TaxTMI 
TaxTMI 
2017 (11) TMI 1764
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....ar 2008 -09. The revenue has raised following grounds of appeal; (1) Whether on the facts and circumstances of the case and in law, the learned Commissioner (Appeals) was correct in deleting the addition of Rs. 1,50,00,000/- on account of share premium/share application money/unexplained cash credit under section 68 without appreciating the fact that Shri Praveen Kumar Jain was proved to be one of the leading entry providers operating in Mumbai who could not be produced by the assessee as his witness during the assessment proceeding before the assessing officer. (2) The appellant prays that the order of Commissioner (Appeals) on the grounds be set aside and that of assessing officer be restored. 2. Brief facts of the case are that Assessee Company is engaged in the construction business. The assessee filed its return of income for relevant assessment year on 29 September 2008 declaring total income of Rs. 1,13,354/-. The return was processed and accepted under section 143(1) of the Income tax Act. Subsequently, the assessment was reopened on 18 March 2015 under section 147 after recording the reasons of reopening. Notice under section 148 dated 18 March 2015 wa....
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....the order of ld Commissioner (Appeals) be set-aside and the order of assessing officer be restored. 4. On the other hand the ld. AR for the assessee strongly objected the submission of the ld. DR and supported the order of the ld. Commissioner (Appeals). It was argued that the assessee received share application money from thirteen people during the relevant financial year. All the parties were genuine. The share application money was received by the assessee through account payee cheques or by RTGS. All payments were credited in the bank account of the assessee. The assessee allotted equity share of the company to the share applicants after passing a resolution. All the details of the share applicants along with their ITR acknowledgement, Audited accounts report, PAN cards and relevant extract of bank account of share applications were given to the assessing officer. The assessee proved the identity, capacity of the parties and the genuineness of the transaction. All the share applicants were responded to the notices issued by assessing officer under section 133(6) of the Income tax Act. All applicants complied and filed the required detailed required by assessing officer. The ....
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.... Ltd ITA No. 169 of 2017(Del), (iv) CIT Vs Supertech Diamonds Tools (P) limited 44 taxman.com 460 (Raj) (v) CIT Vs Ashish International ITA No 4299 of 2009 (Bombay) (vi) ACIT Vs Paradise Inland Shipping Private Ltd ITA No. 327/PNJ/2015 (vii) PCIT Vs Paradise Inland Shipping Private Ltd 84 taxman.com 58(Bombay), (viii) Anil C. Jain Vs ACIT ITA No. 369&370/M/2017, (ix) Maruti Impex Vs JCIT ITA 3823/M/2014, (x) Nathuram Premchand Vs CIT 49 ITR 561(All). 5. In the rejoinder arguments the learned DR for the revenue argued that the retraction of Praveen Kumar Jain was without supporting material. It was further argued that matter may be remanded back to the file of assessing officer for verification of the documentary evidences furnished by assessee and for cross examination of the parties. The learned AR of the assessee strongly objected to the submission of the DR for revenue and would submit that the matter cannot be kept open for ever, when the learned Commissioner (Appeals) has already considered the documentary evidences furnished by assessee and the assessing officer has also given his remand report during first app....
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....was provided to the assessee. We have further seen that the assessee has given its detailed reply to the comments of assessing officer which have been recorded by learned Commissioner (Appeals) in para 8 of his order. We have further noted that on the submission of assessee, the learned Commissioner (Appeals) vide his order dated 07 November 2016 sought the remand report from assessing officer. The assessing officer furnished interim remand report on 9th November 2016. And final remand report on 6 January 2017. In the report dated 6 January 2017 the assessing officer contended that summons under section 131 were issued to the assessee and its investor. Neither the assessee nor any other person attended the office of assessing officer. The assessee did not appear to avail the opportunity given to them to cross examine the witnesses. The assessee was informed by learned Commissioner (Appeals) on 17 January 2017 about the report of assessing officer and to explain for noncompliance of the summon under section 131 issued by assessing officer. The assessee disputed the report of the assessing officer. The assessee contended that they were present in response to the notice of assessing o....
