TaxTMI 
TaxTMI 
2019 (5) TMI 1439
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.... restored. 2.1 The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax-12(2)(2) [AO] u/s 143(3) read with Section 147 on 30/03/2015 wherein the assessee was saddled with addition of Rs. 13.25 Crores on account of unexplained cash credit u/s 68. The original return of income was filed by the assessee at Rs. 2.38 Crores on 29/09/2009 which was processed u/s 143(1). The addition u/s 68 as made by Ld. AO is the sole subject matter of present appeal before us. The assessee being resident corporate assessee was stated to be engaged in investment and trading in shares and securities. 2.2 The reassessment proceedings got triggered pursuant to receipt of certain information from Additional CIT-Range 9(1), Mumbai vide letter dated 28/03/2014 that the assessee received Share Premium amounting to Rs. 12.58 Crores during the impugned AY. On the basis of the same, Ld. AO formed an opinion that the income to that extent escaped assessment accordingly, notice u/s 148 was issued to the assessee on 30/03/2014 which was duly served on assessee. In response, the assessee offered original return of income as filed on 29/09/2009 and sought reasons for reopening whi....
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....de by Ld. AO that the assessee had provided new addresses of the parties. The Ld. AO termed the assessee's replies as mere afterthought aimed at camouflaging non-genuine transactions, factually incorrect and devoid of any merits. It was also noted that the address provided by the assessee with respect to party listed at serial no. 1 above was different in the financial statements and no information of the aforesaid entity was available on the Ministry of Corporate Affairs [MCA] website which led the Ld. AO to form a belief that the party did not exist at the given address. Therefore, the assessee's claim in respect of identity of none of the parties, in the opinion of Ld. AO, could be relied upon. 2.7 Proceeding further, Ld. AO opined that creditworthiness of the parties could not be established since the assessee did not file the details of respective shareholders / directors. The examination of financial statements reveals that most of the entities were loss making entities and did not have any significant fixed assets or employees. The details of business activities were not available and the turnover was meagre. At the same time, an observation has been made in para 8.1 that....
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....d 31.03.2009 viii) Equity Share Application Form ix) Share Certificates issued x) Relevant extract of bank statement of the investor The attention was drawn to the fact that additions have been made merely because the three notices sent u/s 133(6) were returned back unserved whereas the assessee placed on record sufficient documentary evidences to establish the identity of the investors, creditworthiness of the investors and genuineness of the transactions and therefore, the additions were not justified. Reliance was placed on catena of judicial pronouncements including the decision of Hon'ble Apex Court rendered in CIT Vs. Lovely Exports (P) Ltd. [319 ITR 5] & Hon'ble Bombay High Court rendered in CIT Vs. Gagandeep Infrastructure P. Ltd. [80 Taxmann.com 272] in support of various submissions. 3.3 After considering the assessee's submissions and material on record, Ld. CIT(A) concurred with assessee's stand / submissions and deleted the additions by making following observations: - 6.8 On an analysis of the facts on records, it is seen that the share capital and premium of Rs. 13,25,00,000/- has come from different shareholders. It is noted....
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....en submitted that these details called for by the A.O. were duly filled the assessee before the A.O. but the appellant failed to produce the share applicants before the A.O. While observing so, the ratio of following judicial pronouncements was duly noted at para 6.9 to 6.11 of the impugned order: - No. Title Judicial Authority Citation 1. Oasis Hospitality Pvt. Ltd. Vs. CIT Hon'ble Delhi High Court 2011 333 ITR 119 2. CIT Vs. Creative World Telefilms Ltd. Hon'ble Bombay High Court 2011 333 ITR 100 3. CIT Vs. P.Mohankala Hon'ble Supreme Court 2007 291 ITR 278 4. CIT Vs Stellar Investment Ltd. Hon'ble Delhi High Court 1991 192 ITR 287 5. CIT Vs Gangeshwari Metal Pvt. Ltd Hon'ble Delhi High Court 2014 361 ITR 10 Finally, the matter on merits, was concluded in assessee's favor by observing as under: - 6.12 In view of the legal position emanating from legal precedents and the observations of Hon'ble Delhi High Court, in the case of Gangeshwari Metal P. Ltd. as discussed above it is noted that when requisite documents such as PAN, Bank accounts, Balance Sheet etc. were available with the A.O., to ....
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....O ITAT, Mumbai 153 ITD 520 13/08/2014 4.2 Per Contra, Ld. Authorized Representative for Assessee, drawing our attention to the impugned order and documents placed in the paperbook including submissions made during assessment / appellate proceedings, submitted that the assessee furnished plethora of documents to establish the identity of share applicants, creditworthiness of the investors and genuineness of the transactions carried out by the assessee and therefore, the impugned order would not warrant any interference. A chart has been placed before us with respect to share applicants to submit that the assessee filed Name, Addresses, PAN of the investors, Income Tax Return Acknowledgement, audited financial statements, copies of share application form, copies of share certificates, bank statements of the investors and confirmation of accounts. Our attention has further been drawn to the fact that the assessee had provided the new addresses of the 3 Share Allottees to the Ld. AO but no summons was issued to these parties at the new address and no further inquiry / investigation whatsoever has been made to bring the matter to logical conclusion. It has also been submitted t....
