TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1439
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.... 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 which were duly supplied. The objections raised by the assessee ch....
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....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 these entities had substantial money in Securities Premium Account / Other Liabilities which is t....
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.... 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 that these shareholders are existing shareholders and had confirmed that they had contributed to the share capital of the assessee company. The next aspect is their creditworthiness. The a....
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....o 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 establish that no cash transactions were involved in the bank accounts of the investing company then without further probe to prove contrary the addition u/s 68 in the hand of the assessee cannot be made. In view of the above discussion on the ....
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....ora 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 that since all the share applicants were allotted Permanent Account Number by the Income Tax Department and the return of income as well as financial statements of all the Allottees was placed on record, there could be no doubt as to identity of the investors. Regarding creditworthiness of the investor....
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....trate 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 sample basis to 3 investors only. When these notices were returned back, the assessee provided new addresses of these 3 investors to Ld. AO. However, the same were completely disregarded and termed as mere after thought aimed at camouflaging non-genuine transactions, factually incorrect and devoid of any merit. No further inquiries / investi....
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....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 premium. Another striking feature was that most of the investors had reflected meagre income during assessment year under dispute. The two companies in Mumbai as well as Guwahati were found to be nonexistent. With respect to Kolkata Companies, the response came through DAK only and nobody appeared. Further, the bank statements were not produced....
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....n 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 the investors, their creditworthiness & genuineness of the transactions is concerned, we find that all the investors were having Permanent Account number and were duly filing their Income Tax Returns. The audited financial statements were placed on record. The share applicants had confirmed the investments. In fact, it is the finding of Ld. AO that the investment in the ....
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....icle 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 through Banking channels." 6. On going through the documents which have been produced which are basically from the public offices, which maintain the records of the Companies. The documents also include assessment Orders for last three preceding years of such Companies. 7. The Appellants have failed to explain as to how such Companies have been assessed though according to them such Companies are not existing and are fictitious companies. Besides the documents also incl....
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....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 contrary to such public documents. 10. We find no infirmity in the findings arrived at by the ITAT as well as CIT Appeals on the contentions raised by the Appellants-Revenue in the present case and, as such, the question of interference by this Court in the present proceedings under Section 260A of the Income Tax Act would not at all be justified. Apart from that, as rightly pointed out by the learned Counsel appearing for the Respondents, the CIT Appeals had also noted that proceedings under Section 147 of....
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....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 issuing the shares and investor entities and the payment of high premium, in itself, could not be the basis of making addition in assessee's hand unless there was any illegality or restriction, under law, towards receipt of high share premium. Our view is in line with the decision of Hon'ble High Court of Madhya Pradesh rendered in Pr.CIT Vs. Chain House International Pvt. Ltd. [supra] as confirmed by Hon'ble Supreme Court by dismissal of revenue's Special Leave Petition reported at 103 Taxmann.com 435, wherein it has, interalia,....
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....reme 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, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed on 31.12.2007, the investigation report which was specifically called from the concerned department in Kolkata was available but not discussed by the AO. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants' particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. W....