TaxTMI 
TaxTMI 
2018 (11) TMI 943
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....ssue for my consideration is that whether the share application monies along with premium in the aggregate of 71.40.00,0001- disclosed by the appellant invites the mischief of the provisions of s 68 of the Act or not. The provisions of s. 68 of the Act deal with cash credit which reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year. and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year" According to this section, if identity. creditworthiness of the creditor and genuineness of the transaction are not proved and the explanation offered by the assessee is not in the opinion of the Assessing Officer, satisfactory. the sum so credited may be charged to income-tax as income of the assessee of that previous year. In other words, providing of an opportunity is inherently embedded within the second limb of such provisions. Thus, it is a mandatory duty to call for an explanation in this respect. Ad....
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....he realm of life and liberty. would ipso facto even be read into article 21 because any procedure which affected life or liberty had to be a just. fair and reasonable procedure which necessarily meant the observance of the principles of natural justice. That is why these principles have been called as part of the universal law. as part of the rule of law and have also been termed as fair play in action. Audi alterarm partem is one of the fundamental principles of natural justice. A quasi-judicial or administrative decision rendered or an order made in violation of the rule of audi alteram partem is null and void and the order made in such a case can be struck down as Invalid on that score alone - Maneka Gandhi v. Union of India AIR 1978 SC 597. Gangadharan Pillai v. ACED [1980] 126 ITR 356 at pp. 365 to 367 (Ker.). In other words, the order which infringes the fundamental principle. passed in violation of audi alteram partem rule is a nullity. When a competent Court of authority holds such an order as invalid or sets It aside. the impugned order becomes null and void - Nawabkhan Abbaskhan v State of Gujarat AIR 1971 SC 1471 at p 1479 In the light of these decisions, the ad....
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....raj Merchants P. Ltd., all the five share applicants .are Non Banking Financial Companies registered with the Reserve Bank of India: and the investments made by each of them are duly and fully reflected In their audited books of accounts as well as their income tax return. The appellant had duly filed its return of total income u/s 139(1) of the Act in respect of the assessment year 2012-13. In the course of the assessment proceedings, the appellant in response to the requisitions made by the AO, from time to time, produced its audited books of accounts, filed copies of its audited annual accounts including various details and other documents as desired by the AO The details and documents so produced and filed with the AO included inter alia, full details of each of the six share applicants, who had subscribed to the aggregate share capital as well as share premium money raised by the appellant during the assessment year under appeal. The AO, on receipt of the aforesaid details from the appellant did not pursue the matter further. He solely doubted the genuineness of the said share capital and the creditworthiness of the share applicants in the teeth of the cast iron evide....
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....012-13 incorporating the allotments was filed by the appellant with the Registrar of Companies, Ministry of Corporate Affairs, which categorically proves the fact of allotment of shares to the share applicant. It is further observed that the net worth of each of the share applicant, as disclosed in their Balance Sheets, far exceed the amount of investments made by them in the shares of the appellant. It is found that the funds held by the shareholders were disclosed in the balance sheets of the share applicants viz. Sonali Suppliers Pvt. Ltd. is in a sum of Rs.43,58,07,751/- as on 31.03.2012 and a sum Rs.25,00,000/- was invested as share application money with the appellant. Nihon Impex Pvt. Ltd. is in a sum of Rs.51,89,32,502/- as on 31.03.2012 and a sum of Rs.25,00,000/- was invested as share application money with the appellant, Sivarpan Vanijya Pvt Ltd. is in a sum of Rs.45,80,51,770/- as on 31.03.2012 and a sum of Rs.25,00,000/- was invested as share application money with the appellant, Saurabh Management Pvt. Ltd. is in a sum of Rs.5,79,75,856/- as on 31.03.2012 and a sum of Rs.25,00,000/- was invested as share application money with the appellant, Jagajyoti Commodities Pvt.....
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....e issue further. In the case of CIT vs. Orissa Corporation Ltd. (1986) 159 ITR 78 (SC) it was held as under: "in this case the assessee had given the names and addresses of the alleged creditors It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could* be arrived at, no question of law as such could arise." The ratio laid down in the aforesaid case is squarely applicabl....
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....n the life of the assessee company, The amounts were deposited by these 5 corporates per account payee cheques, These parties were not shareholders of the assessee company at the time when the case was reopened under section 147 or when the summons were issued to them. We find that the assessee has filed before the AO, copies of share application forms duly signed along with the complete addresses of the .investors along with their I.T file numbers, account payee cheque numbers and the assessee's bank statements disclosing the deposits of these amounts In these facts we find that the assessee has discharged its initial onus to prove the Identity of the Investors as well as their creditworthiness, It is not the case of the Revenue that the investor parties did not exist or that the money was not invested by them through banking channels, " Having found such, the Tribunal had relied on the judgement in Hindusthan Tea Trading Co. Lid. v. CIT (Cal): 263 ITR 289 (Cal) to uphold the order of the CIT. in view of the findings above noted, no substantial question of law arises and therefore, the appeal and the application are dismissed" 6.2 Again, the Hon'ble Juris....
