TMI Blog2023 (9) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... URT] relied upon by the assessee, are not applicable. Under such facts and circumstances we concur with the decision of the order of Ld CIT(A) having no infirmity, in absence of any divergent argument advanced by the revenue apart from the contentions raised and considered herein above, or without any cogent material or decision having different binding consequence on the instant case, we do not have any distinct opinion other than that of the opinion of Ld CIT(A), thus, we order to sustain the same. Resultantly grounds raised in the present appeal by revenue are dismissed. - Shri Ravish Sood, JM And Shri Arun Khodpia, AM For the Assessee : Shri Ramesh Kumar Singhania, CA, And Shri Vijay Sharma, Advocate For the Revenue : Shri S.K.Meena, CIT-DR ORDER PER ARUN KHODPIA, AM : The revenue has filed this appeal against the order passed by the CIT(A)-1, Raipur, dated 05.07.2018 for the assessment year 2012-2013. The assessee has also filed cross objection. 2. The revenue has filed revised grounds of appeal vide letter dated 14.12.2022, which read as under:- 1. Whether on points of law and on facts circumstances of the case, the Ld. CIT(A) was j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts circumstances of the case, the Ld. CIT(A) was justified in giving a decision in favour of the assessee and against the revenue though there is no nexus between the conclusion of fact and primary fact upon which conclusion is based ? 10. The order of is erroneous both in law and on facts . 11, Any other ground that may be adduced at the time of hearing . 3. Brief facts of the case are that the assessee is a company incorporated under the Companies Act 1956 and engaged in the real estate business. The assessee has filed its return of income electronically on 30.09.2012 declaring total income at Rs. Nil. Sunsequently, the case of the assessee was selected for scrutiny and notice u/s. 143(2) of the Act was issued to the assessee, in response to which the assessee filed its written submission. The AO examined the books of accounts, bill vouchers produced by the assessee. During the year under consideration the commercial operations of the assessee had not been commenced, therefore, the assessee did not prepare any profit and loss account. The lands purchased during the year have been classified as Inventory. The AO found that there were receipts of share capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 2. Everlast Vinimay Pvt. Ltd. 3. Subhlabh Prints Pvt. Ltd. 4. Rajhans Dealers Pvt. Ltd. 5. Liberal Merchangs Pvt. Ltd. 7. Ld DR further submitted that, It was further observed by the ld. AO that since no response has been received from the five share subscriber companies, it is proved that the said five companies does not exist in real sense and mere furnishing of PAN and certificate of incorporation indicates dormant existence and cannot be accepted as sufficient discharge of onus u/s. 68 of the Act, As there is no positive affirmation from aforesaid companies, the genuineness of the receipt of share capital/premium has not been established. By observing so, the ld. AO has contended that the companies from whom the assessee has received substantial amount in the form of share capital/premium are merely paper companies without any concrete business. The financial statements of the said companies also defy all logics of investment in shares of the assessee company. It was further noticed by the ld. AO that the said companies do not have any real business and have been merely used as a conduit to channelize the unaccounted money of the assessee company. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant state. It is beyond one ^comprehension as to what prevented the assessee to produce the same before the AO during assessment proceedings However, on perusal of assessment order it is amply clear that the AO had not disallowed the investment of the companies, which failed to respond to the notices u/s 133(6), rather she had disallowed the share capital and share premium introduced by all the 12 companies aggregating to Rs. 30700000/- in view of inquiries conducted by her wherein it was revealed that the companies are merely paper companies and the investment does not commensurate with their financial status. The document submitted by the assessee in respect of five investor companies which were not received in response of notice u/s 133(6) during assessment proceedings are similar to those in respect of other companies which were received before finalization of assessment order. The AO had taken an adverse view on the financial status of the companies which appears to be applicable in these 5 companies also. Thus the order deserves to be confirmed . 8. The remand report was confronted to the assessee and the ld.CIT(A) has concluded that once the onus has discha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e similar observations as have been made in the assessment order. v) No finding has been made by the assessing officer in respect of those companies which have complied to the notice u/s 133(6). Also, AO has not thrown any light about what inquiry was conducted about those companies. 