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TMI Blog2023 (9) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... resh share capital amount was not properly explained by the assessee during the course of assessment proceedings and the director of the assessee company did not appear against summon u/s. 131 to substantiate the claim of the assessee with documentary evidences. 3. Whether on the facts and circumstances of the case the Ld. CIT(A), failed to appreciate that when the sums are credited in the books of accounts of the assessee, the onus lies on the assessee to prove three criteria viz. Identity of the creditworthiness of the creditor and genuineness of the transaction. 4. Whether on the facts and circumstances of the case the Ld. CIT(A), failed to appreciate that the assessee claimed that no amount has been received but the same was not disclosed under the head of Amount receivable rather it has been shown as investment in unquoted. 5. Whether the Ld. CIT(A) is erred in interpreting the meaning of section 68 of the I.T. Act, 1961 that no money has been received by the assessee during the year under consideration and thus no addition u/s. 68 is applicable in this case. In this instant case the assessee credited sum totalling Rs. 7,96,16,343/- in its books of accounts in the year u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the alleged share subscriber and thus pleaded that the source of the source is duly explained and thus addition u/s 68 of the Act is uncalled for. The assessee also filed complete details including addresses, PAN Nos., financial statements of the alleged share subscriber and cash creditors to prove the identity and creditworthiness of these transactions and also the genuineness of the transaction Ld. CIT(A) deleted the impugned additions. 4. Aggrieved, the revenue is now in appeal before this Tribunal challenging the finding of the ld. CIT(A) deleting the addition for unexplained share capital and share premium as well as unexplained unsecured loans. 5. The ld. D/R vehemently argued supporting the finding of the Assessing Officer and further submitted that the assessee has miserably failed to file the details before the Assessing Officer and also the summons u/s 131 of the Act remained uncomplied and even the Inspector, who was assigned the work to serve the summon failed to do so as he was unable to find the assessee company at the given address and people of the building were unaware of that company. The ld. D/R further submitted that the alleged share applicants and cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is mentioned and the ld. CIT(A) has adopted the view that such sum co-relates to the actual sum received in the bank account. However, the situation is that in the double entry system of accounting, entries are of the three categories:- (i) Those entered through cash books. (ii) Those entered through bank books. (iii) Those entered through journal entries. 8.1.1. Mercantile system of accounting takes into account the entries both in the nature of cash/bank and journal entries and for the purpose of making any entry in the books of accounts, an amount has to be assigned. Thus, in our humble understanding, where there is any journal entry in the books, which of course is denominated in an amount, is found credited in the books and the explanation for the same is not been given by the assessee to the satisfaction of the Assessing Officer, then Section 68 of the Act comes into operation. We also find it pertinent to mention that credit entries can be in the nature of liabilities as well as income and, therefore, if any credit entry is shown by the assessee as a liability, but the assessee is unable to explain its nature and source satisfactorily, Section 68 of the Act changes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual accounts as on 31.03.2012 F. List of directors as on 31.03.2012 G. Bank statement for the period and bank book for the period H. Declaration by the company on Investment in equity shares of appellant, with details of payments made afterwards and supporting bank statement I. Details of Investment in equity shares J. NBFC registration certificate Merrit Fintrade Private Limited (i) Notice u/s 133(6) in remand proceedings to Merrit Fintrade Private Limited (ii) Reposne to Notice u/s 133(6) by the Merrit Fintrade Private Limited thereon (iii) Response filed to proceeding u/s 143(2) of the Appellant with following enclosures:- A. List of shareholder of the company as on 31st March, 2012 B. Certificate of Incorporation C. Article and Memorandum of Association D. Copy of ITR Acknowledgment for A.Y. 2012-13 E. Audited annual accounts as on 31.03.2012 F. List of directors as on 31.03.2012 G. Bank statement for the period and bank book for the period H. Declaration by the company on Investment in equity shares & money due I. Details of Investment in equity shares J. NBFC registration certificate Copy of assessment order for A.Y. 2012-13, in appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year), following can be observes:- i. Tricom Investments (P) Ltd. - 7,11,74,384. It is seen that most of the share capital has come from this company. Identity- The company is an NBFC, registered with RBI. The directors of the company Mr. Partho' Ghosh, Anand Saraf, and Ashok Kumar Agarwal are senior employees of BMW Group of companies. This company belongs to BMW group. The company had filed relevant documents with Assessing Officer and also in remand proceeding. The share holders are mainly body corporate, the shareholders companies, namely Manchest Finpro (P) Ltd, Rolex Fintrade (P) Ltd, Concord Dealcom (P) Ltd and Parakram Tracpm (p) Ltd are group companies of BMW group; holding nearly 78% of paid up share capital. The registered office of the company is at 12/2, Park Mansion, 57A, Park Street, Kolkata-700016, which is the BMW group head quarters in Kolkata. In view of the above identity of this company has been proved by the assessee. Capacity and genuineness- The company is assessed with Income tax under PAN- AABCT8472F. The source of fund paid in next financial year with supporting also filed. The company earned dividend of Rs. 323550 during the year and have inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax under PAN- AADCM5090L The source of fund paid in next financial year with supporting also filed. The company earned dividend of Rs. 389450 during the year and have investments in shares of BMW Industries Ltd. (Rs. 80.85 Lac) and Mutual Fund (Rs. 2.26 Lac). The Bank statement for the period 01.04.2011 to 31.03.2014 reflects transaction with BMW industries Ltd and other group companies. Therefore assessee has been able to submit proof of identity, capacity and genuineness of the share subscriber. iv. Bleweet Finvest (P) Ltd. It is one of the share subscribers during the year. The company is an NBFC, registered with RBI. The directors of the company Mr. Avijit Naskar, Anand Saraf, Suresh Kumar Kedia are senior employees of BMW Group of companies. This company belongs to BMW group. The company had filed relevant documents with Assessing Officer and also in remand proceeding. The share holders are mainly body corporate, the shareholders companies, namely Manchest Finpro (P) Ltd, Rolex Fintrade (P) Ltd, Merrit Fin trade (P) Ltd are group companies of BMW group; holding nearly 76% of paid up share capital. The registered office of the company is at 12/2, Park Mansion, 57A, Park ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding the additions should have been made in the hands of the share applicants and hot the assessee concern. In view of the above discussion, invoking the provisions of section 68 by the AO is not justified in the circumstances. Accordingly, the AO is directed to delete the addition made on this account. This ground of appeal is allowed." 