TaxTMI 
TaxTMI 
2020 (2) TMI 1224
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....d in the business of sale of plots in the territorial area of Ghaziabad, Delhi and Noida. In response to the notice issued u/s 153A dated 26th July, 2017, the assessee filed its return of income on 11th August, 2017, declaring total income at Rs. 5,05,16,000/-. During the course of assessment proceedings, the AO noted that the assessee has issued 8% non-cumulative preferential shares of its companies to below mentioned companies at a premium of Rs. 90/- per share, the details of which are as under:- Subscriber Name Addition during the year Share Capital @ Rs. 10/- per share Share Premium @ Rs. 90/- per share Cindy Goods & Supply Pvt. Ltd. 14,50,00,000/- 1,45,00,000/- 13,05,00,000/- M/s Pabla Leasing & Finance Pvt. Ltd. 15,00,00,000/- 1,50,00,000/- 13,50,00,000/- 29,50,00,000/- 2,95,00,000/- 26,55,00,000/- 4. He, therefore, asked the assessee to furnish the details of share capital/share premium and source of investment. In response to the same, the assessee submitted copies of share certificates, copy of bank statements, income-tax return and audited balance sheet. It was submitted that all the share subscription money were ....
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....e Pvt. Ltd. and Intellectual Securities Pvt. Ltd., are used by different accommodation entry operators to facilitate accommodation entry operators. Further, the Directors of these companies have admitted that they were involved in providing accommodation entries on commission basis to IITL Nimbus group of companies. 8. To verify the source of the investment of the above companies, the AO obtained information u/s 133(6) of the Act from the respective banks and noted that there are back to back transactions of same amount i.e., credit and debit of the same amount on the same dates/following dates with several other deposits and withdrawals. The AO, therefore, confronted the assessee and asked him to explain the identity and credit worthiness of the investor companies and genuineness of the transactions. Rejecting the various explanations given by the assessee and relying on the decision of the Hon'ble Supreme Court in the case of B. Kishore Kumar vs. DCIT, the AO made addition of Rs. 29,50,00,000/- to the total income of the assessee being the amount of share capital and share premium of Rs. 15 crore received from M/s Pabla Leasing & Finance Pvt. Ltd., and Rs. 14,50,00,000/- be....
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....nd in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in assuming jurisdiction and framing the impugned assessment order u/s 153A, is bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs. 29,50,00,000/- on account of non cumulative redeemable preference share capital/share premium by treating it as alleged unexplained transaction u/s 68 of the Act, more so when no incriminating material has been found as a result of search and impugned addition has been made by recording incorrect facts and findings and without providing the entire adverse material on record and without observing the principles of natural justice. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in aggregate making addition of Rs. 29,50,00,000/- on account of non cumulative redeemable preference share capital/share premium u/s 68 of the Act, is bad in law a....
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....non cumulative redeemable preference share capital/share premium u/s 68 of the Act, is bad in law and against the facts and circumstances of the case. 5. That in any case and in any view of the matter, addition made in the impugned assessment order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned assessment order passed by Ld. AO without obtaining the valid approval u/s 153D as per law. 7. That having regard to the facts and circumstances of the case, Ld.CIT(A) has erred in law and on facts in not reversing the action of Ld.AO in charging interest u/s 234A, 234B, 234C & 234D of Income Tax Act, 1961. 8. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 12. The ld. Counsel for the assessee, at the time of hearing, fairly conceded that grounds of appeal N. 1 and 2 by the....
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....ment of the assessee company showing redemption of the said amount to the investor company. Referring to pages 175 to 178 of the paper book, he drew the attention of the Bench to the order passed u/s 147/143(3) in the case of M/s Pabla Leasing & Finance Pvt. Ltd., which substantiates its identity. Referring to page 513 of the paper book, he drew the attention of Bench to the order passed u/s 144 of the Act in the case of M/s Pabla Leasing & Finance Pvt. Ltd., wherein the AO has determined the total income of the assessee at Rs. 47,59,260/- as against the returned income of Rs. 30,85,540/-. Referring to page 264 of the paper book, he drew the attention of the Bench to the notice issued by the AO u/s 133(6) to M/s Pabla Leasing & Finance Pvt. Ltd. Referring to page 265 to 334 of the paper book, he drew the attention of the Bench to the various documents filed by the said company before the AO substantiating the identity and credit worthiness of the investor company and the genuineness of the transaction. Referring to page 335 to 337 of the paper book, he drew the attention of the Bench to the statement of Shri Virendra Tripathy, Managing Director of M/s Pabla Leasing & Finance ....