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....ellant that the investment being a share capital is a capital receipt and therefore cannot be considered as income in the hands of the appellant. The credits fall within the scope of section 68 which is a deeming provision. Several case laws including those of the Apex Court and High Court have considered credits made to capital account of the assessee's to be covered under the provisions of section 68 and therefore deemed income. The rule for application of section 68 is that the identity and credit worthiness of the investor/lender / creditor has to be established and the genuineness of the transaction has to be established. I also do not find merit in the argument that merely because there is a specific amendment to section 68 in respect of credit in the form of share capital or share application money in the case of private company, requiring the person in whose name such credit is there to explain the nature and source of such sum, which is brought on statute w.e.f . 01.04.2013, hence no such addition u/s 68 can be made in earlier years. The amendment only makes the onus more severe in such cases but it is incorrect to read it as if no such additions could be made u/s 68 i....
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....d. Opportunity for cross examination is not provided to the appellant. Papers/evidence found in the search action raises presumption but the same is available in the case of person searched but not in the case of third parties unless proved and corroborated. Similarly, retraction may be rejected as motivated, but the same can be considered only against the person who has retracted in his assessment. Such statement in the case of another person loses its sanctity unless opportunity of cross examination is granted and / or is corroborated with other evidences. When the investor company is filing regular return of income and there is a transaction through banking channel, no addition can be made without having any contrary or cogent evidences in possession. Over such issue there are plethora of judgements to support the appellant. Some of them are discussed here below:- "(i) The Hon'ble Supreme Court in the case of CIT V/s Lovely Exports 6 DTR 308 has held as under: "If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the Assessing Officer then the department is free to proceed to reopen ....
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.... iv. Hon'ble Rajasthan High Court in case of Commissioner of Income Tax v/so AKJ Granites P. Ltd. (2008) 301 ITR 298 (Raj.) v. Hon'ble Delhi High Court in case of Commissioner of Income Tax v/s Oasis Hospitalities (Pvt.) Ltd. (2011) 51 DTR 74 (Delhi). Sec. 69 places the burden of proof on the tax payer to explain the nature and source of any credit found in the books. But, when assessee proves or submit the basic information like identification, genuineness of transactions and creditworthiness of the creditors, onus is discharged by him and if Assessing Officer disbelieve the genuineness of the same, he has to prove otherwise, merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter, held by the Hon'ble Supreme Court in the case of CIT v. Gujarat Heavy Chemicals Ltd. (2002) 256 ITR 795 (SC). In view of the above the question of making any addition u/s. 68 of the Act does not arise." 22. Further, Hon'ble jurisdictional ITAT in the case of ITO-10(2)(3) vs. M/s J.J. Multitrade Pvt. Ltd. ITA No.2158 & 2159/Mum/2014 order dated 1....
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....cord any direct or corroborative evidence that the share application money received is unexplained as covered u/s 68 even after opportunity was given in the remand proceedings. The original statement of Shri Praveen Jain does not name the appellant specifically. He has subsequently retracted even that original statement. In any case, it is cardinal principle of natural justice, that before conclusions are drawn against a person based on statement of a third party, he must be allowed an opportunity for cross examination. This has not been provided. There is a limit to the capacity or responsibility expected of an assessee to prove facts. The assessing officer has" not inquired into or reported on assessment in the case of the investor companies. If the statements recorded of Shri Pravin Jain and others (which were retracted) are ignored, there is no specific evidence cited by the assessing officer in respect of the investor companies and the appellant which would shift the burden back on the appellant u/s 68. The assessing officer has stated that the appellant has not disproved the findings of the department. Now the question is what are the appellant specific findings that has to b....
