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2019 (3) TMI 271
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.... Manish Goyal 10000 10/- - Rs. 1,00,000/- 2. 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....
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....sputed and so they are not repeated for the sake of brevity. We note that the Ld. CIT(A) has taken note of the facts while narrating the gist of facts 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 w....
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.... not enquire further from the assessing officer of the creditor that instead, himself proceeded to consider the profit and loss account of the creditor 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 accoun....
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....is given by AO after looking into their financials from web-site, we note that M/s. Giri Financial Services Pvt. Ltd. which has invested Rs. 25 lacs in the assessee 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....
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....O should have made enquiries from the AO of the share subscribers as held by Hon'ble jurisdictional High Court in CIT vs DATAWARE (supra) which has not been done, 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 K....
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....s Lovelv 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. 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 sh....
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....f the investors were not established." 4.3. The Learned DR prayed for admission of the additional ground raised before us and vehemently supported the order of the Learned AO. In response to this, the Learned AR fairly conceded 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 sha....
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....entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction." Held After hearing the learned counsel for the appellant 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 t....
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....en addresses. The A0 argued that the letters should not have been served at the given address by the assessee. He served a show a cause notice dated 09.12.2011 asking for the explanation from the assessee as to how the notices u/s. 133(6) could be served to these nine companies who had different address as per ROC records. 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 let....
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....he requisite document as discussed above. To our mind the basis on which the addition was made by the AO is not tenable. The Ld. DR also could not brought anything on record to controvert the findings of the Ld. CIT(A). In view of above we find no reason to interfere in the order of the Id. CIT(A). Accordingly the ground raised by Revenue is dismissed." (d) The ITAT Kolkata in ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 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 creditor....
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....hich is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs Devinder Singh Shant in IT A No.20BIKo112009 vide order dated 17.04.2009. 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the 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 remain....
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....d enough corroborative evidence to show that the assessee had routed unaccounted monies into its books through medium of share subscription. The share applicants had confessed that they were "accommodation entry providers". The Assessing Officer in the latter case was able to prove with enough material that the share subscription was a pre-meditated plan to route unaccounted monies. In the present case however the Department was unable to bring any material whatsoever shows that share application 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 ....
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.... department. As such entries of Rs. 5~50/000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income/ penalty proceedings under 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" 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 F....