TaxTMI 
TaxTMI 
2019 (4) TMI 1297
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....the assessee issued part of the equity shares during the year at a premium and the total share capital and share premium received during the financial year 2011-12 was Rs. 2,04,00,000/-. The assessee allotted shares to the following persons:- Sl. No Name of share applicants Amount invested in 'a' company investment (6) to Net Worth (5) 6 ALLOTMENT ON 01.11.2011 01 Anubhav Infrastructure Limited 800,000 02 Balasria Holdings Private Limited 800,000 03 Bluemoon Commotrade Private Limited 800,000 04 Calvin Vanijya Private Limited 800,000 05 Highlife Commotrade Private Limited 800,000 06 Imperial Retails Private Limited 800,000 07 Jatadhari Commodeal Private Limited 800,000 08 Neelkanth Conclave Private Limited 800,000 09 Panchmukhi Commotrade Private Limited 800,000 10 Primerose Commosales Private Limited 800,000 11 Rockwell Vincom Private Limited 800,000 12 Trustworthy Viniyog Private Limited 800,000 13 Zigma Steels Private Limited 800,000 ALLOTMENT ON 30.03.2012 14 Capricon Iron & steel Traders Pvt. Ltd. 1,0....
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....en by the ld CITA is factually incorrect and contrary to the facts recorded by the ld AO in his assessment order. Based on these incorrect factual observations, the ld CITA upheld the action of the ld AO in making addition u/s 68 of the Act. 5. Aggrieved, the assessee is in appeal before us. 6. We have heard the rival submissions. At the outset, we find that the ld CITA had recorded factually incorrect observations contrary to the materials available on record and contrary to facts stated in the assessment order. Hence the entire observation of the ld CITA deserves to be dismissed. On this count itself, the addition confirmed by the ld CITA against which assessee is in appeal before us, deserves to be allowed. We find that the assessee had furnished the following details before the ld AO :- a) Names and addresses of share subscribing companies. b) PAN of share subscribing companies c) ITR acknowledgements of share subscribing companies for Asst Year 2012-13 d) Audited Balance Sheets for Asst Year 2012-13 e) Computation of total income for Asst Year 2012-13 f) Copy of relevant page of bank statements of share subscribing co....
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....ommotrade Private Limited 300,000 50,311,293 7,500 - 50,603,793 800,000 1.581 06 Imperial Retails Private Limited 200,000 49,912,660 8,000 - 50,104,660 800,000 1.597 07 Jatadhari Commodeal Private Limited 300,000 58,614,547 7,500 - 58,907,047 800,000 1.358 08 Neelkanth Conclave Private Limited 3,177,000 80,610,479 26,648 - 83,760,831 800,000 0.955 09 Panchmukhi Commotrade Private Limited 199,480 49,654,265 8,000 - 49,845,745 800,000 1.605 10 Primerose Commosales Private Limited 200,000 49,913,201 8,000 - 50,105,201 800,000 1.597 11 Rockwell Vincom Private Limited 300,000 36,812,172 7,500 - 37,104,672 800,000 2.156 12 Trustworthy Viniyog Private Limited 10,160,400 178,632,730 - - 188,793,130 800,000 0.424 13 Zigma Steels Private Limited 3,267,000 83,647,309 27,080 - 86,887,229 800,000 0.921 ALLOTMENT ON 30.03.2012 14 Capricon Iron & steel Traders Pvt. Ltd. 116,800 16,660,790 7,440 16,770,140 1,000,000 5.963 15 ....
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....sessee beyond doubt. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity of share applicants, genuineness of transactions and creditworthiness of share applicants. The identity of share applicants is proved beyond doubt by the assessee by furnishing the name, address, PAN of share applicants together with the copies of balance sheets and income tax returns. With regard to the creditworthiness of share applicants, these companies are having capital and reserves in several crores of rupees and the investment made in the assessee company is a small part of their capital as could be evident from the aforesaid table. These transactions are also duly reflected in the balance sheets of the share applicants. By this, the creditworthiness of share applicants is also proved beyond doubt. With regard to genuineness of transactions, the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their respective bank accounts. We find that the assessee had even proved the source of money deposited into the respective bank accounts of share applicants, which in turn had been used ....
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....ny manner. The certificates issued by the banks are construable as evidence about the ownership of the transferors or their respective bank accounts, as per s.4 of the Bankers' Books evidence Act 1891, which read as under: "4. Where an extract of account was duly signed by the agent of the bank and implicit in its was a certificate that it was a true copy of an entry contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business and that such book was in the custody of the bank, it was held admissible in evidence. Radheshyam v. Safiyabai Ibrahim AIR 1988 Bom. 361 : 1987 Mah. 725: 1987 Bank J 552." In view of the position of law as discussed above, it is always open for a borrower to contend, that even the "creditworthiness" of the lender stands proved to the extent of credits appearing in his Bank Account and he should be held to be successful in this contention." 6.5. We find that the Hon'ble Jurisdictional High Court in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata reported in 347 ITR 347(Cal) wherein the Court held as follows: "15. It is now a settled law that while ....
