9911796707
TMI Blog2023 (12) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... - "1. That on the facts and circumstances of the case the Ld. CIT(A) erred to delete the addition of Rs. 33,19,33,000/- added by the AO as undisclosed income in the form of share capital and share premium. 2. That on the facts and circumstances of the case the Ld. CIT(A) erred to delete the addition of Rs. 3,00,000/- added by the AO as unexplained cash credit. 3. That on the facts and circumstances of the case, the Ld. CIT(A) erred to delete the addition of Rs. 29,00,000/- added by the AO as bogus income of the assessee. 4. That on the facts and circumstances of the case the Ld. CIT(A) erred to delete the addition of Rs. 16,75,665/- added by the AO as an unexplained expenditure in the form of commission paid to the broker. 5. That the department craves leave to add, alter or modify any grounds of appeal in the course of appellate proceedings." 4. Facts in brief are that the assessee is a limited company and is a Nonbanking Financial Company (NBFC) engaged in the business of investment and trading in shares. Income of Rs. 7,474/- declared in the income tax return for Assessment Year 2011-12 on 25/09/2011. Consequent to the search operation carried out at Chandak Group of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee preferred appeal before the ld. CIT(A) and filed complete details about the identity and creditworthiness of the share applicants and genuineness of the transactions. Various additional evidence were also filed to which remand report was called for. In the remand report, it has been categorically mentioned and observed by the ld. CIT(A) that the assessee has filed complete details including financial statements confirmation of accounts, proof of the directors. Even the directors of the share applicant companies appeared before the Assessing Officer. But since the other share applicants could not be brought by the revenue authorities for cross-objection, the ld. CIT(A) took note of the fact that the assessee has discharged the burden of proof casted on it. Creditworthiness of the share applicants were also examined. Consequently, being satisfied with the explanation of the assessee, the ld. CIT(A) deleted all the additions made u/s 68 of the Act as well as the addition for unexplained expenditure u/s 69C of the Act. 6. Aggrieved, the revenue is now in appeal before this Tribunal. 7. The ld. CIT D/R submitted that the ld. Assessing Officer has examined the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. Even the ld. Assessing Officer in the first remand report confirmed that the share investment companies were very much present at the address provided and there was compliance. Reliance placed on the detailed finding of fact by the ld. CIT(A) and various decisions referred and relied by the ld. CIT(A). 9. We have heard rival contentions and perused the material placed before us and carefully gone through the decisions referred and relied by both the sides. 10. Ground No. 1, is against the finding of ld. CIT(A) deleting the addition u/s 68 of the Act made for alleged unexplained cash credit in the form of share capital and share premium amounting to Rs. 33,19,33,000/-. During the year, the assessee company received share capital including share premium of Rs. 33,19,33,000/- from 14 share subscribers who are body corporate entities:- Name of share applicant Application Money Aadish Commercial Pvt. Ltd. 2,23,00,000 Anandsagar Tradelink Pvt. Ltd. 1,14,00,000 Arpit Vanijya Pvt. Ltd. 5,29,00,000 AvanilIfrahome Pvt. Ltd. 2,67,00,000 Cooper Commercial Pvt. Ltd. 4,06,10,000 Jugantar Commercial Pvt. Ltd. 5,00,000 Jyotika Commercial Pvt. Ltd. 1,77,23,000 Natural Busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f issues and we find it necessary to go through the relevant finding of the ld. CIT(A):- "Ground 3 In this ground the appellant has agitated against the action of the AO in treating the share capital raised by the assessee company including premium money from 14 investing companies, cumulatively amounting to Rs. 33,19,33,000/- on issue of equity shares to these 14 companies, as bogus and adding the same under sec. 68 of the Act. Facts are that during the year the appellant company raised share capital including share premium of Rs. 33,19,33,000/- from 14 share subscribers who are body corporate entities. Name of the share applicant Application Money Aadish Commercial Pvt. Ltd. 2,23,00,000 Anandsagar Tradelink Pvt. Ltd. 1,14,00,000 Arpit Vanijya Pvt. Ltd. 5,29,00,000 AvaniInfrahome Pvt. Ltd. 2,67,00,000 Cooper Commercial Pvt. Ltd 4,06,10,000 Jugantar Commercial P. Ltd 5,00,000 Jyotika Commercial Pvt. Ltd. 1,77,23,000 Natural Business Pvt. Ltd. 3,81,00,000 Parivartan Commercial Pvt. Ltd. 3,62,50,000 Riteshwari Trading &Investment Pvt. Ltd. 99,00,000 Ritz Agencies Pvt. Ltd. 96,00,000 Shreyas Distributors Pvt. Ltd. 89,00,000 Uphar Trade Enterprises Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 131 could not be served and the Departmental Inspector being unable to trace the said share allottee companies, placed a question mark upon the entire transaction, including the identity and creditworthiness of share applicant companies along with the genuineness of the transaction, and found that the appellant companies did not have sufficient income to make the impugned investments in share capital/premium. In addition, the AO has also relied upon some statements given by certain alleged entry operators in some separate proceedings, in March 2015, that they had been providing accommodation entries against a fee through certain Shell companies controlled by them through dummy directors. The AO, finding that some of the share capital/premium received by the appellant came after being routed through some of these