TMI Blog2023 (7) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... d and the CIT(A) has rightly deleted the same. Assessee company is having a huge turnover and for financial year 2012-13, the same is amounting to Rs.145.38 Crores and net profit from continuing operations is Rs.1.45 Crores. In the return of income, total income has been declared at Rs.1.74 Crores. We find that the genuineness of the transactions is proved since the investment which has been made by the alleged share applicants is in a profit making company and, therefore, since the future prospect of investments are good, this decision of the share applicant company to invest in the equity of the assessee company is prudent one and, therefore, the genuineness of the transactions is established. Since the assessee has successfully proved the three necessary ingredients i.e., identity and creditworthiness of the share applicants and genuineness of the transactions as provided u/s 68 are of the view that no interference is called for in the order of the CIT(A) deleting the addition made by the AO u/s 68 of the Act and the same is upheld. Decided against revenue. - SHRI SANJAY GARG, HON BLE JUDICIAL MEMBER DR. MANISH BORAD, HON BLE ACCOUNTANT MEMBER For the Appellant : Shri S.K. Tul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition, alteration and modification, abrogation etc. of ground or grounds on or before or during the course of hearing of the appeal. 2. Brief facts of the case are that the assessee is a company engaged in the business of manufacturing and trading in iron and steel. It filed its return of income on 26/09/2021 declaring total income of Rs.1,74,09,340/-. Case selected for scrutiny following by issuance and service of notice u/s 143(2) 142(1) of the Act, upon the assessee. In response to the notices issued, the assessee filed the requisite documents such as audited accounts, copy of the return of income, complete details of share capital raised during the year and Bank Statement for the year. On perusal of the details of share capital raised during the year, the learned AO noted that the assessee has raised fresh share capital of Rs.19,14,50,000/- from the following two share applicants. Honesty Dealers Pvt Ltd. 10,52,00,000 Seaview Agencies Pvt Ltd. 8,62,50,000 19,14,50,000 2.1. The ld. AO Vide letter dated 20.01.2015, asked the assessee to produce the shareholders as well as directors along with the relevant documents of the share applicant companies. Accordingly, the assessee wrot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital of Rs.14,80,00,000/- was raised by Honesty Dealers Pvt Ltd during FY 2008-09. The said sum of Rs.14.80 cr. had already been added in the assessment order of Honesty Dealers Pvt Ltd for AY 2009-10 dated 12-03-2015 passed u/s 144/263/143(3)/147 of the Act. This share application money received by the party was re-invested in share capital of the assessee company in the relevant year. Since the source of share capital raised by the assessee during the year has already been taxed, adding the same again will tantamount to double addition. So far as the share capital received of Rs.8.62 cr received from M/s Seaview Agencies Pvt Ltd, it was submitted that this company has raised share capital in FY 2008-09. This share capital was reinvested in the share capital of the assessee in the relevant assessment year. The company been assessed u/s. 143(3)/147 of the I.T. Act for assessment years 2011-12, 2012-13 and 2014-15. It was submitted that for assessment year 2012-13, there was information from Investigation Wing regarding unaccounted income of Rs.20,00,000/- and accordingly this amount was added to the total income. Perusal of the assessment orders for this year clearly shows that A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flow been prepared by the Assessing Officer to substantiate the same and the addition u/s 68 of the Act was made purely on the basis of surmises and conjectures. He further submitted that both the share applicant companies, are group companies which is evident from the audited books of accounts and in subsequent years also, these companies had made investments in the share capital of the assessee company. It was further submitted that the assessee had declared revenue of Rs.1,36,14,94,727/- during the relevant year in its audited accounts and reported income of Rs.1,74,09,338/- in the ITR filed, exhibiting its credibility. Referring to the submissions filed before the ld. CIT(A) as well as the finding of the ld. CIT(A), it was submitted that the alleged investors are being assessed to tax and have also passed scrutiny proceedings and the alleged investors have received share capital and share premium in the preceding years and that fund was available with them and the same was utilised for reinvestment to the equity capital of the assessee company. It was also submitted that merely for non-appearance against the summons issued by the assessing officer, no adverse inference can be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that appellant has not fully cooperated in the assessment proceedings is not correct. Further, appellant has also submitted the certified copy of the details submitted by M/s. Honesty Dealers Pvt. Ltd. and M/s. Seaview Agencies Pvt. Ltd. in the office of the Ld. Assessing Officer. Thus, it is apparent that the appellant and the said two shareholders had filed all the details during the assessment proceedings. AO's allegation that the said shareholders did not attend personally may be a matter of debate. Appellant submits that the Directors of the two investing companies had attended during assessment proceedings and as per AO's directions, details were filed in DAK. In any case, AO has not raised issue relating to non attendance of the Directors in the note sheet. Another crucial observation of the Assessing Officer that share capital has been received from outsiders is contrary to the facts. M/s. Honesty Dealers Pvt. Ltd., and M/s. Seaview Agencies Pvt. Ltd. are Group companies and the sister concerns of the assessee company. While questioning the motive of investments made by the said two companies, AO has observed that investment made by them were not justified on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been made in the hands of M/s. Honesty Dealers Pvt. Ltd. for the amount received as share capital, another addition for the same amount cannot be sustained in the hands of the assessee company when the linkages between the two are apparent from records. Now coming to the M/s. Seaview Agencies Pvt. Ltd., it is noticed that this company had also raised huge share capital in AY: 2009-10 