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.....Y. 2014-15 is concerned, the ld. Counsel for the assessee submitted that the assessee has filed the requisite documents such as the copy of bank statement of the investor company, their audited accounts, income-tax return acknowledgement, Form 2 filed with the ROC, etc., to substantiate the identity and the credit worthiness of the investor company and genuineness of the transaction. Referring to paper book page 254, he submitted that Giri Financial Services (P) Ltd., is registered with RBI as a NBFC w.e.f. 16.02.2001. He submitted that in response to notice u/s 133(6), the director of the company Mr. Anshul Mittal had appeared and filed relevant document and he had confirmed to have invested in the assessee company. He submitted that in the A.Y. 2015-16, the AO, in the order passed u/s 153A/143(3) has accepted a sum of Rs. 11.34 crores towards share capital and share premium in the assessee company and no adverse view has been taken. Further, the investor company is showing continuous substantial income and, therefore, no addition is called for u/s 68 of the Act when the assessee has proved the three ingredients of section 68 of the IT Act, 1961. 17. So far as the addition ....
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.... that these companies have substantial income and the allegation of the AO that these companies are mere paper companies without doing any business is contrary to facts. Referring to page 507 to 512 of the paper book, he drew the attention of the Bench to the copy of the assessment order passed u/s 143(3) in the case of M/s Pabla Leasing & Finance Pvt. Ltd., for A.Y. 2014-15 and submitted that the AO in the assessment order has considered the opening investment of Rs. 41.20 crores as on 01.04.2013 and Rs. 42.70 crores as on 31.03.2014 for the purpose of computation of disallowance u/s 14A. 19. So far as the allegation of the AO that Director of the assessee company was required to be produced for recording his statement and the allegation that no investor would invest crores of rupees in a non-listed company without any return and the recipient company even does not have the particulars/contact details of such investments and failed to justify the share premium by filing valuation report/documents, etc., is concerned, he submitted that the director of the investor company was not only produced, but his statement was recorded on oath wherein he has admitted to have invested in th....
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.... For AY 2013-14 and 2014-15 S.No. Particulars AY 2012-13 AY 2013-14 AY 2014-15 AY 2015-16 1. M/s Pabla Leasing & Finance Ltd. (PB 173 of PB for Y 2013-14) Rs. 15,00,00,000/- Rs. 2,51,00,000/- Rs. 2,64,60,000/- (Preferential Share Capital) Rs. 11,34,00,000/- (Equity Share Capital) Accepted and no addition made 2. M/s Cindy Goods & Supply Pvt. Ltd. 164 of PB for AY 2013-14 Rs. 3,50,00,000/- Accepted and no addition made Rs. 14,50,00,000/- Rs. 2,75,00,000/- Accepted and no addition made 3. M/s Giri Financial Services Pvt. Ltd. (PB 255 of PB for AY 2014-15) - - Rs. 18,00,00,000/- Rs. 11,34,00,000/- accepted and no addition made Assessment status Assessed u/s 153A and no addition has been made Year under appeal Year under appeal Assessed and accepted in AY 2015-16 by order passed u/s 153A/143(3) (PB 503-506 of PB for AY 2013-14) 21. Referring to the decision of the Kolkata Bench of the Tribunal in the case M/s Baba Bhootnath Trade & Commerce Ltd. vs. ITO, vide ITA No.1494/Kol/2017, order dated 5th April, 2019, he submitted that under identical circumstances the ITAT has deleted the....
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.... Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/[2015] 228 Taxman 88); 18. PCIT Vs Bikram Singh [2017] 85 taxmann.com 104 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi); 19. Rick Lunsford Trade & Investment Ltd Vs CIT [2016] 385 ITR 399 (Cal); 20. Rick Lunsford Trade & Investment Ltd Vs CIT [2016-TIOL-207-SC-IT] (Supreme Court) 23. The ld. Counsel for the assessee, in his rejoinder, submitted that the various decisions relied on the ld. DR are distinguishable and not applicable to the facts of the present case. So far as the decision of the Hon'ble Supreme Court in the case of NRA Iron & Steel (P) Ltd. (supra) is concerned, he submitted that the said decision does not apply to the facts of the present case, since the said decision was an ex parte decision and the Hon'ble Supreme Court in the said decision at more than one place has held that the said decision is relevant only in the facts and circumstances of this case. In that case, the investors did not appear in response to the summons, whereas, in the present case, the directors of the investor companies have appeared in response to the notice u/s 133(6) and their statements we....