shell companies or that these shell companies appeared in the fund trail of some of the share capital/premium that led finally to the appellant, came to the conclusion that the share capital that had been received by the appellant during the year, that had these shell companies appearing in the fund trail leading to the appellant, was bogus. The AO has also argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.09.2019, Returned back 26.08.2019 Returned back 9, Lal Bazar Street, Block A, Kolkata- 700001 17.07.2019 Returned back All the Summons u/s. 131 of the I.T. Act, 1961, issued to the above entry operators through registered post to the addresses available, returned un-served. Further, the said Summons u/s.131 of the Act were issued through the office notice server who also could not serve the notices on the given addresses. Finally, the Inspector attached to the office of the AO was deputed by him to serve the notices but he also failed as he also could not trace out the entry operators. The director of the assessee company, however, appeared before the AO, but as the entry operators were not available and could not be produced by the AO, the process of cross-examination could not be made. At this point, in his remand report, the AO has made an interesting counter-argument, viz., that even though he admits to his failure to produce the said entry operators/dummy directors, he (the AO) has pointed out that even the appellant had failed to produce the directors of the share applicant companies. Without prejudice to the discussions and proceedings that will follow, the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing any evidentiary value that may be associated with these statements. It must not be forgotten that the appellant was searched and no evidence was found that would go towards proving that the impugned transactions were bogus or that the appellant had injected his own undeclared income in the form of share capital/premium. It must be kept in mind that a Search upon the appellant was conducted on 02.11.2017. The statement of the alleged entry operators, Sri Ashok Jha, and Manoj Kumar, were recorded respectively on 02.03.2015 and 30.01.2014 respectively; while the statement of another alleged entry operator, Sanjib Bhattacharya was recorded on 01.11.2017. In the same context, it is also pertinent to note that the impugned transactions have, in almost every case, taken place in February, March 2011. Now, if the statements of the said entry operators are proposed to be used in connection with the impugned transactions, then at least some form of a nexus or link has to be shown to exist, of these statements with the impugned transactions which had been completed several years before the said statements were given. No such link or nexus has been shown to exist. The said statements unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned transactions in relation to the particular company present on those premises. These documents have already been elaborately listed earlier in this order, and included the PAN Card, IT acknowledgement, audited balance sheets and so on. It was also pointed out in the 1st remand report that the inspector did not find the Directors/Principal officers of the share applicant companies on the premises at the time of his visit. As per the 1st Remand Report, the person present on the premises also did not know of their whereabouts nor much about the operations of the company. This last assertion of the Remand Report has been vehemently contested by the appellant. The AR of the appellant company has pointed out that the inspector report annexed to the remand report clearly indicates that the inspector during his visit to the office premises of the share applicants had made no such queries from the employees who were present on the premises. He has submitted that this incorrect assertion, that the employee did not know either about the business of the company or the whereabouts of the Directors, was being added by the AO of his own accord, without any factual basis. It may be stated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any doubt. The inspector's report dated 12-08-2019 which was enclosed as Annexure to the remand report, stated that all the share applicant companies were found at the new address given by the appellant and the respective employees had also submitted documentary evidences like bank statements, copy of the ITR Acknowledgement, copy of the PAN, Copy of the Annual Accounts for the AY 2011-12, etc. As per the appellant, the aforesaid documents proved the genuineness of the transaction beyond any doubt. The appellant has explained that the observations of the inspector regarding there being mostly only one employee at the premises at the new addresses supplied by the appellant,as well as the fact that there was only limited furniture and that the sign boards appeared newly paid, were observations that had not been corroborated and were in any case subjective as well as having no bearing upon the identities of the share applicants as present upon the said addresses. The appellant has reiterated that the basic issue involved was whether the said transactions were bonafide transactions or not, and whether the identity and creditworthiness of the share applicants as well as the genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 131. The AR said that the appellant had to personally explain to each and every such Director the significance and importance of making a personal appearance before the AO and to convince them that this was a legal requirement and in any case, was essential in order to go to the root of the impugned transaction and to prove it to be bona fide. The appellant also prayed that if an opportunity was provided to the appellant it