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....re stated to be issued at a premium of 190/- per share. During assessment proceedings, the assessee was directed to substantiate the said transactions at the threshold of Section 68. Various details and documentary evidences were called from the assessee to establish the identity of the investors, prove their creditworthiness and demonstrate genuineness of the transactions. The assessee, in support of the transactions, placed on record plethora of documents during assessment proceedings, which has already been enumerated by us at para 3.2 above. These documents, inter-alia, include details of the investors, their respective Permanent Account Numbers, copies of Income Tax Returns, Bank statements of the investors & assessee evidencing the aforesaid payment through banking channels and audited financial statements of the investors which would demonstrate that the assessee discharged the primary onus as casted upon him under the rigors of provisions of Section 68. Nothing on record would suggest that the assessee failed to supply any details called for by Ld. AO during assessment proceedings. However, Ld. AO chose to investigate the transactions by issuing notices u/s 133(6) on sam....
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....ch a conclusion, however, the department has to be in possession of sufficient and adequate material. We find absence of such material in the present case. 5.3 The aforesaid factual matrix would distinguish the recent judgment of Hon'ble Apex Court rendered in PCIT Vs. NRA Iron & Steel Pvt. Ltd. [supra] as relied upon by Ld. CIT-DR. Upon perusal of the cited judgment, we note certain distinguishing features vis-à-vis factual matrix of the present case. Upon perusal of para 3.7 & 3.8 of the said judgement, it is noted that Ld. AO had issued summons to as many as 19 investor entities but nobody appeared on behalf of the investor companies. The submissions were received through DAK only which created a doubt about the identity of the investor company. Further, Ld. AO independently got field inquiries conducted at the location of investor companies, the result of which has been tabulated under the said para. Notices were served on few entities but the same were not replied to. In few cases, the notices were returned back. Submissions were received in few cases through DAK wherein the company only provided the mode of investments without supplying any reason to pay huge ....
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....opers P. Ltd. [supra], inter-alia, deals with a situation wherein summons was issued u/s 131 and field inquiries revealed that none of the subscribers existed at the given address. No such inquiries have been conducted in the present case. 5.9 The case law of Hon'ble Delhi High Court in CIT Vs. Precision Finance Pvt. Ltd. [supra] deals with a situation wherein Income Tax file numbers provided by the assessee were found to be non-existent or Income Tax records did not tally with details furnished by the assessee. 5.10 Extensive inquiries were made by Ld. AO in the case law of CIT Vs. NDR Promoters Pvt. Ltd. [supra] to controvert the assessee's claim. 5.11 In the case of Advance PowerInfra Tech Ltd. vs. DCIT [supra], only PAN was filed to explain creditworthiness and source of the investment, which is not the case here. 5.12 Lastly, the case law of Angel Pipes & Tubes P.Ltd. Vs. ITO [supra] deals with a situation wherein the matter of addition has been restored back to first appellate authority. Therefore, the above case laws as relied upon by Ld. CIT-DR, in our opinion is distinguishable on facts and circumstances. 6.1 In the present case, so far as the identity of....
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....d at Para 3 of the Judgment of the CIT Appeals which reads thus : "The assessment is completed without rebutting the 550 page documents which are unflinching records of the companies. The list of documents submitted on 09.03.2015 are as follows : 1. Sony Financial Services Ltd. - CIN U74899DL1995PLC068362- Date of Registration 09/05/1995 (a) Memorandum of Association and Article of Association (b) Certificate of Incorporation (c) Certificate of Commencement of Business (d) Acknowledgment of the Return of Income AY 08-09 (e) Affidavit of the Director confirming the investment (f) Application for allotment of shares (g) Photocopy of the share certificate (h) Audited account and Directors report thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2009. (i) Audited account and Directors report thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2010 (j) The Bank Statement highlighting receipt of the amount by way of RTGS. (k) Banks certificate certifying the receipt of the amount thro....
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....d the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." 9. This Court in the Judgments relied upon by the learned Counsel appearing for the Respondents, have come to the conclusion that once the Assessee has produced documentary evidence to establish the existence of such Companies, the burden would shift on the Revenue-Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances, the question of remanding the matter for re-examination of such persons, would not at all be justified. The Assessing Officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contr....
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....e Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is 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. 6.3 So far as the justification of share premium is concerned, we find that the assessee, in in its investment note, adopted Discounted Cash Flow method to arrive at the valuation of shares. Be that as the case may be, we are of the considered opinion that quantum of premium was matter between assessee company i....
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.... not been approved by the Supreme Court in the decisions of CIT v. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381 and J.K. Woollen Mfg. v. CIT [1969] 72 ITR 612 (SC). 55. The question of share premium has been considered by the Delhi High Court in the case of CIT v. Anshika Consultants (P.) Ltd.[2015] 62 taxmann.com 192 wherein it was held thus :- "The onus cast upon the assessee under Section 68 of the Act to satisfy the department about the true identity of an investor, its creditworthiness and genuineness of a transaction was explained by the Supreme Court in CIT v. Lovely Exports (P) Ltd., [2008] 216 CTR 195,. Whilst, the AO acted legitimately in enquiring into the matter, the inferences drawn by him were not justified at all in the circumstances of the case. 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 emphasis on genuineness of all the three aspects, identity, creditworthin....