TaxTMI 
TaxTMI 
2018 (10) TMI 1661
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....sed capital against allotment of equity shares during the year. In this regard the AO sought details concerning correspondence made for share application, trade license/professional tax etc. of the applicant, address proof, board resolution & justification of issuing shares at high premium. At Para 3.4 of the assessment order the AO acknowledges that the relevant documents of the share applicants who had subscribed to the assessee's equity capital i.e. audited accounts, IT Acknowledgment, bank statement, explanation regarding source of the source of funds, Board Resolution, Form 18 filed before the ROC etc. were furnished by the assessee and were available on his record. Before the AO the assessee also furnished a detailed justification regarding the premium charged on shares. The AO thereafter had issued summons upon the Directors of the investee companies, which were served but none of the Directors attended the summons. The AO noted that although the assessee's transaction and the introduction of fresh capital may appear to be real but the apparent had to be distinguished from the real. According to AO, most of the share subscribers had petty income in form of interest or commis....
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....urnished by the assessee company in their Paperbook. With regard to the identity of the share subscribers, he submitted that all the share applicants were paper companies and the fact that none of the Directors attended the summons proved their non-existence. Thereafter the Ld. DR first referred to the investment of Rs. 50,00,000/- made by M/s Coxis Finance & Investment P Ltd and invited our attention to its IT Acknowledgment for AY 2012-13 to show that it had returned a meager income and hence the source of its payment ofshare application monies to the assessee company was in doubt and hence submitted that the creditworthiness of all the share applicants were suspicious. The Ld. DR further submitted that the assessee had not justified the reasons for issuing shares at a high premium and that this particular aspect was not dealt with by the Ld. CIT(A). Therefore according to the Ld. DR, the genuineness of the transaction remained unproved. He therefore vehemently argued that the order of the Ld. CIT(A) be reversed and that the order of the AO be restored. 5. On the other hand the Ld. AR first drew our attention to the several grounds raised by the Revenue in the appeal, each of ....
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.... conducted through proper banking channel and that there were no cash deposits in any of the bank account of the share applicants. He also invited our attention to the explanation furnished by each of the share applicants regarding their source of funds. It was thus submitted that the fund flow position of the share applicant and not the profitability was the decisive criteria to examine the creditworthiness of the share applicants. Referring to the Ld. CIT(A)'s order, it was submitted that these factual aspects were taken into consideration and thereafter the Ld. CIT(A) was pleased to hold that the creditworthiness of the share applicants had been established. With regard to the genuineness of the transaction, the Ld. AR pointed out that it was never the AO's case that the assessee did not substantiate the justification for high share premium. He drew our attention to Para 3.1 of the assessment order wherein the Ld. AO noted that he had called for the justification of share premium to which the assessee company had furnished a detailed explanation along with computation of premium, which is available at Page 67 of the paperbook. According to Ld. AR, being satisfied with this expla....
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.... - Correspondence made for application of shares - Copy of Balance Sheet, Profit & Loss A/c, IT Ack for FY 2011-12 - Copy of Bank Statements evidencing transaction with assessee - Source of Funds for making investments in the assessee company - Trade License/P.Tax Certificate etc. towards address proof - Copy of Resolution passed by the Board authorizing investment in shares of assessee - Reasons for making payment of premium. 9. It is noted that the all the above requisitioned documents were furnished before the AO which substantiated the transaction between the assessee company and the share applicants. It is therefore not a case where the documents sought from the applicants to examine the transaction were not available before the AO. As the regards the issue of nonappearance of the share applicants, we note that in such a case the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 / [2003] 127 Taxman 523, has held that onus of the assessee (in whose books of account credit appears) stands ....
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....is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under:- "4. Mode of proof of entries in bankers' books Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." 11. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of AnandPrakashAgarwal reported in 6 DTR (All-Trib) 191 held as under:- "The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transaction of gifts, which undisputedly belonging to the re....
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....aw connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68....
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.... received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee." ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assess....
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....r had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources mere....
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....ng in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case" 15. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- "4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside th....
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....when the Tribunal has relied on the entire judgment of the Commissioner of Incometax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of UdhavdasKewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that 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. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and ....
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....e also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 18. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the CIT Vs Dataware Pvt Ltd (ITAT No. 263 of 2011) dated 21.09.2011 wherein the Court held as follows: "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 asse....
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....he transaction. " It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought Rs. 4, 00, 000/- and Rs. 20,00,000/- towards share capital and share premium respectively amounting to Rs. 24,00, 000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplain....
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.... of allotment with the Registrar of Companies, giving complete particulars of the allottees. The Commissioner of Income Tax (Appeals) found that inquires had confirmed the existence of most of the shareholders at the addresses intimated to the Assessing Officer, but the Assessing Officer took the view that their investment in the Assessee Company was not genuine, on the basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the ....
