appellant for admission of these documents as additional evidence. These documents were sent to the Assessing Officer while calling for the remand report. As stated above, the Assessing Officer has not objected to the admission of these additional evidences. Considering the facts and circumstances of the case, I admit the additional evidences now produced by the appellant as these are required to be admitted for doing substantial justice in the matter. 12.4. The Assessing Officer has mentioned in his order that there was no response from the three company share holders to whom notices were issued u/s.133(6) of the Income Tax Act, 1961 to confirm the investment made by them in the appellant company. The appellant has contended that it was never confronted with the result of notices issued to those company share holders and thus there was a gross violation of the provisions of Section 142(3) of the Act. A perusal of the order sheet, a copy of which has been filed by the appellant, show that there is no order sheet entry regarding issue notices u/s. 133(6) of the Act to the company share holders as mentioned by the Assessing Officer. It further shows that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made by the Assessing Officer by holding that the above subsidies were not derived from the appellant's manufacturing activities. 16. The above finding of ld. CIT(A) take note of all relevant details which are generally required to prove the identity, creditworthiness of the share applicants and the genuineness of the transaction. So far the identity is concerned, there remains no dispute as it is duly supported by address proof, PAN, details available on Ministry of Corporate Affairs for the corporate share applicants. So far as the creditworthiness is concerned, we find that all the companies have sufficient net worth to cover up the investments made in the assessee company. For instance, we take note that in the case of Gajanan Dealers Pvt. Ltd. as on 31.03.2010 it had a net worth of Rs. 22.81 Cr against which the investments made in the assessee company is Rs. 7.50Cr. Similarly, in the case of Rich Valey Traders Pvt. Ltd. as on 31.03.2010 the net worth stands at Rs. 20.39 Cr which justifies the investment in equity shares at Rs. 2 Cr for AY 2011-12 and at Rs. 45 lakh for AY 2012-13. Also in case of the share applicants namely Sarovar Dealers Pvt. Ltd., net worth as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not understand that in what manner ld. AO has examined the balance sheet of the assessee company to come to such a perverse conclusion that it is an unknown and unreputed company. We find that the assessee issued the share capital of face value of Rs. 10/- and charged a share premium of Rs. 40/- per share, so in total Rs. 50/- was received for each equity share. Now, leaving aside the profitability of the company and the future prospects of the assessee company even if we consider the share capital and reserve and surplus which includes capital investment subsidy as well as accumulated profits, the book value of the company comes at Rs. 51.96 per equity share which truly justifies the share premium of Rs. 40/- charged by the company. Analysis of the financial statements clearly indicates that the assessee is carrying out business of a very good magnitude and turnover has also increased post the receiving of fresh share capital as is evident that in FY 2009-10 the turnover was Rs. 105.70 Cr and which has increased to Rs. 143.45 Cr during the FY 2010-11 and the same growth continues for AY 2012-13. We are, thus, satisfied with the genuineness of the transaction of share capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. As rightly pointed out by the learned counsel that the CIT(Appeals) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding. 10. We also take note of the fact that all the share subscriber companies have filed their return of income with the department which have been either processed u/s. 143(1) of the Act for which intimations have been issued or have been assessed u/s. 143(3) or 147 on substantive basis, for which the respective intimation/assessment orders are placed on record in the paper book. We also take note of the fact that all the sixteen share subscriber companies have responded to the notice issued u/s. 133( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in the share capital of the appellant company cannot be a disputed matter as per material facts on record. The aforesaid facts underlined by evidences clearly prove the identity of the share applicants, their creditworthiness and source of funds, as well as the genuineness of the transactions being investments in the share capital issued by the appellant, which was subscribed to by each of them. Thus, it is proved beyond any-doubt or dispute that the share applicants are actually found to have subscribed to the share capital issued by the appellant during the year under consideration as clearly evident not only from their respective books of accounts but also from their audited accounts filed with the income tax authorities in relation to their own income tax assessments and the sources of such funds are also explained by each of the share applicants in their replies addressed to the AO. However, the AO had not brought these indisputable facts on record but acted on his whims and fancies. It is observed that the burden which la on the appellant, in relation to section 68 of the Act, has been duly discharged by it and nothing further remains to be proved by it on the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice and submitted the reply dated 22.12.2017. The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of transaction. There is no discussion by the assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the assessing officer to enquire further into the matter which he failed to do. In more than one place the assessing officer used the expression money laundering. We find such usage to be uncalled for as the allegations of money laundering is a very serious allegations and the effect of a case of money laundering under the relevant Act is markedly different. Therefore, the assessing officer should have desisted from using such expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). The Tribunal re-appreciated the factual position and agreed with the CIT(A). The tribunal apart from taking into consideration, the legal effect of the statement of Ashish Kumar Agarwal also took note of the fact that the notices which were issued by the assessing officer under Section 133 (6) of the Act to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book. These materials were available on the file of the assessing officer and there is no discussion on this aspect. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase laws as under: 11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Office is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of namelenders. iii. If the enquiries 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. 11.3. Hon'ble Supreme Court, thus, held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then, AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition of the alleged sum on account of share capital whereas perusal of the assessment order indicates that it relates to the cash seized during the course of search which has been treated by ld. AO as unexplained cash. Facts in brief that an amount of Rs. 28 lakh was seized during the course of another search operation conducted on 12.03.2011. Ld. AO during the course of assessment proceedings observed that the assessee has shown the seized cash in its balance sheet and claimed that the said amount is duly accounted for in the books of accounts. However, ld. AO was not satisfied and made the addition. 20. Aggrieved, the assessee preferred appeal before ld. CIT(A) and succeeded. 21. Aggrieved, the Revenue is now in appeal before this Tribunal. Ld. D/R supported the order of ld. AO. On the other hand, ld. Counsel for the assessee supported the finding of ld. CIT(A). 22. We have heard rival contentions and perused the records placed before us. Revenue s ground is that ld. CIT(A) erred in deleting the addition of Rs. 28 lakh made by ld. AO towards cash seized during the course of search. We notice that the assessee during the course of the proceedings before lower author ..... X X X X Extracts X X X X X X X X Extracts X X X X
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