TaxTMI 
TaxTMI 
2018 (11) TMI 596
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....ors of all the companies. It is stated that summons u/s 131 of the Act, were issued to the Directors of the assessee company also on 21/03/2013, through e-mails. In response to these notices the share applicant companies furnished various documents such as their respective, annual reports together with audited accounts of the company for the year ended 31st March, 2011, along with the auditor's report, director's report statements. They also furnished their income tax details such as copies of PAN Card, copies of returns of income filed and confirmation certificates. 2.1. The Assessing Officer, on the ground that the Directors of those share applicant companies had not appeared before him, made the addition of the entire share capital received by the assessee, u/s 68 of the Act. Aggrieved, the assessee carried the matter in appeal. Before the ld. First Appellate Authority the assessee repeated the contentions. The ld. First Appellate Authority after examining the evidence, for the various reasons given in his order, deleted the addition and allowed the appeal of the assessee. 3. Aggrieved, the revenue is in appeal before us. 4. The ld. D/R, submitted that the ld. CIT(A) has wron....
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....T(A), at page 32 & 33 of his order, wherein the factual errors committed by the Assessing Officer have been highlighted and submitted that he ld. D/R could not controvert these findings and argued that the matter cannot be restored to the Assessing Officer for fresh investigation. He prayed that the order of the ld. CIT(A) be upheld and the appeal of the revenue be dismissed. 5. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- The ld. CIT(A) at para 32 & 33 of his order has held as follows:- "I have carefully considered the findings made by the assessing officer, submission of the appellant and the cases relied upon by the parties. It is seen that during the year, the appellant company received share application money aggregating Rs. 5,94,50,0001- subscribed by 10 share holders. The assessee discharged its onus to establish the identity, creditworthiness of the share subscribers and genuinity of the transactions by submitting details thereof. In order to verify identity, creditworthiness of the share subscribers ....
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....ing shares had to be sold or fresh funds procured. It is quite obvious that if one wants to make new investments he would have to raise money in same fashion. vi. The share applicants and appellant company have meager profits have no relevance as the share applicants had sufficient funds in form of share capital and reserves. The investments are not necessarily made from profits specifically when the share applicant is a investment company. vii. There had had been no compliance to the summons u/s 131 by the share applicants or the appellant. Its observed that not proper time was available with them to present their case. The notices were served at the very end of the limitation period. Again, no specific material was brought into light by the AO against the replies received against notices issued u/s 133(6), from the share applicants and the source of the share applicants proving otherwise to their identity, creditworthiness or ingenuinity of the transactions. As such it is incorrect to say that the appellant or the share applicants did not comply."(Emphasis Ours) 5.1. These factual findings of the ld. CIT(A) could not be controverted by the ld. D/R. We find that this is no....
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....is company has gross receipts of Rs. 6.42 Crores. Devnath Merchandise Pvt. Ltd. The company invested a sum of Rs. 1,55,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 22.03.2005 and was having company identification number 51109WB2005PTC102401. This company duly filed its return of income before Central Circle-3(1), Kolkata and was having PAN AACCD2441F. This company was having a paid up capital with free reserves and surplus of Rs. 10,95,42,089/- as on 31/03/2011. The company has total gross receipts of Rs. 11,76,97,116/- i.e. (Interest on loans of Rs. 6,99,341/- & Sate of shares of Rs. 11,69,97,775/-) as per Profit & Loss A/c placed at page 92 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has gross receipt of Rs. 11.77 Crores. Hello Communication Pvt. Ltd. The company invested a sum of Rs. 1,00,00,000/- in the appellant company. The share application was made by account payee cheque....
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....186/- & Sale of shares of Rs. 6,70,65,000/-) as per Profit & Loss A/c placed at page 145 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has gross receipt of Rs. 6.76 Crores. Sanchay Trexim Pvt. Ltd. The company invested a sum of Rs. 20,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 10.01.2011 and was having company identification number 51909WB2011PTC156960. This company duly filed its return of income before ITO Ward 5(1), Kolkata and was having PAN AAPCS1999E. This company was having a paid up capital with free reserves and surplus of Rs. 3,14,17,584/- as on 31/03/2011. The company has total gross receipts of Rs. 26,675/- i.e. (Interest on loans of Rs. 5,000/- & Profit in shares of Rs. 21,675/-) as per Profit & Loss A/c placed at page 163 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this....
