AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 18
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....identity, credit worthiness and genuineness of the transaction, the Assessing officer, based on name and address details of the investor companies based out of Kolkata, as provided by the assessee during the course of assessment proceedings, issued a commission u/s 131(1)(d) of IT Act was issued to the DDIT, Unit-3, Kolkata. The DDIT thereafter submitted a report as under:- "A commission u/s 131(1)(d) is received from you in the case of M/s Dhanlaxmi Equipments Private Limited. Summons were issued to the assessee by dak for personal appearance and to verify the identity, genuineness and creditworthiness of the transactions. In response to the summons nobody appeared to prove the identity or genuineness of the shareholder companies. Then ITI was deputed to verify the physical existence of the companies. ITI submitted that none of the companies are existing at given address and no Books of accounts are maintained at the given address. Further on the basis of earlier search and surveys done, it is gathered that the given addresses of the companies are known as jamakharchi/paper companies addresses which are used for providing accommodation entry. As nobody appeared, the ident....
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....ed further, it would be relevant to examine the relevant findings of the ld. CIT(A) which are contained at Para 5.3, page 29 to 33 of his order which are reproduced as under:- "....On careful consideration of all relevant facts discussed above, it may be noted that there is no dispute on the fact that in respect of all the 20 companies who have subscribed for share capital, the appellant company has furnished their confirmation, evidence of their address, PAN, balance sheet, copies of Income Tax Returns as also bank statements from where payment was made. It is also fact that the A.O. has not brought on record any adverse material which may indicate any falsity in respect of the documents submitted by the appellant company in respect of share holders companies. The A.O. made a reference to the DDIT, Kolkata for verification of identity of these share holder companies, credit worthiness of these companies and genuineness of the transactions. It is fact that summons were issued by the DDIT to the share holder companies for personal presence on 05.03.2013 and as per the appellant in compliance of summons representatives of these share holder companies appeared before the DDIT....
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....ellant company or the share holder companies. It is also on record that all the 20 share holder companies submitted documents in support of their existence and identity, credit worthiness and genuineness by way of bank statements etc. but the DDIT, Kolkata without examining the same and without pointing out any falsity in such documents, simply forwarded these documents to the A.O. It is further noted that even the A.O. has not pointed out any falsity in such documents and simply relying on the report of the Inspector, made such addition of Rs. 1.7 Crores in the hands of the appellant company. It is also fact that out of 20 share holder companies, 14 share holder companies were already existing share holders of the appellant company and in respect of these 14 share holder companies (S. No. 1 to 14), while completing the scrutiny assessment for A.Y. 2008-09 detailed inquiries were made and the investment by way of share capital was found to be correct. In this background it may be mentioned that the PAN, complete address, confirmation, copies of ITR of these share holders companies definitely proved the identity of these share holder companies. Further the balance sheet and the bank....
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.... Jurisdictional ITAT in the case of Shalimar Buildcom Pvt. Ltd. Vs. ITO [2011], 136 TTJ 701 decided the similar issue as under: "Shareholder companies having admitted to have subscribed to the share capital of the assessee company and accounted for the source of funds in their books of accounts which is not shown to be incorrect or false, no case is made out for making addition under s. 68 in the absence of any evidence to show that the share capital represented accommodation entries". Keeping in view the facts and circumstances discussed above as also placing reliance on various case laws relied upon by the appellant including decision of Hon'ble Apex Court in the case of Lovely Exports(supra) and decisions of Jurisdictional High Court(supra) on the similar issue, the addition of Rs. 1.7 Crores made by the A.O. u/s 68 of IT Act is deleted. The ground of appeal is allowed." 6. During the course of hearing, the ld. AR submitted that firstly, out of the 20 companies, from whom share capital amounting to Rs. 170 lacs, was received during the relevant previous year, 14 companies (S.No. 1 to 14 in the table below) were existing shareholders of the assessee company to whom sh....