could produce the share applicants on a random basis to substantiate its claim. Considering the request of the appellant and the fact that it is important to provide substantive justice to an appellant who faces the prospect of paying a huge demand, in order to provide adequate opportunity and natural justice to the appellant to establish all the ingredients of the impugned transactions, the matter was once again remanded on 05.05.2022 to the AO for conducting enquiries by examining the directors of share applicant companies u/s 131 of the Act. Since the matter, at this juncture, was being examined in detail, it was considered prudent, lawful and in the interests of proper investigation of the impugned transactions, to make a thorough examination of the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued to the appellant, the director of the appellant company, Shri Pawan Kumar Chandak, appeared and produced the directors of the allottee companies along with requisite documents before the AO on various dates. The details of the enquiries conducted by the AO in remand are as listed below: SL No Name of Share applicants Address PAN Remark 1 ANAND SAGAR TRADELINK PVT LTD 10, MULLICK STREET, KOLKATA- 700007 AAHCA8288N Director appeared before the under signed on 19.05.2022 along with the authorization from current director and his statements was recorded u/s 131 and submitted copy of Share Application form, Share Allotment Advice, Bank Statement is enclosed. The director also filed copy of letter dated 22.11.2019 that in compliance to summons issued u/s 131 earlier. This letter included copy of Source of fund, Share Allotment Advice, Bank Statement, IT Acknowledgement and Audited Financial Statement etc. 2 ARPIT VANIJYA PVT LTD 6A, SAKLAT PLACE, 4TH FLOOR, KOLKATA- 700072 AAICA0722A Director appeared before the under signed on 12.05.2022 and his statements u/s 131 was recorded and submitted copy of Share Application form and IT Acknowledgement for AY 2011-12 is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments was recorded u/s 131 and submitted copy of Share Application form, Share Allotment Advice, Bank Statement is enclosed. The director also filed copy of letter dated 05.09.2019 that in compliance to summons issued u/s 131 earlier. This letter included copy of PAN Card, NBFC Certificate, Source of fund, Bank Statement, IT Acknowledgement etc. 7 RITZ AGENCIES PVT LTD 202, JESSORE ROAD, 3RD FLOOR, BLOCK-D, KOLKATA- 700089 AAECR5447F Director appeared before the under signed on 11.05.2022 and his statements u/s 131 was recorded and submitted copy of Share Application form, Share Application receipt, Bank Statement is enclosed. The director also filed copy of letter dated 16.09.2019 that in compliance to summons issued u/s 131 earlier. This letter included copy of PAN Card, Share Allotment Advice, Source of fund, Bank Statement, IT Acknowledgement. And Audited Financial Statement etc. 8 SHREYAS DISTRIBUTORS PVT LTD 18/1, MAHARSHI DEVENDRA ROAD, 3RD FLOOR, KOLKATA-700007 AAPCS2099R Director appeared before the under signed on 17.05.2022 and his statements u/s 131 was recorded and submitted copy of IT Acknowledgement, Share Application form, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RS PVT LTD 11,16,500.00 20,22,83,861.00 13,118.00 13,640.00 522.00 4 YUGVERI MARKETING PVT LTD 1,58,84,500.00 12,60,26,097.00 4,98,058.00 4,99,218.00 1,160.00 From the above chart it is depicted that the share premium paid by all the share applicants companies are not justified and therefore although the share capital may be treated as explained but the share premium charged by the assessee seems to be unjustified." It is of particular note, as emerging from the findings of the above report as well as the previous remand report, that despite the fact that during assessment, notices u/s 131 were issued to directors of share subscribing companies on the addresses as per MCA database, in remand the appellant provided the correct updated addresses, on which summons were served by post. The reason why the conduct of this enquiry, not only by the production of documents through the issue of summons u/s 131 of the Act, but also through the physical production /examination of the concerned Directors, was considered essential is that it is difficult for a reasonable mind to accept that any person (including a company) who has invested in another company, moneys running into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises of the share applicant companies turned out to be physically present at the said premises. Though, as already stated earlier, the AO has expressed certain suspicions regarding the nature of the premises where the offices of the share applicant companies were situated. Coming to the findings of the remand report, it is found that the directors of the majority the share applicant companies appeared before the AO u/s 131 and submitted their replies. In the case of all the share applicants, replies were filed. The AO examined these applicants, and recorded their statements. It is noted in the remand report that since this is a very old case, in the case of a few of share applicant companies, the directors had changed over the years; in such cases, the earlier directors who had been present at the time of the impugned transaction, appeared before the AO with authorisations from the current directors. The AO, it is noted, has expressed no dissatisfaction with the results of the enquiries or the depositions made before him. He, after conducting these enquires, was ultimately satisfied about the genuineness of share capital subscribed by these companies in terms of the ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed various documents, as listed below. Sl No. Name of Shareholders Documents submitted Paper