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....corporated on 15.03.2005 and was having company identification number 51109W82005PTC102262. This company duly filed its return of income before ITO Ward 5(1), Kolkata and was having PAN AAJCS0597G. This company was having a paid up capital with free reserves and surplus of Rs. 18,87,91,912/- as on 31/03/2011. The company has total gross receipts of Rs. 8,19,47,256/- Le. (Interest on loans of Rs. 10,65,412/- & Sales of Rs. 8,08,81,844/-) as per Profit & Loss A/c placed at page 215 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has gross receipt of Rs. 8.19 Crores and capital and free reserve of Rs. 18.87 Crores. An analysis of these facts of all the companies who applied for shares have proven their identity, creditworthiness and genuineness of the transactions. 5.2. We find that the Assessing Officer had discussed the details furnished by these share applicant companies in the assessment order. The identity, creditworthiness and genuineness of the transactions ha....
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....encing filing of the return of income by each one of them. Copy of the audited books of accounts including balance sheet, wherein such investments are reflected etc. have been filed as evidence After taking all these facts into account, the ld. CIT(A) at para 4.12. as concluded as follows:- "4.12. Considering the totality of the facts and circumstances of the case. I find substance in the arguments of the AR that the appellant has made its case that the identity of the share applicants are established beyond doubt and on enquiries made by the AO there was no adverse finding on this aspect. Admittedly, all the share applicants are existing assessees under the Act and that some of them were subject to scrutiny assessment during the same period establishes he fact that the identity and authenticity of the share applicants were not in doubt. About the genuineness of the transactions, there is neither any adverse finding in the assessment order nor which is subversive to the facts brought on record by the appellant during the course of assessment proceeding to this effect. The creditworthiness of the share applicants as regards their subscription to the share capital is proved by the....
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....ribunal under identical circumstances, discussed the issue at length, in the case of Five Star Vanijya Pvt. Ltd v. Deputy Commissioner of Income Tax, Circle-8, Kolkata in ITA No. 1120/Kol/2015, Assessment Year: 2010-11, order dt. July 31st, 2018, and by relying upon a number of judgement of various Courts of law, held as follows:- "5. After hearing rival contention, perusing the papers on record, orders of the authorities below as well as case-law cited, we hold as follows:- The assessee in this case is not a paper company and is engaged in international and inland trading of iron ores and minerals. It has a turnover of about Rs. 15 Crores during the year 31/03/2010. It has profits and taxation of about Rs. 33.84 Lakhs. The share holders in this company are also not paper companies or Jamakharchi companies. They are individuals who are also the directors of the company. The assessee company has only three Directors and the said application money has been received from these three Directors. Hence, the identity of the payees is proved. The Directors have furnished their annual statement of accounts and explained their sources of funds for the investments in the share capita....
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....ntly, the Hon'ble Jurisdictional High Court in the case of ld. Pr. CIT-1, Kolkata vs. M/s. Steel Emporium Ltd. in GA NO.3275 OF 2016 WITH ITAT NO.354 OF 2016, 14th May, 2018, held as follows:- "The third ground is on account of share application money. The assessing officer found that several of the applicants for issuance of further shares in the assessee shared the same 12, Waterloo Street address as the assessee and that one individual had accepted notices under Section 133(6) of the Act, though different rubber stamps were used along with the signature. The Tribunal was satisfied that the identities of the applicants for shares in the assessee had been established. No legal question arises as a result of such finding." 6.4. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd. (2012) 248 ITR 33, held that once the assessee has prove identity of creditor share applicant, by either furnishing PAN or copy of their bank account, the addition under section 68 of the Act cannot be made without any material to support the same. 6.5. The Hon'ble Delhi High Court in the case of CIT vs. Gangeshwari Metal P. Ltd. in ITA No.597/2012 judgment dated 21.1.2....
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.... Section 271(1)(c ) are being initiated separately. " The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under Section 68 of the Income Tax Act, 1961. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. " 6.6. In the case of CIT vs. Fair Finvest Ltd., (2013) 357 ITR 146 (Del.) at para 6 held as follows. "6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application, affidavits for the directors, form 2 filed with the ROC by such applicants conf....
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....ee. If the ostensible shareholders failed to explain the means of investment, that should have been treated as unexplained income in their hands. In order to add it to the income of the assessee there must be a further finding that in fact the shareholders were mere name-lenders and the money allegedly invested by them really belonged to the directors of the assesseecompany. In the absence of a finding that the persons to whom the share certificates were issued on receipt of consideration as per the book entries were in fact dummies or stooges of the directors of the assessee-company, the same cannot be treated as unaccounted income of the assessee. There was no such finding by the assessing authority. In this view of the matter, the ultimate conclusion of the Tribunal cannot be faulted in any case. We, therefore, see no ground to admit this appeal as no substantial question of law arises for consideration. The income-tax Tribunal appeal is dismissed." 6.3. Applying the proposition of law laid down in the case law to the facts of this case, we find that the Assessing Officer has simply disbelieved the evidence filed by the assessee. He has not conducted any verification, let alo....