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.... 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 Udhavdas Kewalram 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 no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned co....
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.... 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." The assessee's case before us stands on a much better footing in as much as the directors of share subscribing companies also appeared in person before the ld AO and offered themselves for examination after providing the requisite details that were called for by the ld AO. These facts are duly recorded in page 1 para 1 of the assessment order itself. 6.7. It is not in dispute that all the share applicant companies in the instant case before us are assessed to income tax. We find that the assessee had duly proved the source of source of source in the instant case. Even if the creditworthiness of the share applicants are to be doubted , then it would be the duty of the ld AO of the assessee to make enquiries through the ld AO of the concerned share applicants. Once the relevant details are filed by the assessee before the ld AO to prove the creditworthiness of share applicants, then the same cannot be questioned / disputed by the....
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....ered 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. " 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. L....
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.... was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Incometax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law. 6.10. We also find that the co-ordinate bench of this tribunal in the case of VSP Steel P Ltd (formerly M/s Tikmani Metal P Ltd) in ITA N....
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.... cheques out of sufficient bank balances available in their bank accounts, which are quite evident from the bank statements enclosed in the paper book. We agree with the arguments of the ld AR that the source of source of share applicants need not be proved by the assessee herein. We hold that the decision rendered by this tribunal in Subhalakshmi Vanijya relied upon by the ld DR was rendered in the context of validity of revision proceedings u/s 263 of the Act and not on the merits of the case. This tribunal in that case decided the validity of invoking revisionary jurisdiction u/s 263 of the Act by the ld CIT and whether adequate enquiries were made by the ld AO in the facts and circumstances of that case. This tribunal in Subhalakshmi Vanijya case supra never had an occasion to look into the merits of the addition proposed to be made towards share capital in the facts and circumstances of that case and no decision was rendered thereon on merits of the issue. Hence the reliance placed thereon by the ld DR does not advance the case of the revenue. In the instant case, we find that the share applicants have not denied the fact of making investment in share application monies in ass....
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....dit 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 source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, as we noted supra, these Companies are having capital in several crores of rupees and the investment made in the appellant company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers....
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....e added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs. 55,50,000/-. The assessee has further tries to explain the source of this amount of Rs. 55,50,000/- by furnishing copies of share application money, balance4 sheet etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the 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 tha....
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....t the income sought to be added fell within the description ofS.68 of the Income Tax Act 1961. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). The decision 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. " 34. In this case on hand, the assessee had discharged its onus to prove ....
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....osts. In the instant case before us, the share subscribing companies are duly assessed to income tax. It is not in dispute that the share subscribing companies are in existence. It is not in dispute that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record . Hence it could be safely concluded that they are genuine shareholders and not bogus and fictitious. The directors of share subscribing companies also presented themselves before the ld AO in response to summons issued u/s 131 of the Act in the instant case. Accordingly, the ratio laid down by the Hon'ble Apex Court in the case of M/s Earthmetal Electricals P Ltd supra would be squarely applicable to the facts of the instant case. 6.13. We would like to add that receipt of share capital for a company is not a prohibited transaction, as that is one of the main source of raising funds for a company to run its intended activities. Once the replies to notices issued u/s 133(6) of the Act were received from the share subscribing companies, which were later strengthened by complian....
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....s at Mumbai but both of its initial share holders are from Howrah , West Bangal and one of them is a house wife (P B Pg-2 & 3) # Assessee claims itself to be in share broking activity having no visible business prospect but still gets share capital on high premium (PB pg.3) # Most of the share applicants are from same or adjacent address mostly paid money in cash ( PB pg-7 & 8 ). # There is no mention in the minutes of the Board's meeting as to how share premium was fixed (PB pg.5 ) Directors of share applicants were examined by the AO during the assessment proceedings u/s 131 but they failed to justify their sources of fund and their creditworthy regarding payment of share application money ( A.O Pg.- 1). Their bank statement analysis showed that they just provided accommodation entry to the assessee . In view of the fact of the case and findings of the AO during the course of assessment the so called receipt of share capital was considered by the AO as unexplained credit . Ld CIT (A) upheld the observation of the Assessing Officer. For accepting the share applicant as genuine it is necessary to prove the capacity ....
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....t even the case of the ld AO or ld CITA. The ld DR cannot improve the case of the revenue in second appellate proceedings before this tribunal. Hence the various submissions made by the ld DR deserves to be dismissed at source. 6.17. Finally the ld DR placed reliance on the recent decision of the Hon'ble Apex Court in the case of Principal CIT vs. NRA Iron & Steel (P) Ltd reported in 103 taxmann.com 48 (SC) wherein the decision on addition made towards cash credit was rendered in favour of the revenue. We have gone through the said judgement and we find in that case, the ld AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent which is not the case before us. Certain investor companies did not produce their bank statements proving the source for making investments in assessee company, which is not the case before us. Source of funds were never established by the investor companies in the case before the Hon'ble Apex Court, whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 of the Act by c....