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....rs for last three preceding years of such Companies. 7. The Appellants have failed to explain as to how such Companies have been assessed though according to them such Companies are not existing and are fictitious companies. Besides the documents also included the registration of the Company which discloses the registered address of such Companies. There is no material on record produced by the Appellants which could rebut the documents produced by the Respondents herein. In such circumstances, the finding of fact arrived at by the authorities below which are based on documentary evidence on record cannot be said to be perverse. Learned Counsel appearing for the Appellants was unable to point out that any of such findings arrived at by the authorities below were on the basis of misleading of evidence or failure to examine any material documents whilst coming to such conclusions. Under the guise of the substantial question of law, this Court in an Appeal under Section 260A of the Income Tax Act cannot re-appreciate the evidence to come to any contrary evidence. Considering that the authorities have rendered the findings of facts based on documents which have not been disput....
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....n of interference by this Court in the present proceedings under Section 260A of the Income Tax Act would not at all be justified. Apart from that, as rightly pointed out by the learned Counsel appearing for the Respondents, the CIT Appeals had also noted that proceedings under Section 147 of the Income Tax Act cannot lead to re- verification of the records. These findings of the CIT Appeals have not been assailed before the Income Tax Appellate Court." 8. In view of the above factual and legal discussion and considering the latest decision of Hon'ble Jurisdictional High Court referred above, we have noted that the ld Commissioner (Appeals) passed the order after considering the entire material available before him. We have seen that the order passed by ld. Commissioner (Appeals) is reasoned one and does not require any further interference at our end. The facts of various decision relied by ld. DR in Rajmandir Estate Pvt Ltd (supra), in CIT Vs Jansamparak Advertising and Marketing (P) Ltd (supra) in CIT Vs N.R. Portfolio (supra), though is at variance on facts and is of non jurisdictional High Court. The decision of jurisdictional High Court in PCIT Vs Paradise Inland Shipping ....
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....ssessment order and the remand report carefully. A perusal of the assessment order shows that though the conclusions of the investigation wing has been referred to in the assessment order, there are no specific reference to the appellant company. There are no evidences brought on record to show that there is any cash trail in respect of the amounts received by the appellant company from the investors. Though the AO was specifically asked to furnish specific incriminating evidences, it is noted that the AO has not been able to pin point the specific evidences relating to appellant company which would clearly show that the share application money has been received in lieu of cash. In the assessment order the assessing officer has referred to the statement of Shri Pravin Jain recorded at the time of search but has not considered the retraction thereafter in which it was stated that statement recorded at the time of search was under undue pressure and that such statements had been retracted. It is further noted from details called and submitted by the appellant that the advances were repaid as follows: Sr. No. Name of the company Amount Date of repayment 1. Lexus I....
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....x Court upheld the addition u/s 68 in the case of credits as share capi tal in the case of N. Tarika Property Invest . (P.) Ltd. V. Commissioner of Income-tax [2014] 51 taxmann.com 387 (SC) by dismissing the SLP filed by the appellant. 22. Section 68 casts the initial burden of proof on the assessee to show prima facie and to explain the nature and source of credit found in its books. When the statute places the burden of proof in income tax cases on the tax payer, it is understood to be only the initial burden. When the tax payer explains We credit by providing evidence of identity, confirmation and credit worthiness, the burden shifts on the revenue to show that the explanation is not satisfactory or incorrect. In the case of credit as share capital by corporate entity, whose existence is shown by its registration with Registrar of companies and its filing of tax returns, adverse conclusion is not justified merely. because its directors are not produced personally before the assessing officer by the tax payer. 23. In the remand proceedings only the legal requirement was indicated that if any statements of third parties are to be relied upon, opportunity for cros....
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....isclosed income of assessee company". (ii) The Hon'ble Bombay High Court in the case of CIT v/s Creative World Telefllms Ltd 333 ITR 100 has held as under: "If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the Assessing Officer then the department can always proceed against them and if necessary reopen their individual assessments. Held, dismissing the appeal, that there was no dispute that the assessee had given the details of names and addresses of the shareholders, their PAN/ GIR numbers and had also given the cheque numbers, name of the bankers. The Assessing Officer ought to have found out their details through PAN cards, bank statements. Thus, the view taken by the Tribunal could not be faulted. The Hon'ble Supreme Court of India in the case of CIT vs. Orissa Corporation reported in 159 ITR 78 (SC) has herd as under "That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the R....