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.... of the assessee company. The receipt of share capital money had been duly recorded in the books of the assessee company and the payment of share application money was also duly recorded in the audited account of each of the share applicants. We, thus, find that both the authorities below on the basis of the aforesaid materials on record were quite justified in deleting the aforesaid addition of Rs. 45, 00, 000/- done by the Assessing Officer. We are of the view that the order Impugned does not suffer from any defect whatsoever and no question of substantial error of law arises justifying our interference. The appeal is. thus. summarily dismissed. " There is no evidence adduced on record to show that the identities of the share applicants are not proved and/or that the subscription made by them to the share capital of the appellant was not genuine and/or the source of investment was not fully explained to the satisfaction of the AO. Further, the Hon'ble Jurisdictional High Court in the case of CIT vs. Dataware Private Ltd. [ITAT No. 263 of 2011 dated 21.09.2011] wherein while examining the issue of addition of share application money received....
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.... not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more evidence against the assessee; (3) the Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and the veracity of the repudiation. " 7.1 Further this decision of the hon'ble Delhi High Court was approved by the Hon'ble Supreme Court in CIT vs. Lovely Exports Ltd (2008) 216 CTR 195 (SC) wherein it was held as under "2. Can the amount of share money be regarded as undisclosed income under section 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. " In other words, it is observed that if share application money is received by an assessee from subscribers, whose names are given to the AO. are allege....
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....der is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of its registered address or PAN identity, etc. can be furnished. [Para 12] Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it had come from the coffers of that very shareholder. When the money is received by cheque and is transmitted through banking or other indisputable channels. genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction can be the copies of the shareholders' register, share application forms. share transfer register, etc. [Para 13] As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced. the assessee would have satisfactorily discharge....
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....ares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment. Thus, the assessee has categorically established the nature and source of the said sum and discharged the onus that lies on it in terms of section 68. When the nature and source of the amount so invested is known, it cannot be said to undisclosed income. Therefore. the addition of such subscriptions as unexplained credit under section 68 is unwarranted. " 7.6. The instant case is further supported by the decision. of Hon'ble Allahabad High Court in the case of CIT vs. Vacmet Packaging (India) (P.) ~td (2014) 367 ITR ?17 (All). wherein their Lordship has held as under: "That apart, as regards genuineness of the transaction, the view which has been taken by the Tribunal is at least a possible view to take on the basis of the material on the record. The assessee undoubtedly had to discharge the onus of establishing the identity and creditworthiness of the applicant companies and of the genuineness of the transaction. In this regard, both the Commissioner (Appeals) and the Tribunal had noted that the assessee had establ....
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....duced the evidence in support of the credits in the form of certificates from Racing Clubs. The Apex Court after considering the ratio of CIT vs. Durga Prasad More (Supra) upheld the majority view of the Settlement Commission and held at page 808 of the Report as under: "The observation by the Chairman of the Settlement Commission that "fraudulent sale of winning tickets is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the Direct Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972, whereby the exemption from tax that was available in respect of winnings from lotteries. crossword puzzles. races. etc., was withdrawn. Similarly, the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality, The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumst....
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.... therefore, the AO was entirely in error in resorting to the impugned addition thereunder misconceiving the sweep and scope of the case of CIT vs. Sumati Dayal (supra) 8.1. Therefore, considering the totality of the facts and circumstances of the case, I find substance in the argument of the AIR that the appellant has proved its case that the Identity of the share applicants are established beyond doubt and there is no adverse finding reached by the AO 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 establish the identity and authenticity of the share applicants. About the genuineness of the transactions there is neither any adverse finding in the assessment order nor one which is contrary to the facts brought on record by the appellant during the course of assessment proceeding. The creditworthiness of the share applicants as regards their subscription to the share capital is proved by the source as apparent from their audited balance sheet return and bank statement. The net worth of such subscribers are in excess of the amounts invested by ea....
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..... Ltd., & M/s Mangalraj Merchants Pvt. Ltd., involving sums of Rs.25 lac in case of former Rs.5 and Rs.15 lac regarding last entity; respectively. We find that these former five investors are in fact Non- Banking Finance Companies (NBFCs) as per their respective registration certificates issued by the market regulator i.e. Reserve Bank of India under Banking Regulation Act. Learned Departmental Representative fails to dispute that registration of NBFC requires a long drawn process of compliance(s) and approval(s). All this takes care of the Revenue's argument terming these five an NBFCs as mere sham companies. We make it clear that the Assessing Officer nowhere issued sec. 131 or 133 process against all these investors. Relevant paper book comprising of 106 pages makes it clear that assessee had placed on record all share application / NBFC registrations certificates, bank statements, income-tax returns and audited accounts pertaining to its investors during the course of assessment. The Revenue's stand that this assessee was not carried out any business activity does have no substance in view of relevant raw materials stock of Rs.94,53,816.5 work-in-progress of Rs.283,74,528/- ....