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....ir funds and not for the assessee company to show wherefrom these shareholders obtained funds." 22. Further, our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner of Income Tax vs M/s. Leonard Commercial (P) Ltd in ITAT No. 114 of 2011 dated 13thJune, 2011 wherein the Court held as follows: "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 accoun....
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....nus of establishing the identity, genuineness and creditworthiness of both the investors as well as the lenders. This has been concurred with by the ITAT in the impugned order which is again an extremely detailed one. 5. The concurrent factual findings of both the CIT (A) and ITAT have not been shown to be perverse by the Appellant. This is virtually the fourth stage of the litigation. 6. Question (1) is accordingly answered in the negative, i.e., in favour of the Assessee." It is noted that the SLP filed by the Revenue against this judgment has been dismissed by the Hon'ble Supreme Court. 24. In the light of the aforesaid decisions of the Hon'ble Apex Court and jurisdiction High court and other High Courts, let us now examine the present case in hand. We will examine each share subscribers totaling fifteen (15). The Ld. AR has extensively brought out the relevant facts in respect of each share subscribers which will throw light as to the identity, creditworthiness and genuineness of the share subscribers. We note from pages 68 to 99 of the paper book the details of M/s. Coxis Finance & Investment Pvt. Ltd. is given. We note that this company invested ....
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....paid up capital with free reserves and surplus of Rs. 48,37,82,527/- as on 31/03/2012 and Rs. 1,49,73,373/- 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 is taken note 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 from a perusal of the bank statement and other documents filed in the paper book. 26. In respect of M/s. Radiant Equity Management Private Limited, our attention was drawn by the Ld. AR to pages 123 to 154 of the paper book wherein we note that this company invested a sum of Rs. 25,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 30/12/1994 and was having company identification number U63090WB1994PTC066993. This company is also a registered Non-Banking Financial Company with the Reserve Bank of India. This company duly filed its return of income before ITO Ward 9(3), Kolkata declaring income of Rs. 1,05,605/- and was having PAN AABCR3645N. This company was having a paid up capital with free reserves....
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....are application was made by account payee cheque. This company is a registered Non-Banking Financial Company with the Reserve Bank of India. This company duly filed its return of income before ITO Ward 9(4), Kolkata and was having PAN AABCR4087F. This company was having a paid up capital with free reserves and surplus of Rs. 33,45,01,216/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The of source of funds from which this company had made the share application was the application money received by this company from M/s Fastspeed Agencies Pvt Ltd; which is evident from a perusal of the bank statement and other documents filed in the paper book. It is noted that the income-tax assessment of this company was framed by the ITO, Ward 9(4), Kolkata and the copy of the order passed u/s 143(3) is also available in the paper book. The AO of the share applicant has categorically mentioned that he has examined and accepted the source of funds i.e. the share capital raised by the applicant during the year. 29. Coming to M/s. Minolta Finance Ltd., ou....
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....account payee cheque. This company was incorporated on 20/03/2009 and was having company identification number U51909WB2009PTC134364. For the relevant year the company had turnover aggregating to Rs. 3,21,39,780/-. This company duly filed its return of income before ITO Ward 3(1), Kolkata and was having PAN AANCS1260J. This company was having a paid up capital with free reserves and surplus of Rs. 71,52,246/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note 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 from a perusal of the bank statement and other documents filed in the paper book. It is noted that the income-tax assessment of this company was completed u/s 143(1) and the order passed by the CPC, Bengaluru is also available in the paper book. 32. In respect of M/s. Fasttrack Tie-up Private Limited, the Ld. AR drew our attention to pages 275 to 304 of the paper book wherein we note that this company invested a sum of Rs. 20,00,000/- in the assessee company. The share application was ....
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....Rs. 30,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 11/01/1995 and was having company identification number U51219WB1995PTC067328. This company duly filed its return of income before ITO Ward 1(4), Kolkata and was having PAN AACCA1521H. This company was having a paid up capital with free reserves and surplus of Rs. 3,03,79,986/- available as on 31/03/2011 which was sufficient enough to cover the cost of investment of Rs. 30,00,000/- made in the assessee company. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note 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 from a perusal of the bank statement and other details filed in the paper book. It is noted that the income-tax assessment of this company was framed by the ITO, Ward 1(4), Kolkata and the copy of the order passed u/s 143(3) is also available in the paper book.The Ld. AR also drew our attention to the fact that apart from investing in shares of the assessee company, the share ....
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....e company. The share application was made by account payee cheque. This company was incorporated on 15/10/2007 and was having company identification number U51109WB2007PTC119633. This company duly filed its return of income before ITO Ward 4(1), Kolkata and was having PAN AADCR8017Q. This company was having a paid up capital with free reserves and surplus of Rs. 9,86,35,421/- as on 31/03/2012 and Rs. 5,52,28,705/- 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 is taken note 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 from a perusal of the bank statement and other documents filed in the paper book. It is noted that the income-tax assessment of this company was framed by the ITO, Ward 9(3), Kolkata and the copy of the order passed u/s 143(3) is also available in the paper book. 37. Coming to M/s. JiwanjyotiVinimayPvt Ltd, our attention was drawn by the Ld. AR to pages 415 to 443 of the paper book wherein we note that this Company invested a sum of Rs. 50,00,000/- in the assessee com....