Book Page Nos. 1 M/s. Aadish Commercial Pvt. Ltd. Order u/s 143(3) for AY 2011-12 1-5 Share Application Form 6-8 PAN Card 9 Confirmation & source of funds 10 ITR Acknowledgement 11 Audited Financial Statement 12-24 List of Investments 25 Bank statement 26-27 Reply to summons u/s 131 28-29 2 M/s. Anandsagar Tradelink Pvt. Ltd. Allotment advice 30 Share Application Form 31 Confirmation & source of funds 32 ITR Acknowledgement 33, 49 Audited Financial Statement 34-46 List of Investments 47 Bank Statement 48, 50 3 M/s. Arpit Vanijya Pvt. Ltd. Share Application Form 51-54, 71 Confirmation & source of funds 55 ITR Acknowledgements 56 Audited Financial Statement 57-67 Bank Statement 68-70 Allotment Advice 72 Reply to summons u/s 131 73-74 4 M/s. Avani Infrahome Pvt. Ltd. PAN Card 75 Share application Form 76 Confirmation & source of funds 77 Allotment Advice 78 Assessment Order for AY 2011-12 79-82 ITR Acknowledgements 83 Audited Financial Statement 84-94 Bank Statement 95 5 M/s. Cooper Commercial Pvt. Ltd Share A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 131 399-400 13 Uphar Trade Enterprises Pvt. Ltd PAN Card 412 Share Application Form 413-415 Allotment Advice 416 Assessment Order for AY 2011-12 417-422 ITR Acknowledgements 423, 441, 109 Audited Financial Statement 424-434 List of Investments 435 Relevant Bank Statement 436, 438, 442 Confirmation & source of funds 437, 439-440 14 Yugveri Marketing Pvt. Ltd. Share Application Form 443-450, 469-476 Confirmation & source of funds 451 ITR Acknowledgements 452, 495, 497, 499, 501 PAN Card 453, 492-493, 502 Audited Financial Statement 454-467 Certificate of Registration 468 Relevant Bank Statement 477-486, 494, 496, 498, 500, 507 Assessment Order for AY 2011-12 487-491 Reply to summons u/s 131 503 Copy of summons 504-505 Allotment Advice 506 In making investigations in relation to authenticity of share capital/premium, it is imperative to keep the provisions of section 68 in mind. The initial onus for proving the identity and creditworthiness of the share applicants as well as the genuineness of the transaction lies upon the assessee who is claiming that such an investment was received by him. This can be done through the production of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out any deficiency. It is found and accepted by the AO that the entire transactions have been through banking channels only, and there are no cash deposits reported in any of the bank statements. The identities of all the parties involved, including the appellant and the investor companies and their directors have undoubtedly been proved. The AO has accepted the appearance of ten directors out of total of fourteen share applicants as being reasonable. This is on account of the fact that almost twelve years have passed since the impugned transactions and this passage of time, necessarily and undeniably, would pose problems in producing the directors. In any case, a majority of the directors undeniably appeared and deposed before the AO in remand. This process, which amounted to much more than a test or sample check, was accepted by the AO in remand. In fact, based upon the above, the AO has accepted the share capital as being genuine. His only objection is that the investing companies did not have the financial wherewithal to invest in the high premium that was claimed to have been paid by them. The basis for this objection has been that in his remand report, he has analysed the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt Numbers, bank statements, etc. to establish the identities of the four share applicants. The copies of the bank statements of the share subscribers wherein the transactions are reflected as well as the fact that they are assessed to income tax, alongwith copies of their final accounts wherein investments made by them in the appellant company are not only shown but constitute a small portion of their total investments, establish the creditworthiness of the parties concerned. The incomes of the four shareholders for the year under appeal may have been meagre, as pointed out by the Assessing Officer, but creditworthiness of a party is not gauged merely from income of a particular year. The balance sheets of the four shareholders companies reveal that they had ample share capital to invest in the appellant company. In fact, the Income Tax scrutiny assessments of all four share subscribers were completed in March, 2015, a few days after the finalization of the impugned assessment order and in three of the four cases, the returns filed by them have been accepted, thereby implying that the Assessing Officer of those three companies have accepted the fact of their investment in the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case in the light of documentary evidences on record and the decisions referred to above, we do not find any infirmity in the Order of the Ld. CIT(A) in deleting the addition. Accordingly, the appeal of the Department is dismissed." Applying the above discussed propositions of law in this regard, it is found that the creditworthiness of the companies are to be examined with respect to net worth of these companies, which would either justify or not justify the share applicant company's capacity to pay the premium claimed to have been paid by it. Depending upon only one criterion, that of low net profits, could lead to erroneous conclusions, based on inadequate appraisal of facts. In the above context, it must first be noted that the AO himself has accepted in his order that the share applicants in this case are investment companies, whose basic and primary object is to make investments of the funds available with them,. The appellant has submitted a table of the net worth of the investing companies, derived from the audited balance