12. From going through the above finding of the ld. CIT(A) as well as the details submitted by the assessee in the paper book which in itself is sufficient to indicate that the assessee has filed all necessary details to explain the nature and source of alleged transactions of receiving share capital and share premium and also to prove that these are transactions carried out with the group concerns which are registered with the Reserve Bank of India as Non-Banking Financial Companies and the source of fund is from the key group company BMW Group and, therefore, the identity and creditworthiness of the share applicants and genuineness of the transactions is proved. 13. So far as the issue of addition u/s 68 of the Act at Rs. Rs. 6,85,77,614/- is concerned, we note that the said amount was noticed by the assessing officer on the basis of the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was asked from the AO- With respect to unsecured loan - it was stated that some of the loans have been received from Group Companies; therefore; no addition for the same could have been done. Further some of the loans were old loans; therefore, no addition could have been done in this year. For the same in the light of these two arguments and the evidences submitted." Please submit your remand report within 30 days." 9.2. In reply the AO has stated the following- With respect of Unsecured Loans a reference was made from this office to M/s. Murray Financial Services Pvt. Ltd. & to M/s. Gourav Commerce Pvt. Ltd. But the letter of M/s. Murray Financial Services Pvt. Ltd. has returned back to this office with the postal comments "Insufficient address" and no reply has yet been received from M/s. Gourav Commerce Pvt. Ltd. till date. Therefore, the unsecured loans could not be verified. Moreover on perusal of the evidences as filed by the assessee company before the Ld. GIT(A)-4, Kol., it reveals that as per confirmation of accounts & a certificate given by M/s. Gourav Commerce Pvt. Ltd. that a sum of Rs. 6,95,00,000/- has been given as advance to the assessee company i.e. M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to delete the addition made on this account. This ground of appeal is allowed." 14. On going through the above finding of the ld. CIT(A) and also perusing the details filed by the assessee in the paper book, we notice that there was a proper response from M/s. Gourav Commerce Pvt. Ltd., to the notice issued u/s 133(6) of the Act and necessary details including statement of account, audited financial statements, income tax return and bank statements were directly submitted to the Assessing Officer and no discrepancy has been observed specifically in these details. The explanation was also filed by the said creditor in the form of a certificate stating that the source of the alleged sum was the loan received by it from another group concern M/s. BMW Industries Ltd. on 09/03/2012 at Rs. 16.02 Crores. Further we notice that the information was also called by the Assessing Officer from BMW Industries Ltd., which is annexed at pages 514 to 518 of the paper book and all the necessary compliance was made by the said company. It is also brought to our notice that M/s. BMW Industries is a listed company and further the alleged cash creditor M/s. Gourav Commerce Pvt. Ltd. is a group conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the subscription of shares of the appellant. In the course of the appellate proceedings, the appellant filed copy of each of the assessment orders passed in all the 6 cases of the shareholders for that year in which the share subscription amount has been received by the assessee company. Besides, the income-tax return filing acknowledgment, Audited Balance and sheets as on 31.03.2012, relevant bank, copy of the notices issued u/s 133(6) to the shareholders and reply thereof were also submitted. It is observed form the details & documents furnished by the appellant that in the cases of 2 share holders, namely 1) M/s Alfort Merchants Private Limited, 2) M/s Sharekhan Merchants Private Limited, the Assessment Orders u/s 143(3) for AY 2012-13 were passed u/s. 143(3) without taking any adverse view. Therefore, it can be assumed that the respective Assessing Officers have all verified the accounts and therefore any amount that is credited from these two companies to the assessee company is fully explained. The assessment in the case of the other 4 share holders, namely, 1) M/s. Dhanamrit Commercial Private Limited, 2) M/s Jealous Commercial Private Limited, 3) M/s Mutual M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en note of the accounts of the share subscribers but also, noted that all the six share subscribers were assessed u/s 143(3) of the Act. Out of which, no additions were made in case of two share subscribers. However, in the case of other four share subscribers, the additions were made regarding their source of income. Now, it is settled law, once the addition has been made in the hands of the share subscribers, the investments by which share subscribers in the hands of the other company whose shares have been subscribed stood explained then no additions in such a case would be warranted in the hands of the assessee company as it would amount to double additions of the same amount. Even if the said addition stand confirmed in the appeal or stand deleted, in both the instances, the investment in the hands of the assessee company will stand proved. Reliance has been placed in this respect on the decision of the Coordinate Kolkata bench of the Tribunal in the case in the case of DCIT vs. M/s Maa Amba Towers Ltd. in ITA No. 1381/Kol/2015 vide order dated 12.10.2018. The aforesaid decision has been further relied upon by the coordinate Kolkata bench of the Tribunal in the case of "Steele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther the jurisdictional Calcutta High Court in the case of "Crystal networks (P) Ltd. vs CIT" (supra) has held as under: "We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. 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." 8. As the ld. CIT(A), in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three 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 had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was 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 had discharged his initial burden and the burden shifted onto 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". Such usage was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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