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....000 0.5 4.5 5 19 Tycoon Distributor Pvt. Ltd. 15,000 1.5 13.5 15 20 V.K. Mercantile Pvt. Ltd. 20,000 2 18 20 Sub Total (C) (15 to 20) 75,000 8 68 75 Total (A + B + C) 170,000 17 153 170 7. It was further submitted that the assessee Company produced all the required documents before the ld. AO to prove the identity, creditworthiness and genuineness of the companies investing money as well as genuineness of the transactions. All the investing entities are private limited companies duly regulated by the stringent provisions of the Companies Act, 2013 and their complete details could be verified from MCA Website (official website of Ministry of Company Affairs). The department has also issued them PAN and these investing companies are regularly assessed to tax. Thus the onus, on the part of the assessee company, stood fully discharged. As against the above, action of the Id. AO was solely based on the non- conclusive, scanty and unsupported report of DDIT Kolkata. Nothing was brought on record by ....
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....urce of the money infused by them:- * Kanhaialal Jangid vs. Asst. CIT (2008) 217 CTR (Raj) 354 * Aravali Trading Co v. ITO (2008) 220 CTR (Raj) 622 * Labh Chand Bohra v ITO (2010) 189 Taxman 141 (Raj) * CIT vs. Jay Dee Securities & Finance Ltd. (2013) 350 ITR 220 (ALL.) 13. Further reliance was placed on the decision of Hon'ble Madhya Pradesh High Court in the case of Peoples General Hospital Ltd. [2013] 356 ITR 65 (MP) held that "....from the Heads Notes - Section 68 of the Income-tax Act, 1961 - Cash credit [Share application money] - Whether, where assessee had established identity of person providing share application money, burden of proving creditworthiness of said person was not on assessee, and, therefore, addition could not be made as cash credit under section 68-Held, yes...." 14. It was further submitted that the case of the assessee company, on facts, is completely distinguishable from those cases where on account or search/survey, incriminating documents have been unearthed by the department to establish non genuineness of the transaction or cases where companies/individuals have themselves admitted of providing entries. 15.....
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....n interim report, as per Assessing Officer in 9 cases, notices were returned back but it was not informed to the assessee about the conclusion of the enquiry by the ADIT, Kolkata or Assessing Officer of the assessee. The ld. Assessing Officer heavily relied on the Inspector's report in confirming the addition but result of the enquiry of the Inspector has not been communicated to the assessee, which is against the principles of natural justice. As per Assessing Officer, in case of 5 companies, the source of fund was not found explained. The ld. Assessing Officer again gave show cause notice on 23.12.2010. The assessee filed reply on 27.12.2010 and it was claimed before the Assessing Officer that no enquiry has been made by the Assessing Officer on changed addresses. The ld. Assessing Officer had not considered the evidence filed by the assessee during the course of assessment proceedings i.e. affidavits confirming the transaction, PAN number, complete addresses of creditors, copy of balance sheet, ITR for AY 2008-09, bank statement and form No. 18. The assessee had discharged its onus by providing the requisite evidences to prove the identity, genuineness and creditworthiness of th....
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....d share application money along with share premium from 20 companies totaling to Rs. 17 crores. Out of these 20 companies, first 14 companies as detailed in list of these companies as per Para 6 above are existing shareholder companies which have invested and hold shares in the assessee company. The Revenue has accepted the identity of these companies and genuineness of the share transaction while framing the assessment under 143(3) for AY 2008-09 after conducting the detailed enquiry. Where the same set of existing shareholders invest further sum of money by way of share application and the assessee company issues shares to them, it would not be appropriate for the Revenue to challenge the identity and genuineness of the share transaction which has occurred during the year. More so, when the assessee company has again furnished complete particulars of all these companies in terms of name, address, PAN no., copy of their confirmation, copy of their income tax returns, copy of their balance sheet and bank statements through which the cheque payment has been made. Further, the ld CIT(A) has returned a finding that the balance sheet and bank statement of these companies prove the cred....