TMI Blog2023 (9) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... 012-13. 2. The assessee has raised the following grounds of appeal:- 1. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition made u/s. 68 of Rs. 7,96,16,343/- on account of unexplained cash credit in the form of share capital with premium. 2. Whether on the facts and circumstances of the case the Ld. CIT(A)-4, Kol., is erred in deleting the addition without considering the facts that the source of fresh 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexplained share capital and share premium and addition of Rs. 6,85,77,614/- for unexplained unsecured loan u/s 68 of the Act and assessed the income at Rs. 14,81,85,157/-. 3.1. Aggrieved the assessee preferred appeal before the ld. CIT(A) and filed complete details of allotment of shares, consideration received during the year and the consideration outstanding to be received. The assessee also filed details of the group concern BMW Industries Ltd., which advanced loan to one 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h receipt or credit of any money during the year and hence section 68 of the Act cannot be invoked. So far as this finding of the ld. CIT(A) is concerned, we fail to find any merit because though Section 68 of the Act, comes under the heading cash credit but the Section provides that where any sum is found credited in the books of the assessee maintained for any previous year and the assessee provides no explanation about the nature or source thereto or the explanation offered by him is not in the opinion of the Assessing Officer satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. In this provision, the words any sum as found credited 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 journa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, article and memorandum of association and also the proof that these share subscribers are Non-banking Financial Companies duly registered with the Reserve Bank of India. The details filed in the paper book of these share subscribers are as follows:- Torrid Fintrade Private Limited (i) Notice u/s 133(6) in remand proceedings to Torrid Fintra Private Limited (ii) Reposne to Notice u/s 133(6) by the Torrid Fintra Private Limited thereon (iii) Response filed to u/s 143(2) of the Appellant with the followings:- 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 of appellant, with details of payments made afterwards and supporting bank statement I. Details of Investment in equity shares J. NBFC registration certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the A.Y. 2012-13 11. Further we notice that all the alleged share subscribers are active companies as appearing on the master data of the Ministry of Corporate Affairs and non-banking financial companies having made alleged investments in the regular course of business. Further, we notice that in para 7 of the impugned order, the ld. CIT(A) has examined the factual details of the share subscriber companies and also observed that the shareholders in these subscribing companies are body corporates and they are group companies of BMW Group which is a company having turnover of Rs. 750 Crores. The finding of ld. CIT(A) examining the identity, capacity and genuineness of the transactions in respect of share subscribers reads as follows:- 7. Without prejudice to above, if we look at the identity, capacity and genuineness of transactions w.r.t. share subscribers, (even though received in subsequent year), foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd paid in next financial year with supporting also filed. The company owns a residential unit also. 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. iii. Merrit Fintrade (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. Partha Ghosh, Mr. Anand Saraf, Mr. Suresh Kumar Kedia and Mr. Ashok Kumar Agarwal are senior employees of BMW Group of companies. This company belongs to BMW group a listed entity. The company had filed relevant documents with Assessing Officer and also in remand proceeding. The shareholders are mainly body corporate, the shareholders companies, namely Manchest Finpro (P) Ltd, Rolex Fintrade (P) Ltd, Shakti Vanijya (P) Ltd, Torrid Fintrade (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 Street, Kolkata-700016, which is the BMW group headquarters in Kolkata. The com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a group concern of BMW Industries Ltd and it had credited the share capital account by Rs. 6.55 crores and the money was received in subsequent year. Ld CIT appeal has allowed relief to the assessee under similar set of facts. Further in case of Manchest Finpro (p) Ltd. A.Y. 2012-13 where the assessee is a group concern of BMW Industries Ltd and it had credited the share capital account by Rs. 7.77 crores and the money was received in subsequent year. Ld CIT appeal-5 has allowed relief to the assessee under similar set of facts. It is seen that the facts of present case are identical to these two cases where the assessee has got relief. In view of the above it is clear that the assessee has not received any share capital during the year and therefore addition during AY 2012-13 is not justified on this count. Further it is seen that all the share subscribers in whose name credits have come during the year are associate companies of the assessee (BMW group, a listed entity). The assessee has been able to show the source of share capital in the hands of the share allottees. First of all the AO has not been able to prove that the share subscribers are doubtful. Further even if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mained