sheets of these companies. These balance sheets had been duly produced before the AO and in any case are available on the MCA site. This table ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Tribunal of Kolkata has stated on this subject in the decision of the Hon'ble ITAT Kolkata in the case of ITO vs. Goodpoint Commodeal (P) Ltd in ITA No. 1204/Kol/2015 for AY 2012- 13, order dated 07.06.2019: "6. Thus, we note that we find all the four share subscribers have been assessed by the Department and that too u/s. 143(3) of the Act and the genuineness of the transactions, cannot be disputed since the payments have been made through banking channel and we note that there cannot be any dispute in respect to creditworthiness of the share subscribing companies since they had sufficient net worth/own fund in its kitty to invest in the assessee company. It would be worthwhile to take note of the observation by Hon'ble Justice A. K. Sikri while delivering the judgment in CIT Vs. Mayawati when His Lordship then was in Hon'ble Delhi High court reported in 338 ITR 563 (Del) observed that "The capacity of any person does not mean how they earn monthly or annually but the term capacity is a wide term and that can be pursued by how wealthy he is. All the formalities, as per the law are made by the assessee and donors as well." Therefore, the Hon'ble High Court wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuineness of the transaction and the mode of the transaction. The AO has nowhere made a comment regarding the fact that all the share applicants explained the source of funds in their respective replies filed in response to summon u/s 131 of the Act and also by appearing personally before the AO. The facts furnished on record by the share applicants, in the context of the aforesaid discussions, clearly bring on record their capacity for making such payments and accordingly the criteria of their creditworthiness is also explained. As already discussed above that it is uncontroverted that the share applicants in their respective replies furnished copies of their income tax return acknowledgements evidencing filing of income tax return, copies of their audited accounts including Balance Sheet wherein such investments, made by each of them by virtue of the subscription of share capital issued by the appellant, are duly reflected and also copies of their bank statements for the relevant period from which such subscription monies were paid by them respectively and copy of the allotment advise received by them from the appellant in respect of shares allotted to them. Return of allotmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emain uncorroborated suspicions and cannot be relied upon to throw away all the other evidence admittedly present before the AO. In any case, I do not find that the AO has followed up upon any of these observations and brought on record any further corroboration in their respect even when admittedly, he had examined the Directors of the share applicant companies. It is further observed that the net worth of each of the share applicants as disclosed in their Balance Sheets, far exceeded the amount of investments (share application as well as premium) made by them in the shares of the appellant company. These discussions clearly prove the creditworthiness of these investing companies. The aforesaid facts, duly supported by concrete evidence, establish the identity of the share applicants, their capacity, source of funds, as well as the genuineness of the transactions in relation to the share capital including the share premium subscribed to by each of them. But before ascertaining if the burden which lay on the appellant, in relation to sec 68 of the Act, has been duly discharged by it, one aspect of this case has also to be considered. This relates to the appellant's contention th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act which was introduced with effect from 1st April, 2013 would apply in the facts of the present case even for A.Y. 2008-09. The basis of the above submission was that the de hors the proviso also the requirements as set out therein would have to be satisfied. HELD by the High Court dismissing the appeal: "(i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced " for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immateria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem, in his remand report. The appellant, has discussed this fund trail in his submissions. In this connection, the appellant has stated that the only thing that can be seen from the alleged fund trail is that it gives merely a list of entities from whom money has been flowing through banking channels. This is. not prohibited by Income Tax law. He has stated that nowhere has the AO shown, nor is it apparent from this fund trail that it was the same money that had been flowing from entity to entity until it reached the appellant. It is stated that these entities, as shown in the said finds trails, are independent entities with no business connection with the appellant. The AO has also at no point of time been able to show any form of connection between the appellant and these entities. The appellant received money on account of share/premium application only from those companies that were genuine companies and in the case of which, 10 out of 14 had been scrutinised u/s 143(3)/147 of the Act in the same assessment year where the no adverse questions had been raised in respect of genuineness of the funds in the hands of these companies. The AR of the appellant has submitted an analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o other entities and surprisingly this Rs. 22,00,000/- has after flowing to 8 layers become Rs. 1,10,00,000/-. The assessee has said that he has not understood as to how the funds have been alleged to be assessee's own funds when the assessee has no transactions with these entities and the assessee has received Rs. 1,10,00,000/- as against Rs. 22,00,000/- reflected in layer 9. How this Rs. 22,00,000/- becomes Rs. 1,10,00,000/- is not explained. There can be no probability that assessee has provided funds to all the entities separately into their bank accounts and then finally got it into his bank account when there is no nexus established. 