TaxTMI 
TaxTMI 
2019 (10) TMI 982
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....er :- "i) On the facts & in the circumstances of the case, the Ld. CIT(A), Aurangabad has erred in deleting the addition of Rs. 3,55,00,000/- made on account of unexplained cash credit under section 68 of Income Tax Act, 1961. ii) On the facts & in the circumstances of the case, the Ld. CIT(A), Aurangabad has erred in not confirming the facts as submitted by the A.O. in his Remand Report about the credibility, genuineness and identity of the share application money received. iii) On the facts & in the circumstances of the case, the order of the Ld. CIT(A), Aurangabad be quashed and that the Order of the A.O. be restored. iv) The appellant prays leave to adduce such further evidence to substantiate its case as the occasion may demand." 3. Briefly stated the relevant facts include that the assessee was formerly known as M/s. Ashwa Multi Trade Pvt. Ltd. and is a group concern of M/s. Laxmi Cotspin Limited. Before the Assessing Officer 4. During the proceedings u/s 143(3) of the Act, the Assessing Officer noticed from the Balance Sheet that the facts relating to the details of "share application money" pending for allotment amounting to Rs. ....
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.... Kolkata. Thus, while commenting on the alleged non-existence nature of the said three companies, the ITO acknowledged the facts relating to the submission/compliance by the assessee and submission of the submitted the details in the Central Receiving Section. Assessing Officer received the same later after the first negative report of the ITI was sent by the ITO (Inv.), Kolkata. Shri Nemichand Jain, which is director of the one of the three companies (para 4.1 to 4.5 of the assessment order) attended to notices of the ITO (Inv.), Kolkata. The Assessing Officer issued one more show cause notice to the assessee on 11.03.2013 proposing to treat the transactions as "bogus". In reply to the said show cause notice, the assessee again submitted that all the three companies are genuinely existing and they complied with all the provisions of I.T. Act and Companies Act. Accordingly, the companies have creditworthiness to invest and rely on the transactions relating to share application money. The compliance levels of the information by assessee is tabulated as under :- Table showing the furnishing of information/documentation by the assessee. M/s Anand Vyapar Pvt. Ltd.....
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....bank account extract of Anand Vyapar Pvt. Ltd., it is noticed that at the time of decision of investment, the company was not having sufficient funds. Funds have been credited in instalments, into company's bank account at various dates and on the same date, the same funds have been transferred to the assessee's bank account. 5.1 An analysis of assessee's authorized capital and money received as share application money and in the background of enquiries conducted by ITO (Inv) and also the fact that, the assessee was having meagre amount of share capital, it is beyond imagination and prudence that, an investor will invest substantial amount in company which has very limited and negligible net worth and having not any business activity. Therefore, the receipt of share application money is doubtful. It is quiet surprising that a substantial amount of money has been introduced in the assessee company in the form of share application money pending for allotment, inspite of the fact that, it is not doing any business arouses suspicion, as regards the share application money introduced by Anand Vyapar Pvt. Ltd. it was noticed that the source of money introduced of is not proved s....
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....ugh creditworthiness to make investment in the share capital of the appellant company. Nothing adverse has been noticed in the documents and bank statement filed by the appellant company. There is no evidence that money deposited in the bank account of investor company, came from the coffers of the appellant. On the other hand, it is obvious that sources of investment were liquidation of earlier investments. The documents filed with Registrar of Companies also do not lead to any adverse inference. It is not a case where the Assessing Officer was in possession of some material that discredited and impeached the particulars furnished by the assessee and also established the link between self-confessed 'accommodation entry providers' whose business it was to help assessee bring into its books of account the unaccounted monies through the medium of share subscription. The transaction entered by the appellant company with M/s Anand Vyapar Pvt. Ltd. is true, genuine and not a camouflage. It is also duty recorded in the books of share applicant. Even the sources of the share applicant for making investment stand explained. The suspicion however strong it may be, cannot take place....
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.... Nemichand Jain is the director and the details were submitted in Kolkata in the Central Receiving Section. Further, ld. DR mentioned that, being a Kolkata based company, the transactions between the assessee and the AVPL are doubtful as mentioned in para 5.1 of the assessment order. When the question is raised by the Bench about the adverse evidence, if any, gathered by the Assessing Officer/ITO (Inv.), Kolkata, the ld. DR fairly relied on the order of the Assessing Officer and the report of the ITO (Inv.), Kolkata. 12. The ld. AR's arguments : On the other hand, the ld. Counsel for the assessee relied heavily on the order of the CIT(A). Referring to all the details narrated above, ld. Counsel submitted that there are 6 subscribers in total contribution Rs. 6.55 crore by the end of this year under consideration and same were collected by the assessee for in turn subscribing into the share capital in M/s. Laxmi Cotspin Limited, which is going to the Public Issue. The Assessing Officer picked up 3 Kolkata based companies i.e. (i) Anand Vyapar Pvt. Ltd.; (ii) Pushpanjali Trading Pvt. Ltd.; and, (iii) Radico Services Pvt. Ltd for deep scrutiny and outsourced the services of the Inv....