unexplained. The AR filed the following table on unsecured loans appearing in the balance sheet of the appellant:- Name Particulars Opening balance Transaction during the year Closing balance Rupees Dr in Rupees Cr Gourav Commerce Pvt. Ltd. Inter corporate deposit taken by cheque 10.03.2012 29.03.2012 40000000 29500000 69500000 Murray Financial Pvt. Ltd. Unsecured loan taken in earlier years 344164 344164 BMW Industries Ltd. Unsecured loan taken in earlier years 332386 332386 Merrit Fintrade Pvt. Ltd. Unsecured loan taken in earlier years 590 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of payment and mode of payment was not mentioned anywhere and no bank statement was filed in this respect. Moreover from the balance sheet of the above two loan providers it could not be established that advance given to the assessee company were included in schedule of Loans Advances of their balance sheets. In view of the above it may be stated that the credibility genuineness of the loan could not be established. a. It is seen that M/s Gaurav Commerce Pvt Ltd (GCPL) complied with notice u/s 133(6) and filed confirmation of loan and filed copy of ITR. Identity of creditor- It is also seen that GCPL is showing 12/2 Park Mansion, 57A Park street as its city office. This is also the address of BMW Industries a listed group concern of the assessee group. Therefore the assessee has been able to provide proof of identity of the lender. Capacity of creditor - It is seen that the AO has acknowledged that the money has been received by Gaurav Commerce Pvt Ltd from BMW Industries Ltd. BMW industries is a listed company of the assessee group with turnover of Rs. 750 Crores and profit of Rs. 27.13 Crores. Therefore Source of source for the loan transaction is genuine an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmerce Pvt. Ltd., and the genuineness of the transactions. The ld. CIT(A) has rightly examined these facts and deleted the said addition. Our view is further supported by the recent decision of the co-ordinate bench in the case of ITO vs. Forceful Estates Pvt. Ltd. in ITA No. 2558/Kol/2018; Assessment Year 2012-13, order dt. 08/02/2023, and for necessary reference, the facts and findings of the Tribunal read as follows:- 5. The ld. counsel has further invited our attention to the impugned order of the CIT(A) to submit that the ld. CIT(A) has categorically noted that the assessee during the year had raised share capital including share premium amounting to Rs. 7,60,00,000/- from six share subscribers. The Assessing Officer had issued notices u/s 133(6) of the Act to the share applicants and in response, they all confirmed the transactions and furnished details/documents as called for including source of fund in their hands. The ld. CIT(A) has considered the evidences and details on record and found that the assessee has been able to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction. The relevant part of the order, for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to the shareholders were served on the their respective address by the postal authorities and in response, they confirmed the transactions and also submitted the details of the source of funds for making investment. Hence, the identity creditworthiness of the shareholders are not in doubt. Further, all the share application money was received through banking channels. Therefore, the issue for my consideration now is -whether the share capital of Rs. 7,60,00,000/- raised during the year by the appellant can be treated as unexplained cash credit u/s. 68 of the I.T Act or not. When the identity creditworthiness of the shareholders have been clearly established because all of them were scrutinized u/s 143(3) and thus the source of the share capital and the share premium are clearly established and the transactions have all taken place through banking channels, merely for failure of the directors of the assessee and the shareholders to appear before AO in person in response to the summons issued to them u/s.131 of the Act, the addition cannot be in my considered opinion, unjustified. Where the corpus becomes technically explained in the eyes of law, how can, the credits ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents furnished by the assessee as well as by the share subscriber companies to prove the identity and creditworthiness of the subscribers and the genuineness of the transaction. The AO has not pointed out in the Assessment Order as to what further enquiries he wanted to make from the directors of the subscribers to insist for their personal presence. The Assessee in this case, as noted above, explained about the identity, creditworthiness and financials etc. of each of the share subscriber company individually. However, we note that in the assessment order that the AO has not even mentioned the names of the share subscriber companies and even has not mentioned a word as to which of the share subscriber company or the corresponding transaction thereof was not genuine and on what grounds. The AO, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, dismissed. 15. Our views are further fortified by the judgment of the Jurisdictional Calcutta High Court in the case of Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) has held as follows: Section 68 of the Income-tax Act, of 1961, deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The crucial words in the provision are the assessee offers no explanation . This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their confirmations, the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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