and the source of investments in the shares of the assessee company in the current year is the share capital raised by M/s. Seaview Agencies Pvt. Ltd. in AY: 2009-10. Although, there was no scrutiny in its case for AY: 2009-10 but in the subsequent years, i.e., AY: 2011-12 and AY: 2012- 13, assessment proceedings were reopened on the basis of information received from the Investigation Wing and orders w/s. 147 read with section 143(3) have been passed on 21.12.2018 and 11.12.2018 respectively for assessment year 2011-12 and assessment year 2012-13. In the assessment year 2011-12 information was received from the Investigation Wing regarding unaccounted income of Rs. 3,00,000/- received by M/s. Seaview Agencies Pvt. Ltd. and accordingly addition of this amount was made by treating the same as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, during the year under consideration some of the funds have been received backed by Honesty Dealers Pvt. Ltd., and has been utilised for investing in the equity share capital of the assessee company. These details have gone uncontroverted at the end of the revenue authorities and it remains an admitted fact that the source of the source stands proved with the details filed before us and, therefore, making an addition again in the hands of the assessee would tantamount to double addition and, therefore, the addition in the year under consideration is not warranted and the ld. CIT(A) has rightly deleted the same. 9. We find support from the decisions of the ITAT, Kolkata in the case of M/s Happy Structure Pvt Ltd (ITA 1977/Kol/2016) wherein on similar facts it was held that:- Applying the proposition of law laid down in the above referred cases to the facts of this case and keeping in view the fact for the share applicant company have been assessed to tax u/s 143 (3) of the Act and the source of money in question was brought to tax in their hands, we uphold the order of the ld. CIT(A) that no additions can be made in the case of the assessee company 10. The ld. CIT(A) duly peruse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing paragraphs, it has been established again and again that identity and creditworthiness of both the share applicant companies have been established beyond doubt. 12. Our view is fortified by the decision of this Bench of the Tribunal in the case of ITO vs. Dharmvir Merchandise (P.) Ltd. reported in [2023] 149 taxamann.com 221 (Kolkata- Trib.), wherein dealing with the similar issue, this Tribunal considering the facts of the case and judicial precedents deleted the addition u/s 68 of the Act on similar grounds observing as follows:- 9. We have heard rival contentions and perused the records placed before us. Addition u/s 68 of the Act for unexplained share capital and share premium of Rs. 1.40 Cr is in challenge before us. We notice that the assessee company issued fresh share capital during the year of face value of Rs. 10/- and premium of Rs. 240/- per share and received 1.40 Cr from following three companies: Sr No Name of the Share Applicant Amount Received 1 Everlike Projects Pvt Ltd 50,00,000/- 2 Mahashakti Vintrade Pvt Ltd 50,00,000/- 3 Satyam Plywood Merchandise Pvt Ltd 40,00,000/- TOTAL 1,40,00,000/- 10. After the case being selected for scrutiny, ld. AO asked the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d complete and detailed enquiry has been conducted by ld. AO. In the assessment order, ld. AO has not brought any adverse material which could have remotely suggested that the unaccounted income of the assessee was brought in disguise of the share capital. Therefore, the decision of Bisakha Sales Pvt. Ltd. (supra) is not applicable on the present case. 14. So far as merits of the case are concerned, we find that the assessee has successfully discharged its onus by filing complete details of the share subscriber companies including their bank statement, audited financial statements, Form no. 18 in support of registered office address, source and utilization of funds, copies of ITRs, copies of all relevant company returns. Even the photo identity, address proof of the Directors of the assessee company and the subscriber companies have been filed directly by these Directors to ld. AO. On the basis of these facts undoubtedly the assessee has successfully discharged the onus which lay upon it by producing all the evidences for proving the identity and creditworthiness of the investors and the genuineness of the transaction. Merely non-appearance of the Directors cannot be a basis for tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plying the propositions laid down in these case laws to the facts of this case, we are inclined to allow the appeal of the assessee. 35. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore we delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged share capital and share premium. Ld. AO did not find any fault or any shortcoming in the compliances made by the appellant company. It is also an evident fact that the only basis for making the alleged addition by ld. AO was non-appearance of the Directors of the share allotted company but as claimed by ld. Counsel for the assessee, the time allowed for compliance was too short and the assessee filed all the confirmations in respect of such share subscribers which were not doubted by ld. AO. Facts are brought to our notice out of the eight shareholders five have been assessed for the same assessment year u/s 143(3) of the Act and complete details of their financials and bank transactions have been examined by ld. AO in the scrutiny proceedings. This is also an admitted fact that each of the shareholders were duly served notice u/s 133(6) of the Act which is sufficient to prove the identity of such shareholders. As far as the genuineness of the transaction is concerned, the same have taken place through banking channel which is traceable from the origin to the destination of such payments and further confirmed from the documents furnished before us. All these transactions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact. It 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 HIGH COURT OF M.P. BENCH AT INDORE Pg. No.--58-- (ITA No.112/2018 Other connected matters) 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 A.O 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in [2022] 448 ITR 332 (Cal) wherein Hon ble Court 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 Incometax 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 has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referrin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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