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....y are filing their return of income, (iii) the board resolutions approving the investment in the assessee company 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 share applicants have furnished declaration explaining the source of funds out of which the cheques were issued to the assessee company, (viii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above. 40. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee 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 capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of sou....
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....herefore, the impugned order is set aside. The appeal is allowed accordingly. No order as to costs. 42. We further find that in as many as four instances, the share applicants had also advanced loans to the assessee company. The AO has indeed accepted the identity & creditworthiness of these applicants in their capacity of lenders and did not doubt the genuineness of the loan transactions. In such a scenario, we do not find any reason for the AO to dispute the genuineness of the share application monies received from such parties when their identity, creditworthiness and genuineness in respect of the loans transactions had not been disputed. These facts lend credence to the assessee's case that the addition made by the AO u/s 68 was based on mere suspicion and conjecture, lacking any cogent basis. 43. In the instant case before us, we also note that the share subscribing companies are duly assessed to income tax. The Ld AR had placed on record the copies of the assessment orders framed in the cases of several of the share subscribing companies, as noted above. It therefore cannot be disputed that the share subscribing companies are not in existence. From the assessme....
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....es. 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 reappreciate 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 disputed, we find that there are no substantial question of law which arises in the present Appeal for consideration. 45. We also find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex r....
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....he wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. [Para 52] Once the genuineness, creditworthiness and identity of investors are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. [Para 53] There is no dispute about the receipt of funds through banking channel nor there is any dispute about the identity, creditworthiness and genuineness of the investors and, therefore, the same has been established beyond any doubt and there should not have been any question or dispute about premium paid by the investors; therefore, unless there is a limitation put by the law on the amount of premium, the transaction should not b....
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....for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. (f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained. (c) In CIT VsAnshika Consultants Pvt Ltd (62 taxmann.com 192), the AO had added the share application monies treating it to be their unaccountedmonies routed though accommodation entries since the shares were issued at a high premium. The Hon'ble Delhi High Court did not agree with this contention put forth by the Revenue, by observing as under: "Whether the assessee-company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of section 68 is to avoid inclusion of amount which are suspect. Therefore, the emph....
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....d to tax. We therefore note that the impugned addition was made by the AO without any enquiry or application of mind into the material placed before him. Inour considered view, the assessee could only furnish the relevant details to prove its primary onus. Thereafter the onus shifts to the revenue. The shifting of onus is like a pendulum clock between the assessee and the AO. Once the assessee had furnished all the relevant documentation in respect of transaction between the assessee company and share applicants, the AO could not straight away draw adverse inference about the transaction of receipt of share capital and share premium by the assessee company without first conducting independent enquiries into the material furnished by the assessee company. This in our considered opinion was not in accordance with the due process of law.In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in the above mentioned case laws to the facts of this case, we are inclined to uphold the order of the Ld. Commissioner of Incom....
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....e (P) Ltd (342 ITR 169). The High Court however held that the aforesaid judgment was distinguishable from the facts of the present case. The Court observed that in that judgment the Assessing Officer had brought on record 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 ....
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.... 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" 51. Further, in the decision of the Hon'ble Delhi High Court in the case of CIT v. Kamdhenu Steel & Alloys Ltd. [2012] 19 taxmann.com 26/206 Taxman 254/[2014] 361 ITR 220 is also relevant, wherein it was held as under : "Once adequate evidenc....
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....on in this case is based on the peculiar facts which attract the ratio of Lovely Exports (supra). Where the assessee adduces evidence in support of the share application monies, it is open to the Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on the report of the investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between the assessee and the alleged hawala operators, such a link was shown to be present in the case of Nova Promoters &Finlease (P) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under Section the ratio of Lovely Exports (supra) is attracted, irrespective of the facts, evidence and material. " 54. 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: (a) In the case of DCIT Vs Global Mercantiles Pvt. Ltd in ITA No. 1669/Kol/2009 dated 13-01-2016, this Tribunal held as follows: "3.4. We have heard the rival submissions and perused the....
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.... 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 him. He found that the assessee did not do so but furnished copies of pay orders used for payments to the assessee company and also furnished income tax particulars and balance sheets of all the shareholders. The Learned AO on analyzing all the ba....
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....r 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 by the Learned CITA in this regard does not require any inter....
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.... 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. On appeal, the Tribunal set aside the order of the Commissioner (Appeals) and deleted the additions. On further appeal: Held, dismissing the appeal, that the additional burden wa....
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....e 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 raised any objection on any of the information furnished before him. The AO has not asked the respective Company applicants also to explain the alleged discrepancy in the address. The AO has not brought any m....
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....eted 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 ShyamTrexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. JewellockTrexim 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 also filed, copies of their return of income and financial statements for as well as copy of their assessment or....