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....rior to the date of search, therefore, under the facts and circumstances of this case, the addition made by the AO and sustained by the CIT(A) is not justified. 26. We have heard the rival arguments made by both the sides, perused the orders of the AO, CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO, in the instant case, made addition of Rs. 29,50,00,000/- to the total income of the assessee being the amount of Rs. 14,50,00,000/- from M/s Cindy Goods & Supply Pvt. Ltd., and Rs. 15 crores from M/s Pabla Leasing & Finance Pvt. Ltd., on account of non-genuine share premium/share capital. Similarly for A.Y. 2014-15, the AO made an addition of Rs. 20,51,00,000/- being an amount of Rs. 2,51,00,000/- received from M/s Pabla Leasing & Finance Pvt. Ltd. and Rs. 18 crores from Giri Financial Services Pvt. Ltd. treating the same as non-genuine and by invoking the provisions of section 68 of the IT Act. We find the ld.CIT(A) upheld the addition so made by the AO. It is the submission of the ld. Counsel for the assessee that the assessee has filed the requisite details such as copy of the bank account, c....
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....0,000/- towards preferential share capital and Rs. 11,34,00,000/- towards equity share capital and no addition has been made. Similarly, in the case of Giri Financial Services Pvt. Ltd., the AO, in the order passed u/s 143(3)/153A for A.Y. 2015-16, copy of which is placed at pages 505 and 506 of the paper book, has accepted the same and no addition has been made. Therefore, the allegation of the AO that these companies are paper companies without doing any business and these companies are existing only for being used by different accommodation entry operators to facilitate accommodation entries in different forms to various beneficiary groups is factually incorrect in view of the orders passed in case of these investor companies in preceding and subsequent years. 29. From a perusal of the assessment orders passed in the case of these investor companies, we find the AO in all those cases has considered the investments held by those companies for the purpose of computing the disallowance u/s 14A read with Rule 8D. In the orders passed u/s 143(3) in the case of those investor companies, the AO has considered the opening balance of investment and closing balance of investments to ar....
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....he argument of the ld. Counsel for the assessee that without discharging the onus cast on the AO by not putting a single query to the directors of the investor companies who appeared before him in response to notice u/s 133(6) and whose statements were recorded u/s 131 on oath, the AO cannot make an allegation in the assessment order as to why they have invested in such non-descript company. So far as the allegation of the AO that the bank account show back to back entries is concerned, we find merit in the argument of the ld. Counsel that the investor companies have withdrawn money from companies where funds were invested earlier and they invested money in the assessee company in the shape of preference shares and, therefore, this prudent financial planning should not be viewed adversely and, rather, it supports the case of the assessee that there was source of funds invested by the investor company in the shares of the assessee company. We further find the various inferences/statements/materials which were the basis for the addition by the AO were never confronted to the assessee before being used by the AO against the assessee. 32. From the various details furnished by the as....
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....es issued u/s 133(6) of the Act were duly complied with by all the share subscribing companies. Summons issued u/s 131 of the Act to certain directors of share subscribing companies by the ld AO were also duly complied with , wherein the respective directors appeared in person before the ld AO and submitted the PAN card as proof of identity and address, ITR acknowledgements for Asst Year 2012-13 and copy of bank statements highlighting the transactions of making investments in the assessee company together with the details of source of funds. All these facts are also noted by the ld AO in his assessment order. We find that the ld AO had observed that the share applicants did not have creditworthiness to make investment in assessee company. We find that the assessee company had received share capital and premium in the sum of Rs. 2,04,00,000/- during the year under consideration from 23 companies who had sufficient creditworthiness as under:- ............................................................................................... 6.2. From the aforesaid details, we find that in case of all the share applicants - a) The share application form and all....