3. Assessee filed all the evidences. All the investors confirmed having made investment. In such a case, no addition could be made in the hands of assessee. Reliance on: - i) ACIT vs Venkateshwar Ispat (P) Ltd. (2009) 319 1TR 393 (Chhattisgarh). 4. Burden cast on assessee discharged. No addition could be made. Reliance on: - i) CIT vs Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC). ii) Pr. CIT vs Laxman Industrial Resources Ltd. (2017) 397 ITR 106 (Del.). iii) Prabhatam Investment (P) Ltd. vs ACIT (2017) 49 CCH 299 (Del. Trib.). 5. Onus u/s 68 discharged. The burden never shifted back by the AO to the assessee as the outcome of enquiry was never confronted to the assessee and no positive material has been brought on record by the AO disputing the legal and cogent evidences. 6. Addition made on the basis of inference, which is not permissible. Even such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Companies have net worth which has remained undisputed and therefore, the observation of AO about alleged paper companies is arbitrary. iv) The balance sheet of investors show substantial net worth of the companies and nothing has been brought on record to show why such net worth was not acceptable to the AO. v) The credit worthiness of the investors is being accepted in their individual cases. 10. Further, the ld. AR vide letter dated 26.07.2022, has filed additional written submission, which read as under:- BEFORE THE HON BLE INCOME TAX APPELATE TRIBUNAL, RAIPUR Date : 26/07/2022 Re: ARYAN BUILDERS DEVELOPERS PRIVATE LIMITED [PAN: AAJCA3942M] Ref.: Appeal No. ITA 201/RPR/2018, [A.Y. 2012-13] Date Fixed for hearing: 26th July 2022 Subject: Our additional written submission against the above referred appeal before the tribunal preferred by the department (Department's Appeal). Honorable Sir, Most respectfully, in continuance of our earlier submission, we submit as under- 1. That the assessing officer vide its assessment order dated 25/03/2015 has made an addition of Rs. 3,07,00,000/- u/s 68 of the IT Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital/ premium has not been established. (Para-6 of the assessment order) (ii) The Ld. AO in his assessment order nowhere questioned the identity as well as creditworthiness of investor companies also both these aspects has duly been established before the Ld. AO in the course of assessment proceedings. (iii) Therefore the allegation of Ld. AO that AO had made the addition not only on the basis of non-response was received from the alleged shareholders but also on the basis of creditworthiness of such shareholders is not tenable your honor. (iv) Further, Since all the essential ingredients of sec.68 of the Act, viz. identity of the creditor, creditworthiness of the creditor and genuineness of the transaction, are been abundantly proved before the AO as well as CIT(A) on the strength of the documentary other evidences, the impugned addition made by the AO, unsubstantiated on the strength of corroborative evidence, is unsustainable on facts and in law. 2. The Ld. CIT(A) ignored the findings of the AO which was given after enquiries that the genuineness as well as creditworthiness of the investor companies were not proved. (Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information if any, before making additions Further the allegation that the Ld. CIT(A) has not considered the finding of the AO that the creditworthiness of the investor companies are not satisfactory is not tenable as: Firstly, there is no allegation whatsoever with respect to creditworthiness of investor companies in the assessment order so passed by the AO. Secondly, Ld. CIT(A) has thoroughly examined all the documents submitted by the assessee and found the creditworthiness of investor companies as satisfactory, which is also substantiated by the Ld. C1T(A) by citing example as under: For example on going through the balance sheet of M/s Apurva Bartar (P) Ltd as on 31/03/2012 it has interest income of Rs. 15,35,594/-. Share capital and reserve of the company was Rs. 5,79,33,838/-, which was invested in long term loan and advances and shares of the companies (Page-6 of CIT(A) s Order) Further, (i) The net-worth of each of the investor companies as on 31.03.2012 is much higher than the amount of investment made by them in the assessee company, which itself signifies creditworthiness of respective investors (ii) Only a minor p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion in his assessment order. ❖ Further without prejudice to above, no opportunity of cross-examination of those statements has been given to the assessee. ❖ Furthermore, copy of such statements has not been provided to the assessee in the course of assessment proceeding for assessee s counter submission. ❖ It is already the settled principal of law that merely based on the statement of some individual with whom the assessee has no link or reference, and in the absence of any