4.) Similarly, the AR states, that in all other fund flows same inconsistencies are there. Further, it can also be seen that the amounts mentioned at different layers are different and hence the proposition that these are assessee's own fund routed through these alleged jamakharchi companies has remained unsubstantiated and based only on suspicion and cannot be relied upon. 5.) At page 163, 3rd instance of layering of funds are mentioned. On perusal of the same, it is noticed that at layer 9 various amounts are mentioned along with Bank name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant could have introduced its own unaccounted money so it could be brought back to itself after passing through several layers. I have also examined the other instances of discrepancies pointed out by the appellant in the said find trail. I have not found any form of elaboration from the AO, who undisputedly had been in possession of the said fund trail from the beginning of assessment proceedings of these discrepancies despite the opportunity to do so having been afforded to the AO during assessment as well as during the two remand proceedings. My predecessor in office had, in fact, specifically asked the AO, during first remand proceedings, to elaborate on the fund trail and point out where cash had been introduced. No cohesive explanation has admittedly ben provided or even attempted in remand, in response to my predecessor's queries, to form a tangible link between the fund trails and the proposition that it was the appellant's own money that was being routed back to him thorough several layers. There is also no mention of introduction of cash.It must be kept in mind that this fund trail is evidence sought to be adduced by the AO and therefore the onus for establishing its b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal appearance. This objection, it has already been noted earlier in this order, has been duly addressed during the remand stage when not only the director of the appellant company but also the directors of the investor companies made personal appearances and depositions before the AO. At this stage the directors of the share applicant companies were examined with reference to the documentary evidences furnished by the appellant as well as by taking into consideration the documents submitted by the directors of the investing companies. Based upon these investigations and enquiries the AO has duly accepted the share capital amount received from the share applicants as being genuine, but has treated only the share premium amount as being unjustified. This latter fact brings us to the second objection of the AO. The second objection of the AO during assessment has been reiterated by him in remand. This is that the financials of the investing companies did not show that they were capable of paying such high amounts in premiums. What this implies is that while the AO accepts in remand that the investing companies could be considered creditworthy if only the payment of share capital w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er from sale of shares amounting to Rs. 90,01,687/- and during the Financial Year 2009-10 the turnover was Rs. 72,63,821/-. It was also carrying inventories in the form of equity shares amounting to Rs. 33,03,16,000/- as on 31.03.2011 and stock-in-trade amounting to Rs. 90,92,277/- as on 31.03.2010. The growth in the trading in shares of the appellant company was apparent from the fact that in the immediately preceding AY, the turnover had been Rs 72,63,821/-, while in this AY the turnover had shown a growth of 24%. This was a phenomenal reported growth especially in view of the fact that in the immediately preceding financial year ending 31.3.2009, there was virtually no turnover from sales of shares for the appellant company. It transpires that the appellant company was also carrying impressive inventories of quoted equity shares for a company in such nascent stages of its operations. It had inventories of Rs. 33,03,16,000/- as on 31.3.2011. The appellant company was obviously showing good returns and was showing good prospects for its investors. It was also a very fast growing company in terms of profits and therefore the prospects for any investor would be good on a return on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though it may fairly be stated that the AO has not tried to take this view either in his assessment order or in the remand report. In conclusion, I find that the AO has not doubted the identities, and creditworthiness, nor the genuineness of the transactions. of the same set of share subscribers from whom the appellant accepted share capital, but has doubted the payment of high share premium. In my considered view, as per the discussions above, this is not permissible in law. A transaction cannot be partly accepted and partly held to be unexplained based on the results of the same enquiries conducted by the AO in respect of same entities who have not only furnished documentary evidences but also appeared personally before the AO who examined them u/s 131 by recording their statements. This could only have been done if the AO, either in assessment or in remand would have brought on record that while the investing companies had enough financial wherewithal to invest in the share