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....dited financial statements of shareholder companies. d) Details of bank balances, loans and advances. e) Share Allotment Letters f) Copy of the bank account of the shareholders g) Transactions with the assessee duly highlighted in the bank statement. h) Copies of assessment orders for the Asst Year 2012-13 of the shareholder companies. i) Evidences of source of source of the shareholders. These evidences are enclosed in pages 57 to 226 of the paper book filed before us. 5.1. The assessee submitted the details of the transactions as under:- a) Flower Distributors Pvt. Ltd.: This company invested a sum of Rs. 25,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 03.03.2011 and was having company identification number U52190WB2011PTC160152. This company duly filed its return of income before ITO, Ward-1(2), Kolkata and was having PAN AABCF 6846 M. This company was having a paid up capital with free reserves and surplus of Rs. 4,34,79,170/- as on 31.03.2012 and Rs. 55,84,414/- as on 31/03/2011 respectively. The copy of the bank statem....
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....book. All the relevant documents for this company are available on pages 106-122 of the paper book. (d) Kavya Marketing Private Limited: This Company invested a sum of Rs. 50,00,000 in the appellant company. The share application was made by account payee cheque. This company was incorporated on 03/03/2011 and was having company identification number U521 00WB2011 PTC160161. This company duly filed its return of income before ITO Ward 1 (3), Kolkata and was having PAN AAECK2547D. This company was having a paid up capital with free reserves and surplus of Rs. 4,50,79,092/- as on 31/03/2012 and Rs. 90,74,585/- as on 31103/2011 respectively. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash. The copy of the assessment order passed u/s 143(3) of the Act for the AY 2012-13 is also available in the paper book. The details of source of funds from which this company had made the share application are also available in the paper book. All the relevant documents for this company are available on pages 123-148 of the paper book. (e) Mandira Supplier....
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....09WB2008PTC126187. This company duly filed its return of income before ITO Ward 7(3), Kolkata and was having PAN AAMCS0780N. This company was having a paid up capital with free reserves and surplus of Rs. 4,89,71,429/- as on 31/03/2012 and Rs.,4,09,19,363/- as on 31/03/2011 respectively. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available in the paper book. All the relevant documents for this company are available on pages 201-220 of the paper book. 5.2. From the aforesaid details, we find that in case of all the share applicants - a) The share application form and allotment letters are available. b) The share applicants are income tax assessees and had filed their income tax returns regularly. c) The investment in share application money were made out by account payee cheques. d) The bank accounts of the share applicants reveal that there were no deposits of cash before issue of cheques to the assessee company. ....
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....16.2.2015 and a statement was recorded from Shri Hemand L Harkhani, director of assessee company. He explained the details that were sought for by the ld AO. Merely because he could not produce the directors of the share applicant companies, drawing an adverse inference against the assessee company to treat the receipt of share capital as bogus is unwarranted. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Orissa Corporation P Ltd reported in 159 ITR 78 (SC) and Hon'ble Gujarat High Court in the case of DCIT vs Rohini Builders reported in 256 ITR 360 (Guj) , wherein it was held that onus of the assessee (in whose books of account, the credit appears) stands fully discharged, if the identity of the creditor is establishd and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of 'cash deposited in the bank accounts of the creditors' , the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word 'may' in section 68 of....
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....hat previous year". The Supreme Court while interpreting similar phraseology used in Section 69 has held that in creating the legal fiction the phraseology employs the word 'may' and not 'shall'. Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan [1999] 237 I TR 570." It would be pertinent to note that against the said decision of Hon'ble Gujarat High Court, the Special Leave Petition (SLP in short) preferred by the revenue was dismissed by the Hon'ble Supreme Court. 5.5. Undisputedly the Share Applicants in this case are the bank account holder in their respective banks in their own name and are sole owner of the credits appearing in their bank account from where they issued cheques to the appellant. For the proposition that a Bank Account holder himself is the 'owner' of 'credits' appearing in his account (with the result that he himself is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from....
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....ing that the same should be decided by taking 5.6. In the case of Nemi Chand Kothari vs CIT reported in 264 ITR 254 (Gau), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- "While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretatio....
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....d the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the a....
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....cted by him into the transactions, which have taken place between the creditor and the subcreditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the subcreditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had establi....