corroborative evidence on record, one cannot establish that the share capital taken from investor companies are unaccounted money of the assessee. ❖ There was no evidence brought by the AO on record to prove that the impugned investment was actually flown from the coffers of the assessee company. For this preposition, the assessee wishes to rely on following decided case laws: (i) Aravali Trading Co. v. ITO (2008) 220 CTR (Raj.) 622 (ii) ACIT v. Anima Investment Ltd. (2000)73 1TD 125 (Del.) (iv) CIT v. Real Time Marketing (P) Ltd. (2008) 306 ITR 0035 MM Securities Ltd. v. ACIT (2004) 1 SOT 452 (Hyd.) CIT v. Gangeshwari Metal Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that in the case of alleged bogus shareholders, the department is free to proceed to reopen the individual assessments of the subscriber in accordance with law The Bombay High Court in Pr. CIT v. Veedhata Tower (P.) Ltd. [2018] 403 ITR 415 held that the requirement of explaining the source of the source of receipts came into the statute book by amendment to section 68 of the Act on April 1, 2013, i.e., effective from the assessment year 2013-14 onwards. Further, it is also submitted here that no adverse inference has been drawn in the assessment order on the source of funds and therefore it can t be raised in any subsequent stage of proceeding. 6. Distinction of present case with the case laws relied on by the AO in his grounds of appeal: In his grounds of appeal filed before the honorable tribunal, the AO has relied on several case laws, which are summarized in below table along with assessee s submission on merit as well as on distinction of those case laws with the facts of the present case: Sr. No. Department's Objection raised in appeal paper book Assessee s Submission against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly distinguished from the facts of the decision given by ITAT, Kolkata B Bench in the case of M/s Subhlakshmi Vanijya (P) Ltd. Vs. CIT-1, Kolkata in ITA No. 1104/Kol/2014 as in the case of M/s Subhlakshmi Vanijya (P) Ltd., the jurisdiction of CIT for invoking section 263 was under challenge whereas in present case, substantial question before the bench is with respect to legality of additions made by the AO with respect to share capital/ premium. Consequently, ratio of the case of M/s Subhlakshmi Vanijya (P) Ltd. is not applicable in assessee s present case 3 ITAT, Kolkata Bench in the case of M/s Bisakha Sales (P) Ltd. Vs CIT-II, Kolkata [ ITA No. 1493/Kolkata/2013] The facts of instant case of assessee is clearly distinguished from the facts of the decision given by ITAT, Kolkata B Bench in the case of ITAT, Kolkata Bench in the case of M/s Bisakha Sales (P) Ltd. Vs CITII, Kolkata [ITA No. 1493/Kolkata/2013] as in the case of M/s Bisakha Sales (P) Ltd., the jurisdiction of CIT for invoking section 263 was under challenge whereas in present case, substantial question before the bench is with respect to legality of addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. T hat the Ld, AO overlooked various jurisdictional binding pronouncements on the issue as given by the Raipur Bench of the Tribunal as well as by the Chhattisgarh high court and honorable Supreme Court of India 7.1. Honorable Chhattisgarh High Court in the case of ACIT v. Venkateshwar Ispat (P.) Ltd. (2009) 319 ITR 393 (Chhattisgarh HC) held that: As decide by the SC in CIT v. Lovely Exports (P.) Ltd. (2009) 319 ITR 5 (SC), even if the share application money was received by the assessee company from alleged bogus shareholders whose names were given to the AO, then, the Dep t. Was free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee company. Hence, the Jurisdictional HC held that no question of law arose from the Tribunal s order deleting the addition. Therefore, the additions made by the Ld. AO is unsustainable in the light of the aforesaid decision of jurisdictional High Court in the case of ACIT v. Venkateshwar Ispat (P.) Ltd. reported in 319 ITR 393 (Chhattisgarh). 7.2. ITAT, Raipur Bench in the case of DCIT (Central) Vs. Mahalaxmi Technocast Ltd. ITA No. 256 to 256/RPR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 DCIT, Central Circle, Raipur Vs. R.R. Energy Ltd. has ruled in favour of the assessee and deleted the additions on account of share capital premium by observing as under: It is an undisputed fact that the names, addresses and assessment particulars of the investors, certificate of registration from the ROC and bank statement of the applicants had been furnished by the appellant before the AO. It is further observed that the share application/capital money has been received by way of account payee cheques from the investors most of whom are companies and is duly reflected in the bank account of the appellant. I have perused the bank statements of the investors, their audited financial statements and confirmation for making such investments, which clearly establishes the factum of making investments. These facts are clearly establishing the identity of the investors and the genuineness of the impugned transactions. It