capital, they did not have the capacity to pay the premium. This has not been done by the AO at any stage and is in any case, as discussed above, not borne out by the net worths and investing capacities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned unserved with the remarks "no such company"; the inspector sent to the addresses for verification confirmed this fact. In view of this, the assessee was asked to produce the principal officers of the companies who had subscribed to the shares along with the relevant details. In response, the assessee filed a letter at the "dak" counter of the office of the AO stating that all the notices of the annual general meeting and call notices for shares were being sent to the same addresses of the share subscribers under certificate of posting and they have not come back unserved, implying that the share subscribers did exist at the addresses given to the AO. It was also submitted that the capital was subscribed through account payee cheques with valid share application forms, copies of the memorandum of association and board resolutions. It was pointed out that the registered offices of the companies could be found in the website www.mca.gov.in. and the AO may visit the site for further verification. These submissions were not accepted by the AO as constituting satisfactory explanation of the nature and source of the monies as required by Section 68 of the Act. He held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which it exists between a debtor and creditor. The share- subscribers in the present case have each invested substantial amounts in the assessee's shares, as the chart at pages 2-3 of the assessment order would show. Most of them, barring two or three, are themselves private limited companies. It cannot therefore be contended, as was contended before us on behalf of the assessee, that if the summons issued u/s. 131 to the subscribing companies at the addresses furnished by the assessee returned unserved, the AO is duty-bound to enforce their attendance with all the powers vested in him. The unreasonableness of such a general proposition is writ large in the face of the contention. The assessee-company received the share monies; it even says that the communications sent by it at the addresses did not return unserved, yet when the AO requested it - that too only after trying to serve the summons unsuccessfully - to produce the principal officer of the subscribing companies, the assessee developed cold feet and said it cannot help if those companies did not appear and that it was for the assessing officer to enforce their attendance. It needs to be remembered that the AO did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterially different from the instant case. The AO has relied upon CIT Vs NR Portfolio of the Hon'ble Delhi High Court to buttress his claim that if an assessee does not produce evidence or tries to avoid appearance before the assessing officer then an adverse view would be taken against such an assessee. But this is not true in the present case where all compliances were made along with personal appearances etc. In view of the above discussions and in the present facts and circumstances of this case, I cannot lend legal support to the impugned additions made by invoking the provisions of sec. 68 by the AO in the facts and circumstances of this case and accordingly, direct that these additions be deleted. Thus, this ground of appeal is allowed." 13. After going through these detailed finding and examining the same in the light of the documents filed before us, we notice that all the 14 shareholder are body corporates and annual returns have been regularly filed on the Ministry of Corporate Affairs portal. All the share applicant companies are regularly assessed to tax and even passed through scrutiny proceedings also. From perusal of the financial statements of the share subscrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital/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 Officer 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 name-lenders. 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." 13.2. The Hon'ble Supreme Court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted above, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.2004-05 Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y.2005-06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Lne 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 Merchants Private Limited, 4) Winsom Vanijya Private Limited were also passed u/s.143(3) where additions u/s 68 & u/s.14A of the Act were made. Therefore, the entire capital of all the above mentioned share holders had been added in its hands u/s 68 of the I.T. Act Thus, once an amount is already taxed, whatever investment is being made out of it in the assessee company can be treated as explained and the Same cannot be taxed again. Further, it is apparent from the records that the notices u/s.133 (6) issued to the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 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 "Steelex India (P) Ltd vs. ITO, Ward-3(2), Kolkata"I.T.A. No.2666/Kol/2019 decided vide order dated 09.09. 2022. 7. Further, a perusal of the Assessment order would reveal that the AO has duly acknowledged the receipt of the relevant documents/evidences not only from the assessee, but also from the subscriber companies. However, he insisted for personal appearance of the directors of the subscriber companies without even going through and discussing about the discrepancies, if any, in the documents furnished by the assessee as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this case, has not only duly examined the facts and explanation as furnished by the assessee but also has given a categorical finding that the identity and creditworthiness of the share subscribers and genuineness of the transaction stood established. 