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....T in the case of M/s S.D.B. Estate Pvt. Ltd. vs ITO- 5(3)(2) ITA No.584/M/2015 has deleted similar addition made u/s 68 of the I.T. Act. The Hon'ble ITAT (Jaipur Bench)In the case of Bharti Syntex Ltd. vs. DCIT ITA Nos.172 & 173/Jp/2010 has held in para 24.4 as under:- "24.4 In this case also no cross examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only on the statement of Shri Mukesh Choksi. We further noted that all other necessary details have been filed before AG. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation along with copies of share certificate, bank statement, memorandum of articles, copy of share application money, audited balance sheet and P&L a/c of these parties were filed. These are similar details as were filed in case of three other companies for asst. yr. 2005-06. We have already disposed of the appeal for asst. yr. 2005-06 whereby we have held that the assessee has discharged its onus by filing necessary details and further have relied on the decisions of Hon'ble Supreme Court and Hon'ble Delhi High Court along with various other decisions of ....
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....ering the scope of section 68, the addition made of Rs. 50,00,000/- in respect of share capital and Rs. 1,00,00,300 in respect of advances u/s 68 in the case of the appellant is deleted." 13. In view of the above factual and legal discussion and considering the facts that we have dismissed the appeal for AY 2008-09 and the grounds of appeal are identically worded except variation of figure. We have seen that the order passed by ld. Commissioner (Appeals) is reasoned one and does not require any further interference at our end. In the result the grounds of appeal raised by the revenue is dismissed. ITA No. 3756/M/2017 for AY 2012-13 by revenue. 14. The revenue has raised identical grounds of appeal as raised in appeal for AY 2008-09 and in 2009-10, except variation of figure of addition under section 68 of the Act. The facts for the year under consideration are also at variance. The assessment order for the year under consideration was passed on similar lines by the assessing officer, making the similar additions under section 68 of the Act for Rs. 2,46,00,000/- The ld. Commissioner (Appeals) has deleted the entire additions by the order of same date. 15. The ld. DR for ....
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....t order was passed in a hurriedly manner. After appreciating the facts and the evidences the ld Commissioner (Appeals) passed the following order:- " 9.18. I have examined the contention of the appellant as well as the assessment order and the remand report carefully. It is noted that the assessing officer has incorrectly considered the loan from Raghuveer Sales Ltd. at Rs..6,00,000/- whereas, it is actually Rs..60,00,000/- and thus the total loans are Rs..3,00,00,000/- and not Rs..2,46,00,000/- considered but the assessing officer. Further that the appellant is correct in pointing out that the share capital and reserves of this company is positive and the assessing officer has incorrectly referred to it as negative In the case of Viraj Mercantile P. Ltd., the current year loss is mainly 'n so1rLt of exchange loss of Rs. 3.35 crores. The capital and reserves of Park Tools Ltd. is Rs. 43,54,392/- and not 34,29,392/- The capital and reserves of Utakantha Trading & Properties Ltd. is Rs. 2,50,31,098/- and not 24,31,098/- as mentioned by the assessing officer. This does indicate that the assessing officer has passed the assessment order in a hurry without confronting the appellant ....
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....arlier in the assessment proceedings. Confirmation letters with copy of PAN and address, bank statements of applicants, Income Tax return acknowledgement, and audited accounts balance sheet and P& L account of the investor companies have been filed before the assessing officer and also in the appellate proceedings. 9.22. Section 68 casts the initial 'burden of proof on the assessee to show prima facie and to explain the nature and source of credit found in its books. When the statute places the burden of proof in income tax cases on the tax payer, it is understood to be only the initial burden. When the tax payer explains the credit by providing evidence of identity, confirmation and credit worthiness, the burden shifts on the revenue to show that the explanation is not satisfactory or incorrect. In the case of credit as loans by corporate entity, whose existence is shown by its registration with Registrar of companies and its filing of tax returns, adverse conclusion is not justified merely because its directors are not produced personal ly before the assessing officer by the tax payer. 9.23. In the remand proceedings only the legal requirement was indicated ....