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.... by the assessee as per law. The share applicants have confirmed the fact of investment in share capital and share premium in response to notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. Summons issued u/s 131 of the act to the share applicants were also duly complied with by them by their personal appearance before the ld AO. 6.4. Undisputedly the Share Applicants in this case are the bank account holder in their respective banks in their own name and are sole owner of the credits appearing in their bank account from where they issued cheques to the appellant. For the proposition that a Bank Account holder himself is the 'owner' of 'credits' appearing in his account (with the result that he himself 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 b....
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....nation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmation- certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements." 6.6. We find that the Hon'ble Jurisdictional High Court in yet another case of Crystal Networks (P) Ltd vs CIT reported in 353 ITR 171 (Cal) had held that when the basic evidences are on record, the mere failure of the creditor to a....
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....instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." 6.8. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in ITAT No. 241 of 2010 dated 10.1.2011 , while relying on the Hon'ble Supreme Court in the case of Lovely Exports reported in 216 CTR 295 (SC) , had held :- "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as....
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.... 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 account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct ....
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....om five share applicants. The nature of receipt towards share application money is well established from the entries passed in the respective balance sheets of the companies as investments. Hence the nature of receipt is proved by the assessee 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. In the instant case, we find that 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, the ld AO himself states that the five share applicants had invested in assessee company's shares by taking money from some other companies. Hence the source of the share applicants for making investment in share application monies of assessee company is also proved. By this, the creditworthiness of the share applicants is also proved beyond doubt. Third ingredient is genuineness of the transactions. We find that the five share applic....
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....the Act. Hence we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed." 6.11. We find that the co-ordinate bench of this tribunal recently in the case of ITO vs Wiz-Tech Solutions Pvt Ltd in ITA No. 1162/Kol/2015 dated 14.6.2018 had held as under:- 28. From the details as aforesaid which emerges from the paper book filed before us as well as before the lower authorities, it is vivid that all the share applicants are (i) income tax assessee's, (ii) they are filing their return of income, (iii) the share application form and allotment letter 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 applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above. 29. As noted from the judicial precedents cited above, where any sum is found credited in the books of ....
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..... 30. ***** 31. ***** 32. We would like to reproduce the Hon'ble High Court order in CIT vs. Gangeshwari Metal P.Ltd. in ITA no. 597/2012 judgement dated 21.1.2013, the Hon'ble High Court after considering the decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgement in the case of CIT vs. Lovely Exports 319 ITR (St) 5(SC) held as follows:- "As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect:- ''Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of a....
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.... (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8/ it was held as follows. "6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application affidavits of the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacke....
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....f the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to I.T.A. No.1494/Kol/2017 Assessment year 2012-13 M/s Baba Bhootnath Trade & Comme rce Ltd . AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed. 6.12. We find that the Hon'ble Supreme Court in the case of M/s Earthmetal Electricals P Ltd vs CIT & Anr. reported in 2010 (7) TMI 1137 in Civil Appeal No. 21073 / 2009 dated 30.7.2010 arising from the order of Hon'ble Bombay High Court had held as under:- ORDER Delay condoned. Leav....
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....tten submission placing the facts and by placing reliance on various case laws. But we find that the ld DR had factually erred in stating that the share capital and share premium were received from the share subscribing companies in cash. The various documents as listed supra go to prove that the entire monies were received only through account payee cheques. For the sake of convenience, the written submissions of the ld DR on the factual aspects are reproduced below:- .............................................................................................. 6.16. We find that majority of the factual observations made by the ld DR are only his general comments which is not emanating from the records of the ld AO or by the ld CITA. The various general observations made by the ld DR are not at all relevant to the facts of the instant case as they are not 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'....
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.... to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed before the ld AO. Accordingly, all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction were placed before the ld AO and the onus shifted to the ld AO to disprove the materials placed before him. Without doing so, the addition made by the ld AO is based on conjectures and surmises cannot be justified. At the cost of repetition, the addition was confirmed by the ld CITA by making factually incorrect observations which are contrary to the facts recorded by the ld AO in the assessment order. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we direct the ld AO to delete the addition made u/s 68 of the Act and consequently the grounds raised by the assessee are allowed." 34. The various other decisions relied on by the ld. Counsel for the assessee also supports his case that no addition can be made u/s 68 of the IT act and in the insta....