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....charged his onus leave alone primarily onus. In this case, the Assessing Officer did not gather any adverse information whatsoever against the assessee. Referring to the report of the Inspector of Income Tax and the postal authorities response about the existence of AVPL, ld. Counsel submitted that the facts of Shri Nemichand Jain, the proprietor and director of the AVPL is appeared before the ITO (Inv.), Kolkata who confirms the existence of the assessee and the same constitutes an additional evidence in the pre-active stand of the assessee in matters relating to the discharge of onus. Further, ld. Counsel relied heavily on the various decisions/judgements discussed by the Assessing Officer and the CIT(A) in their respective orders which relied on by the assessee. Mentioning that there is no reason to discredit transactions, ld. Counsel submitted that this is neither a case of shell company nor a case of accommodation entries. Commenting on the Assessing Officer's decision in restricting the addition to the contribution or investments of AVPL, ld. Counsel submitted that the suspicion about the Kolkata based companies is restricted to AVPL only and left the investment by (i) Pus....
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.... conduct fresh enquiries by the assessing officer, in view of the contention of Nemichand Jain. He however, did not carry out any fresh enquiry but instead merely stated that as per postal authorities the company is non-existent, and that the submission was made by Nemichand Jain to the Central receiving Unit and not to the ITO personally. Thus the identity of AVPL stands established not merely by the submissions made by the respondent but also as a result of scrutiny assessment carried out by its assessing officer. 2. Issue related to credit worthiness of M/s Anand Vyapar Pvt Ltd. As stated above, the assessing officer of AVPL had carried out scrutiny assessment for the assessment year 2007-08, in which year the said company had received Rs. 4.31 crores as share capital / share application money. Enquiries u/s 133(6), were carried out by the assessing officer in respect of the contributors to share capital / share application money. The assessing officer found nothing adverse and satisfied himself as to the source of funds in the hands of M/s AVPL. The total amount received by the respondent from AVPL is Rs. 6.05 crores, and thus a large part of the same....
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....ts regarding the transaction pertaining to the sale of shares of M/s Laxmi Cotspin. It should be noted that M/s Laxmi Cotspin is a listed company and is regularly paying dividend, and shares of this company were sold by the respondent to AVPL at the correct market value as per Rule 11UA of the Income Tax Rules. Later the shares of M/s Laxmi Cotspin were offered at a higher price during the initial public offering (IPO). Thus AVPL received an asset of matching value from the respondent in lieu of the advance received. 6. Existence of adverse evidence with the assessing officer Revenue has placed great stress on the fact that the reply received from M/s AVPL, during the remand proceedings was in the printed envelope of M/s Metarolls which is a group concern of the respondent. However, this is not a fatal flaw. It is a common experience that whenever, summons are issued to a witness by the tax authorities, there is hesitation to respond and it is the assessee who has to follow up to see that a reply is duly filed. The reply received has to be tested on the basis of documents submitted and the sources of funds received and not on the basis of the envelope in which the....
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....s Hospitalities Pvt. Ltd. (2010-TIOL-69-HC-Del). 1.2 Divine Leasing & Finance Ltd. (299 ITR 268). 1.3 CIT vs. Orbital Communication (P) Ltd. (327 ITR 560). 1.4 CIT vs. K. C. Fibers Ltd. (87 Taxman 53) 1.5 CIT vs. Aquatic Remedies Pvt. Ltd. (96 taxmann.com 609). 1.6 Shyam Indus Power Solutions Pvt. Ltd. [62 ITR (Trib) 512]. 1.7 Wiz-Tech Solutions Pvt. Ltd. [ITA No.1162/Kol/2015]. 1.8 Lovely Exports Private Limited [216 CTR 195]. 1.9 CIT vs. Creative World Telefilms Ltd. (333 ITR 100). 1.10 Pr.CIT vs. Paradise Inland Shipping Pvt. Ltd. (400 ITR 439). 1.11 Orchid Industries Pvt. Ltd. (88 taxmann.com 502). 1.12 CIT vs. Green Infra Ltd. (ITA No.1162 of 2014]. 8. Is it a case of shell companies and accommodation entries Both Anand Vyapar and Mangalmayee Stock Management are active companies till date and regular IT returns are being filed and ROC compliance is being made. They do not find mention in any list of shell companies prepared by the department, or any other body. These companies are genuine. In view of the discussions above, it is humbly submitt....