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....eed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company". (ii) The Hon'ble Bombay High Court in the case of CIT v/s Creative World Telefilms Ltd 333 ITR 100 has held as under:- "If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the Assessing Officer then the department can always proceed against them and if necessary reopen their individual assessments. Held, dismissing the appeal, that there was no dispute that the assessee had given the details of names and addresses of the shareholders, their PAN/ GIR numbers and had also given the cheque numbers, name of the through PAN cards, bank statements. Thus, the view taken by the Tribunal could not be faulted. (iii) The Hon'ble Supreme Court of India in the case of CIT vs. Orissa Corporation reported in 159 ITR 78 (SC) has held as under: "That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the avenue that the said creditors were income-tax assessee's. Their index number....
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....le jurisdictional ITAT in the case of, M, s S.D.B. Estate Pvt. Ltd. vs ITO-5(3)(2) ITA No.584/M/2015 has deleted similar addition made u/s 68 of the I.T. Act. The Hon'ble ITAT (Jaipur Bench)In the case of Bharti Syntex Ltd. vs. DCIT ITA Nos. 172 & 173/Jp/2010 has held in para 24.4 as under:- "24.4 In this case also no cross examination was allowed to the assessee. Therefore, adverse inference cannot be drawn only on the statement of Shri Mukesh Choksi. We further noted that all other necessary details have been filed before AG. Amounts were received through account payee cheque. Both the companies are assessed to tax in Mumbai. Confirmation along with copies of share certificate, bank statement, memorandum of articles, copy of share application money, audited balance sheet and P&L a/c of these parties were filed. These are similar details as were filed in case of three other companies for asst. yr. 2005-06. We have already disposed of the appeal for asst. yr. 2005-06 whereby we have held that the assessee has discharged its onus by filing necessary details and further have relied on the decisions of 1-lon'bIe Supreme Court and Hon'ble Delhi High Court along wit....
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....ot even in the list of Praveen Jain as per the assessing officer's details. It has already been noted that the assessing officer has hurriedly drawn incorrect conclusions from the audited accounts of the lenders. The borrowings carry interest arid interest has been paid after TDS. All the loans have been subsequently repaid through banking channels. In this fact matrix, and the judicial decisions covering the scope of section 68 , the addition made of Rs. 2,46,00,000/- in respect of unsecured loans / advances u/s 68 in the case of the appellant is deleted. The grounds of appeal no 6 in this regard are allowed as above." 17. In view of the above discussion we do not find any infirmity and illegality and we have already confirmed the order passed by ld CIT(A) for AY 2008-09 and 2009-10, hence, the appeal for the year consideration is also dismissed with similar observation. ITA No. 2948/M/2017 for AY 2012-13 by assessee 18. The assessee has raised following grounds of appeals; (1) The Commissioner (Appeals) erred in upholding the action of assessing officer in reducing transportation charges Rs. 52,000/- from work in progress on the ground that the said charges ....
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....35,000/-from work in progress on the ground that the slum dwellers were not eligible and the appellant were not required to pay such rent. The appellants contend that on the facts and in the circumstances of the case and in law the Commissioner (Appeals) ought not to have upheld the action of assessing officer inasmuch as the date is paid wholly and exclusively in the pursuit of the business and that the commission appeal has not correctly appreciated the facts of the case; and as such, the reduction of the said payment from work in progress is untenable in law. (5) The commissioner (Appeals) erred in upholding the action of assessing officer in reducing cash payment made to slum dwellers Rs. 25,89,156/- from work in progress in view of the provisions of section 40A(3) of the Act. The appellants contend that on the facts and in the circumstances of the case and in law the Commissioner (Appeals) ought not to have upheld the action of assessing officer inasmuch Commissioner (Appeals) has not correctly appreciated the facts of the case and hence, the impugned reduction of the said payments from work in progress is untenable in law. 19. At the outset of he....