TaxTMI 
TaxTMI 
2019 (3) TMI 271
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....Nisha Goyal 20000 10/- - Rs. 2,00,000/- 3. Manish Goel & Sons 30000 10/- - Rs. 30,00,000/- 4. Aakarshan Dealers Pvt. Ltd. 23A, Netaji Subhas Road, Kolkata - 01. 3000 10/- 490/- Rs. 15,00,000/- 5. Arrowroot Tracom Pvt. Ltd., 125, N.S. Road, Kolkata - 01 1600 10/- 490/- Rs. 8,00,000/- 6. Giri Financial Services Pvt. Ltd. 63, Jessore Road, 3rd Floor, Flat No. 314, Kolkata - 700055 5000 10/- 490/- Rs. 25,00,000/- 7. Ranisati Hosiery Pvt. Ltd., Military Quarter ER (Ansha Bishesh), Bali, Howrah - 711227 3000 10/- 490/- Rs. 15,00,000/- 8. Sri Narayan Mercantiles Pvt. Ltd. 5/1, Clive Row, R. No. 125, Kolkata - 01. 5000 10/- 490/- Rs. 25,00,000/- 9. Vibhuti Ma Tradecom Pvt. Ltd. 125, N.S. Road, Kol-01 1600 10/- 490/- Rs. 8,00,000/- 10. Walnut Dealcom Pvt. Ltd. 125, N.S. Road, Kol-01. 2000 10/- 490/- Rs. 10,00,000/- 11. Walnut Dealcom Pvt. Ltd. 125, N.S. Road, Kol-01. 1200 10/- 490/- Rs. 6,00,000/- 12. Walnut Tradecom Pvt. Ltd. 125, N.S. Road, Kol-01. 1600 10/- 490/- Rs. 8,00,000/- 4. From a perusal of the aforesaid chart, according to the AO, the serial no. 4 to 12 (hereina....
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....acts from the assessment order that the notices issued by the AO u/s 133(6) to the respective share subscribers for verification of the share application transaction, had been duly complied with by share subscribers and they have confirmed to the AO that they have invested the share capital and premium in the assessee company. The ld. CIT(A) took note of the fact that they also provided their respective return of income, audited balance sheet and their bank statement. We note of the fact that the AO had not recorded any adverse finding against the identity and genuineness of the share subscribers. However, the AO found fault only about the creditworthiness of these corporate entities that they had no capacity to make such investment, accordingly he added Rs. 1.20 crores as unexplained credit u/s 68. We do not agree with the aforesaid action of the AO because when the identity and genuineness of these corporate entities were proved by the following documents produced before the A.O which A.O acknowledges at Page 3 of the assessment order wherein A.O observes "assessee submitted name and address of the investing companies (as stated above) and notices under section 133(6) were issued....
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....tor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the 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 princi....
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....sessee company had a share capital of Rs. 1.29 cr. and share premium of Rs. 39.72 cr. which means Rs. 41.01 cr. (refer page 4 of AO). Likewise, Shri Narayan Mercantile Pvt. Ltd. had invested Rs. 25 lacs in Assessee Company and it has share capital of Rs. 7.48 cr. and share premium of Rs. 83.74 cr. own fund (page 4 AO's order). We note that M/s. Rani Sati Hosiery Pvt. Ltd. had invested Rs. 15 lacs in assessee company and it had a share capital of Rs. 21.70 lacs and share premium of Rs. 14.25 cr. own fund (page 4 of AO). Likewise, in the case of M/s. Narayan Mercantile Pvt. Ltd. had a share capital of Rs. 7.48 cr. and share premium of Rs. 76.29 cr. (written as FY 2012-13 and in FY 2010-11 share capital of Rs. 99.94 lacs) and this company had invested Rs. 25 lacs (page 5 of AO). In the case of M/s. Shree Narayan Mercantile Pvt. Ltd. the AO also has gone into the source of source which provided Rs. 25 lacs to Shri Narayan Mercantile Pvt. Ltd. which is shown from M/s. Original Tradelink pvt. Ltd, which had share capital of Rs. 2.76 cr. and premium of Rs. 24.96 cr. Therefore, from the financials, it is seen that four share subscribing companies had own funds in crores of Rupees and inves....
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....e, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. Hence the source of source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/ applicable in this assessment year. The share applicants have confirmed the share application in response 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. 9. We also note that recently the ITAT Kolkata in several cases has deleted the addition on account of share application in similar circumstances. The relevant portion of the decisions are as follows: ....