is observed from the records and assessment order that for the purpose of making addition as unexplained cash credits, the AO has heavily relied upon the judicial pronouncements, however, the appellant has made elaborate submissions distinguishing the facts, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. which is a Private Limited Company and which cannot bring public issue of shares. I find that the investments made by the share applicants were duly reflected in the audited financial statements of the corporate investors. It is a settled principle of law that reason for suspicion, however grave it may be, cannot be a basis for holding adversity against appellant. The Assessing Officer has disregarded the documentary evidences adduced by the appellant such as confirmation from the share applicants, their PAN, certificate of incorporation of subscriber companies. The subscription for the shares was received through cheques. The Investor-companies are duly registered with ROC. Those companies were also having their income tax PAN numbers and regularly fled returns of income. No material was brought on record by the A.O independently of the information received, if any, from the investigation wing of the Income Tax Department to show that the monies represented the appellant s undisclosed income. The Hon ble Supreme Court in CIT vs. Lovely Export, 216 ITR 198 SC and the Delhi High Court in Divine Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts as under: Sr. No. Case Reference Decision laid down by the Judiciary 1. Calcuttta HC in the case of PRINCIPAL COMMISSIONER OF INCOME TAX - 9, KOLKATA VERSUS M/S. SREELEATHERS ITAT/18/2022 (IA NO: GA/02/2022) The issue before the Calcutta High court in the case of PCIT-9, Kolkata Vs Sreeleathers was whether addition u/s 68 can be made casually by assessing officer by simply saying that the loan creditor companies are paper companies and the assessee is involved in money laundering. The Calcutta High Court relying on the decisions in the case of Sreelekha Banerjee Vs CIT(1963) 49 ITR 112 and other landmark decisions held that where the assessee furnishes full details regarding the creditors, it is up to the department to pursue the matter further to locate those creditors and examine their creditworthiness. 2. ITAT SURAT BENCHDeputy Commissioner of Income-tax V. Karmeshwar Exim (P.) Ltd. [2022] 138 taxmann.com 560 (Surat-Trib.) IT APPEAL NO. 90 (SRT) OF 2017 [AY 2012-13] Where assessee company received share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in lakhs of rupees and investment made in assessee-company was a small part of their capital - Thus, creditworthiness of share applicants was also established - Further, sharecapital monies were directly paid to assessee by cash out of sufficient bank balances available in their bank accounts - Whether assessee had discharged its onus to prove identity and creditworthiness of share subscribers and genuineness of transactions, therefore, addition made under section 68 was unjustified. 6. ITAT PUNE BENCH 'A' Deputy Commissioner of Income Tax Central Circle, Aurangabad V. Mahalaxmi TMT (P.) Ltd. [2021] 128 taxmann.com 396 (Pune - Trib.) Where assessee a newly startup company received sharecapital and share premium amount from several parties and furnished all necessary details such as confirmation of parties, copy of ITR, copy of bank statement of parties along with their balance sheet, share certificate, etc. so as to prove identity and creditworthiness of parties and genuineness of transactions and, further, all transactions were carried out through banking channel, impugned addition made on account such share capital an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account. 6] The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by all the 12 companies aggregating to Rs. 30700000/- in view of inquiries conducted by her wherein it was revealed that the companies are merely paper companies, and the investment does not commensurate with their financial status. On such comments by the AO in remand report Ld CIT(A) observed that such documents were submitted by the assessee before the AO also which she had ignored. At appellate stage also AO has adopted an evasive approach, has not thrown any light about the inquiry conducted about Kolkatta based companies. (v) CIT(A) observed that once the assessee has discharged its onus by furnishing the details and documents, onus shifts back to AO to make enquiries/investigation to establish that either or all of the identity, creditworthiness of shareholders and genuineness of the transaction has not been established. (vi) Reliance was placed on the judgment in the case of Hon ble Supreme Court in the case of CIT Vs. Lovely Exports, 216 ITR 198 (SC), ratio of law emerged from the said judgment was adopted by Hon ble Jurisdictional High Court of Chhattisgarh in the Case of M/s Venkateshwar Ispat (P) 319 ITR 393 which are binding judgments rendered on identical facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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