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.... us, the appellant by producing the loanconfirmation- certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements." 5.8. We find that the Hon'ble Jurisdictional High Court in yet another case of Crystal Networks (P) Ltd vs CIT reported in 353 ITR 171 (Cal) had held that when the basic evidences are on record, the mere failure of the creditor to appear before the Assessing Officer cannot be the basis to make addition. The relevant observations of the Hon'ble Court are as under:- 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). ....
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....fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: "The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act; it is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. " 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the ....
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....he Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." 5.10. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in ITAT No. 241 of 2010 dated 10.1.2011 , while relying....
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.... No. 114 of 2011 dated 13.6.2011 had held as under:- "The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs. 8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified....
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.... plain reading of section 68 of the Act, the duty cast on the assessee is to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share application money from five share applicants. The nature of receipt towards share application money is well established from the entries passed in the respective balance sheets of the companies as investments. Hence the nature of receipt is proved by the assessee beyond doubt. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity of share applicants, genuineness of transactions and creditworthiness of share applicants. In the instant case, we find that the identity of share applicants is proved beyond doubt by the assessee by furnishing the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, the ld AO himself states that the five share applicants had invested in assessee company's shares by taking money from some other companies. Hence the source of the share applicants for making investment in share application monies of as....
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.... made without material and on mere suspicion. In these facts and circumstances, there is no need to treat the receipt of share application money from five share applicants as unexplained u/s 68 of the Act. Hence we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed." 5.13. We find that the co-ordinate bench of this tribunal recently in the case of ITO vs Wiz-Tech Solutions Pvt Ltd in ITA No. 1162/Kol/2015 dated 14.6.2018 had held as under:- 28. From the details as aforesaid which emerges from the paper book filed before us as well as before the lower authorities, it is vivid that all the share applicants are (i) income tax assessee's, (ii) they are filing their return of income, (iii) the share application form and allotment letter is available on record, (iv) the share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the applicants are having s....
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.... to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. 30. ***** 31. ***** 32. We would like to reproduce the Hon'ble High Court order in CIT vs. Gangeshwari Metal P.Ltd. in ITA no. 597/2012 judgement dated 21.1.2013, the Hon'ble High Court after considering the decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgement in the case of CIT vs. Lovely Exports 319 ITR (St) 5(SC) held as follows:- "As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer's its back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in....
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....where there is lack of enquiry on the part of the A. O. as in the case of Ganjeshwari Metals (supra). b) In the case of Finlease Pvt Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8/ it was 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 of the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning t....
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....lication 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 do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed. 5.14. We find that the Hon'ble Supreme Court in the case of M/s Earthmetal Electricals P Ltd vs CIT & Anr. reported in 2010 (7) TMI 1137 in Civil Appeal No. 21073 / 2009 dated 30.7.2010 arising from the order of Hon'ble Bombay High Court had held as under:- ORDER ....
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.... receipt of share capital for a company is not a prohibited transaction, as that is one of the main source of raising funds for a company to run its intended activities. The ld CITA had categorically given a finding that the ld AO did not bring on record sufficient tangible and cogent material to support his conclusion that the amount credited in the assessee's books in the form of share capital and share premium actually represented assessee's undisclosed income. This factual finding remain uncontroverted by the revenue before us. Once the replies to notices issued u/s 133(6) of the Act were received from the share subscribing companies, if at all, the ld AO had any doubt that the details filed thereon warranted further examination, nothing prevented him from issuing summons u/s 131 of the Act to the directors of the share subscribing companies or carry out examination through the Assessing Officer of the share subscribing companies. Why should the director of the assessee company produce the directors of the share subscribing companies. The assessee could only furnish the relevant details to prove its primary onus. Thereafter the onus shifts to the revenue to de....
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.... We find that the reliance placed by the ld DR on the decision of Hon'ble Calcutta High Court in the case of Rajmandir Estates supra was distinguishable on facts as the said decision was rendered in the context of validity of revisionary jurisdiction u/s 263 of the Act by the Learned Administrative Commissioner. This fact has already been addressed by this tribunal in the case of VSP Steel P Ltd supra. No decision whatsoever was rendered by the Hon'ble Jurisdictional High Court in the case of Raj mandir Estates P ltd on merits of the addition and hence does not come to the rescue of the revenue in the facts of the instant case. 5.16. We also find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96 taxmann.com 469 (SC) wherein the SLP of the Revenue has been dismissed by the Hon'ble Apex Court. The brief facts of that case were that the addition u/s 68 of the Act was made by the Assessing Officer in respect of capital contributed by the partner of the firm. The Hon'ble Gujarat High Court noted that when the concerned partner had confirmed before the Assessing Officer about his fact of making capital contrib....