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....tantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 3.4.2. In view of the aforesaid findings and respectfully following the decision of the apex court (supra) and Jurisdictional High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the ground no.2 raised by the Revenue is dismissed. 4. The last ground to be decided in this appeal of the Revenue is as to whether the Learned CIT(A) is justified in deleting the addition u/s 68 of the Act made in respect of allotment of shares to 20 individuals for an amount of Rs. 57,00,000/- in the facts and circumstances of the case. 4. 1. The brief fact of this issue is that the assessee had received share application monies from 20 individuals in the earlier year which were kept in share application money account. During the asst year under appeal, the assessee allotted shares to these 20 individuals out of transferring the monies from share application money account to share capital account. The details of 20 individuals are reflected in page 6 & 7 of the Learned CIT(A) order. The Learned AO asked the assessee to produce the shareholders before h....
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....ed to admission of this additional ground and vehemently supported the order of the Learned CIT(A). 4.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the additional ground raised by the assessee separately before us vide its covering letter dated 9. 12.2011 is admitted as it appears to be a genuine and bonafide error of omission on the part of the Revenue from not raising this ground in the original grounds of appeal filed along with the memorandum of appeal. Moreover, it does not require any fresh examination of facts. Hence the same is admitted herein for the sake of adjudication. 4.4. 1. We find from the details available on record that the share application monies from 20 individuals in the sum of Rs. 57,00,000/- has been received by the assessee during the financial year 2004-05 relevant to Asst Year 2005-06 and only the shares were allotted to them during the asst year under appeal. Admittedly no monies were received during the asst year under appeal and hence there is no scope for invoking the provisions of section 68 of the Act. Hence we hold that the order passed ....
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....ant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovely Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed." 6.2. We find that the issue is also covered by the decision of Hon'ble Delhi High Court in the case of CIT vs Value Capital Services P Ltd reported in (2008) 307 ITR 334 (Del) , wherein it was held that: "In respect of amounts shown as received by the assessee towards share application money from 33 persons, the Assessing Officer required the assessee to produce all these persons. While accepting the explanation and ITA No. 632/KoI12011--C-AM M/s. R.B Horticulture 6 & Animal Proj. Co. Ltd the statements given by three persons the Assessing Officer found that the response from the others was either not available or was inadequate and added an amount of Rs. 46 lakhs pertaining to 30 persons to the income of the assessee. The Commissioner (Appeals) upheld the decision of the Assessing Officer. ....
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....s. The AO was explained vide letter dated 20.12.2011 of the assessee that those companies had changed their addresses since filing of Form 2 with the Registrar. Further, it was none of the business of the assessee to question the addresses of the applicants as long as they affirm the address. The applicants were duly incorporated bodies under the Companies Act. 1956 since long. They have been regularly filing their returns of income under the Income Tax Act and are being assessed by the Revenue since long. Some of them are even registered as Non-Banking Financial Companies with Reserve bank of India. They have been filing returns regularly with Registrar of Companies and RBI since long. The letters might have been received at their old addresses because in case of change in the address, people instruct the incumbents at old addresses not to refuse the receipt of letters and receive the same. Just because, a letter was received at the old address instead of present address, it cannot be said that the identity of the applicant has not been verified. All of these companies had duly replied to notice u/s. 133(6) and confirmed the transaction with all the evidences. The AO has not raise....
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.... dated 2.3.2016. In this the decision the Ld. Tribunal held as follows: "6. On appeal by the assessee the CIT(A) deleted the addition made by the AO observing as follows "6) I have considered the submission of the appellant and perused the assessment order. I have also gone through the details and documents filed by the appellant company in the course of assessment: proceedings vide letter dt. 3-10-2007. On careful consideration of the facts and in law I am of the opinion that the AO was not justified in making, the addition aggregating to Rs. 54,00,000/- u/s.68 of the Act being the amount of share application money by holding that the appellant company has failed to prove the identity, and creditworthiness of The creditors as well as the genuineness of transactions. It is observed that all the three share applicant companies i.e. M/s. Shree Shyam Trexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. Jewellock Trexim Pvt. Ltd. had filed their confirmations wherein each of them confirmed that they had applied for shares of the appellant -company. All the three companies provided- the cheque number, copy of bank statements and their PAN. It is observed that these companies....
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.... 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 cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. " 10. Re....
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....ication was in the nature of accommodation entries. The Court observed that the appellant had filed sufficient documentary evidences to establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. The AO however chose to sit back with folded hands till the assessee exhausted all the evidence in his possession and then merely reject the same without conducting any inquiry or verification whatsoever. The Court thus held that the decision of CIT Vs Novo Promoters & Finlease (P) Ltd (342 ITR 169) was not applicable to the facts of the case. Instead it was held that the issue in hands was on the lines of the decision of the Supreme Court in the case of CIT Vs Lovely Exports Pvt Ltd (319 ITR 5). Accordingly the addition made under Section 68 on account of share application was deleted. 11. 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 (Sat 5)(5. C) held as follows:-....
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....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" 12. The case on hand clearly falls in the category 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 s....