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....cer and the discharge of primarily onus by the assessee? (v) Is it a case of accommodation entries provider? 15. Regarding identity of AVPL: The AVPL address is 35B, Brajadulal Street, Joraban, Kolkata, West Bengal-700006. This company assessed to tax over the years with PAN No.AAGCA2061E. The same is assessed to tax in ITO, Ward-1(3), Kolkata. The copy of the written submissions are placed in the Paper Book of the Revenue at page 15 onwards. Therefore, Shri Nemichand Jain is the director of the company. S. Sadhu & Associates are the statutory auditors bearing the Membership No.061636. This company has the share capital of Rs. 32,96,000/- and it has reserves and Rs. 6,07,05,000/- as on 31.03.2010. It is a recorded transaction that Ashva Multi Trade Pvt. Ltd. received Rs. 6.55 crores as seen from the Schedule 3 of the Balance Sheet page 25 of the Paper Book. The said creditor AVPL is filing the returns with the active company in the records of Ministry of Commerce and is not struck for any default or reason. Considering the same, the above allegation that the identity of the creditor is unsustainable within the meaning of section 68 of the Act. Accordingly, the Revenu....
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.... Assessing Officer for the amount of Rs. 2.5 crores in the assessment year 2009-10. Therefore, this kind of transaction with the creditor can be partly suspectable or partly unsuspectable and partly existing or partly not existing and partly genuine or partly non-genuine etc. Regarding the allegation of Kolkata based company, therefore fictitious company are accommodation entries provider etc. we find that the AVPL with so much of background as narrated above i.e. existence, identity, size reserves, punctual filing the document etc., the said company cannot be just accommodation entries provider. Shri Nemichand Jain is the director of the AVPL appeared before the authorities filing various documents clearly demonstrated the existence, genuineness, creditworthiness of the AVPL. From this point of view, we are of the opinion that the huge amount of documentation was filed by the assessee. Per contra, the Assessing Officer did not gather any iota of direct evidence or indirect evidence to demonstrate that the AVPL is bogus concern or sham concern or accommodation entries provider. Considering the same, we proceed to extract the finding of the CIT(A) as given in para 9 and 10 of his....
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....er rejected the explanation of the assessee and added the amount to the taxable income of the assessee. The Tribunal found that the assessee had furnished complete details to the Assessing Officer regarding the transactions in question, which included confirmation details of bank account and the permanent account numbers of the parties in whose favour the share capital was subscribed. The Tribunal also noted that all the payments were received by the assessee by cheques and that the assessee had, in the process, fully discharged the onus that lay upon it for proving the identity of the subscribers and the genuineness of the transactions. On that basis, it deleted the addition made by the authorities below. On appeal, it was held that in the absence of any perversity in the view taken by the Tribunal or anything to establish conclusively that the finding regarding the genuineness of the subscribers and the transaction suffered from any irrationality, no substantial question of law arose from the order of the Tribunal. The deletion of the amount was justified. In the following cases, the Hon'ble High Courts have also held that once the identity of the share holder is proved, the shar....
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....nterference. Thus, the relevant grounds raised by the Revenue are dismissed. 19. In the result, the appeal of the Revenue In ITA No.1602/PUN/2015 for the assessment 2010-11 is dismissed. Rest of two appeals ITA No. 1603/PUN/2015 - A.Y. 2011-12 ITA No. 2568/PUN/2016 - A.Y. 2012-13 20. Now, coming to the rest of two appeals in ITA No.1603/PUN/2015 and ITA No.2568/PUN/2015 for the assessment years 2011-12 and 2012-13 respectively. 21. For the A.Y. 2011-12 : Assessing Officer in his order dated 21.03.2014 added an amount of Rs. 1.78 crore on the suspicion and doubtful nature of the transactions. The contents of para 4.8 of the assessment order are relevant in this regard and the same are extracted hereunder :- "4.8 It is already established in the instant case that due to the close connection between the investing company and the assessee company, the attempt to take shelter behind legal pronouncement is woefully inadequate. The fact that the assessee has given certain information is insufficient to hold that the assessee has proved the creditworthiness of the share applicant, which I have noticed is conduits for passing through of monies to the assessee comp....
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....ransactions. Since the creditor was a private limited company registered under the Companies Act, and the amount was received through banking channels and the creditor was existing income tax assessee, its existence had been proved beyond doubt. The bank statement of the creditor company did not show any cash deposits. According to the financial statement of the creditor company for the year ended 31.03.2011, the said company had enough creditworthiness to give advance to the appellant company. Nothing adverse has been noticed in the documents and bank statement filed by the appellant company. There is no evidence that money deposited in the bank account of the creditor company, came from the coffers of the appellant company. On the other hand, it is obvious that sources of advance were cheques received from Gold Securities Private Limited, M/s Gopal Steels, M/s Acute Designfab and RIMS Fastners and out of credit balance, it gave RTGS to the appellant company. This explained the sources of investment of M/s Mangalmayee Stock Management Pvt. Ltd. The AO had raised doubts that M/s Mangalmayee Stock Management Pvt. Ltd. had itself received share premium and this amou....