9. The ld. DR could not point out any distinct facts warranting our interference in the order of the CIT(A). 10. In view of the above, we accordingly upheld the order of the CIT(A). The appeal of the revenue is, therefore, dismissed." 14(b). Our views are further fortified by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly set aside by the Commissioner (Appeals). The Tribunal had rightly deleted the additions under section 68." 15. Respectfully following the above decisions, which in our view are squarely applicable on the facts of the instant case, we find that the assessee has successful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be carrying on some form of business or the other, there was no trace of these parties either before or after the impugned transactions. The appellant did not offer any form of an explanation before the AO resulting in the making of addition in the hands of the appellant as his own unaccounted income. Now, in appeal, the appellant has explained that the said amount was received by the appellant as consideration against the sale of investments already with the appellant, in the shares of one Torrent Commercial Pvt Ltd. He has stated that the AO completely misunderstood the transaction and even the person from whom this amount was received. He has stated that this amount had not been received from any Tuhin Bannerjee at all, but from one M/S Surya Commotrade. With regard to the Rs. 3,00,000/- received from Surya Commotrade Pvt. Ltd., 32, Ezra Street, Kolkata- 700001 it is submitted that the appellant had sold shares of Torrent Commercial Pvt. Ltd. held as investments to Surya Commotrade Pvt. Ltd. These investments were made in earlier years and were accepted as genuine investments. He has stated that in fact the appellant had applied for 25000 shares of Torrent Commercial Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. These were not doubted or considered to be not-genuine or bogus. He has stated that the sale bills along with Bank statement etc were furnished before the AO in course of assessment proceedings. However, the AO ignored this fact and simply relying upon the fact that the notice issued to Eureka Suppliers Pvt. Ltd. could not be served by the Inspector, made the impugned addition. The appellant has pointed out that although the AO has admitted that Eureka Suppliers Pvt. Ltd. has filed return of income for the relevant assessment year but still he did not conduct independent enquiries within the Income Tax Department and concluded that sum of Rs. 29,00,000/- received by the appellant from Eureka Suppliers Pvt. Ltd. was unexplained in nature. The matter was also sent in remand and duly examined by the AO. In this connection, the AO, in his remand report, has made the following observations: "In respect of other creditors of Rs. 3,00,000/ and Rs. 29,00,000/- respectively the assessee explained that Rs. 3,00,000/- was received from Surya Commotrade Private Limited and Rs. 29,00,000/- was received from Eureka Suppliers Private Limited on account of liquidation of shares held as inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which underline the proposition that if the investment in shares were made in an earlier year, for which documents in support were duly furnished, then merely because a notice u/s 131 could not be served upon the person who was claimed to have purchased the said shares, the sale of such shares could not be doubted and added back as the appellant's own income u/s 68 of the Act. In Brij Resources Pvt Ltd, New Delhi vs Ito Ward - 5(2), New Delhi, ITA No.8835/Del/2019, Assessment Year: 2010-11 in an order pronounced on 7th July, 2021, the Hon'ble Delhi Tribunal has, under very similar facts, held the following, "13. So far as the merit of the case is concerned, it is a fact that the assessee, during the impugned assessment year, has sold the shares of M/s Shree Govind Devji Biogenic Pvt. Ltd. to M/s Sunny Cast and Forge Pvt. Ltd. for an amount of ITA No.8835/Del/2019 Rs. 10 lakhs. The assessee has purchased the shares of Shree Govind Devji Biogenic Pvt. Ltd. during the F.Y. 2008-09, relevant to A.Y. 2009-10 and were shown in the balance sheet of the assessee company under the head 'Investments' which is discernable from page 17 of the paper book. I find, the assessee, duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since he has accepted the purchase of shares of two companies? Considering the facts of the case in hand in totality, we do not find any error in the findings of the CIT(A). This ground is also dismissed. [Emphasis supplied] 16. Since the facts of the instant case are identical to the facts of the case decided by the Tribunal in the case of Maurya Udyog Ltd., therefore, respectfully following the decision of the Tribunal in the case of Maurya Udyog Ltd., we uphold the order of the CIT(A) and the ground raised by the Revenue on this issue is dismissed." The Hon'ble Delhi Tribunal, once again, in the case of ACIT Vs Navneet Kumar Surekha [2018] 100 taxman.com 439 (Delhi Trib), has endorsed the above proposition of law, that once purchases of the said shares have been accepted by the Department, and admittedly, the AO has not challenged the books of account of the appellant, then it is difficult to see how the sales could be challenged as being bogus and how could it be held that the consideration received upon sale of such shares could be considered to be the appellant's own money rotated back, through various layers, to him. The facts of the afore-cited case laws are identi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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